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Income Taxes | 12 Months Ended
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Dec. 27, 2020
Income Tax Disclosure [Abstract] |
Income Taxes | Income TaxesThe Tax Cuts and Jobs Act (the “Tax Act”) enacted on December 22, 2017 introduced significant changes to U.S. income tax law. Effective 2018, the Tax Act reduced the U.S. statutory tax rate from 35% to 21% and created new taxes on certain foreign-sourced earnings and certain related-party payments. Each year, the U.S. Treasury has promulgated new regulations that have impacted our interpretation of our U.S. tax federal income tax obligations. Due to the timing of the enactment and the complexity involved in applying the provisions of the Tax Act, the Company made reasonable estimates of the effects and recorded provisional amounts in our consolidated financial statements as of December 31, 2017. As the Company collected and prepared necessary data, and interpreted the additional guidance issued by the U.S. Treasury Department, the Internal Revenue Service, and other standard-setting bodies, the Company made adjustments, over the course of 2018, to the provisional amounts including additional tax expense of $40,650, primarily related to adjustments to the transition tax. The accounting for the tax effects of the Tax Act was completed as of December 30, 2018. The components of earnings before income taxes, determined by tax jurisdiction, are as follows:
| 2020 |  | 2019 |  | 2018
United States | $ | 191,461 |  |  | 250,453 |  |  | 6,293 |
International | 130,601 |  |  | 343,757 |  |  | 264,109 |
Total earnings before income taxes | $ | 322,062 |  |  | 594,210 |  |  | 270,402 |
Income taxes attributable to earnings before income taxes are:
| 2020 |  | 2019 |  | 2018
Current |  |  |  |  |
United States | $ | 22,279 |  |  | 41,355 |  |  | 12,805 |
State and local | 6,080 |  |  | 5,528 |  |  | 5,644 |
International | 37,946 |  |  | 41,829 |  |  | 42,613 |
| 66,305 |  |  | 88,712 |  |  | 61,062 |
Deferred |  |  |  |  |
United States | 27,171 |  |  | (20,139) |  |  | (4,937) |
State and local | (10,847) |  |  | (1,438) |  |  | (471) |
International | 13,992 |  |  | 6,621 |  |  | (5,686) |
| 30,316 |  |  | (14,956) |  |  | (11,094) |
Total income taxes | $ | 96,621 |  |  | 73,756 |  |  | 49,968 |
A reconciliation of the statutory United States federal income tax rate to Hasbro’s effective income tax rate is as follows:
| 2020 |  | 2019 |  | 2018
Statutory income tax rate | 21.0 | % |  | 21.0 | % |  | 21.0 | %
State and local income taxes, net | 2.2 |  |  | 0.5 |  |  | 1.5 |
Tax on international earnings | (6.2) |  |  | (4.6) |  |  | (11.4) |
Change in unrecognized tax benefits | 4.1 |  |  | 0.6 |  |  | (7.9) |
Change in valuation allowance | 4.5 |  |  | — |  |  | — |
Share-based compensation | (0.4) |  |  | (0.8) |  |  | (4.0) |
Tax Cuts and Jobs Act of 2017 | — |  |  | — |  |  | 15.0 |
Research and development tax credits | (1.6) |  |  | (0.7) |  |  | (1.9) |
Non-deductible goodwill impairment | — |  |  | — |  |  | 2.0 |
Deferred tax rate change | 3.6 |  |  | — |  |  | — |
Gains on integrated hedging instruments | — |  |  | (4.0) |  |  | — |
Officers' compensation | 1.4 |  |  | — |  |  | — |
Other, net | 1.4 |  |  | 0.4 |  |  | 4.2 |
| 30.0 | % |  | 12.4 | % |  | 18.5 | %
The components of deferred income tax expense (benefit) arise from various temporary differences and relate to items included in the consolidated statements of operations as well as items recognized in other comprehensive earnings. The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities at December 27, 2020 and December 29, 2019 are:
| 2020 |  | 2019
Deferred tax assets: |  |  |
Accounts receivable | $ | 32,688 |  |  | 26,973 |
Inventories | 14,038 |  |  | 10,020 |
Loss and credit carryforwards | 221,598 |  |  | 35,509 |
Operating leases | 23,147 |  |  | 15,378 |
Operating expenses | 32,912 |  |  | 23,124 |
Pension | 7,905 |  |  | 6,206 |
Other compensation | 33,718 |  |  | 27,633 |
Postretirement benefits | 7,932 |  |  | 7,053 |
Interest rate hedge | 4,996 |  |  | 5,202 |
Tax sharing agreement | 2,219 |  |  | 3,096 |
Deferred revenue | 8,298 |  |  | 5,591 |
Other | 11,992 |  |  | 10,637 |
Gross deferred tax assets | 401,443 |  |  | 176,422 |
Deferred tax liabilities: |  |  |
Depreciation and amortization of long-lived assets | 181,227 |  |  | 13,361 |
Equity method investment | 21,328 |  |  | 17,674 |
Operating leases | 20,056 |  |  | 11,936 |
Foreign exchange | 7,280 |  |  | 58 |
Prepaid expenses | 3,565 |  |  | 2,597 |
Other | 10,993 |  |  | 7,741 |
Gross deferred tax liabilities | 244,449 |  |  | 53,367 |
Valuation allowance | (174,185) |  |  | (33,260) |
Net deferred income taxes | $ | (17,191) |  |  | 89,795 |
Certain reclassifications have been made to prior year presentation to conform to current year presentation. The most significant amount of the loss and credit carryforwards relate to tax attributes of the acquired eOne entities that historically operated at losses in certain jurisdictions. At December 27, 2020, the Company has loss and credit carryforwards of $221,598, which is an increase of $186,089 from $35,509 at December 29, 2019. Loss and credit carryforwards as of December 27, 2020 relate primarily to the US and Canada. The Canadian loss carryforwards expire at various dates from 2031 to 2040. Some US federal and state loss and credit carryforwards expire at various dates beginning in 2021 while others have an indefinite carryforward period. The recoverability of these future tax deductions and credits is evaluated by assessing the adequacy of future expected taxable income from all sources, including taxable income in prior carryback years, reversal of taxable temporary differences, forecasted operating earnings and available tax planning strategies. To the extent the Company does not consider it more likely than not that a deferred tax asset will be recovered, a valuation allowance is generally established. To the extent that a valuation allowance was established and it is subsequently determined that it is more likely than not that the deferred tax assets will be recovered, the change in the valuation allowance is recognized in the consolidated statements of income. The Company has a valuation allowance for certain net deferred tax assets at December 27, 2020 of $174,185, which is an increase of $140,925 from $33,260 at December 29, 2019. The valuation allowance pertains to certain U.S. state and international loss and credit carryforwards, some of which have no expiration and others that would expire beginning in 2021, and other net deferred tax assets. The significant increase in the valuation allowance is due to historical losses and other net deferred tax assets within eOne entities that are not expected to be utilized, offset by a release of historical attributes that will now be utilized by the combined Company. At December 27, 2020 and December 29, 2019, the Company’s net deferred income taxes are recorded in the consolidated balance sheets as follows:
| 2020 |  | 2019
Other assets | 137,633 |  |  | 92,401 |
Other liabilities | (154,824) |  |  | (2,606) |
Net deferred income taxes | $ | (17,191) |  |  | 89,795 |
We previously considered the earnings in our non-U.S. subsidiaries to be indefinitely reinvested and, accordingly, recorded no deferred income taxes. However, the Tax Act gave the Company more flexibility to manage cash globally. The Company still has significant cash needs outside the United States and continues to consistently monitor and analyze its global working capital and cash requirements. However, we intend to repatriate substantially all of our accumulated foreign earnings when appropriate. As such, we have recorded $1,163 of foreign withholding and U.S. state income taxes as part of the provisional repatriation tax amount, which will be incurred due to certain future cash distributions. The Company has not finalized the timing of any actual cash distributions or the specific amounts and therefore we could still be subject to some additional foreign withholding taxes and U.S. state taxes. We will record these additional tax effects, if any, in the period that we complete our analysis and are able to make a reasonable estimate. A reconciliation of unrecognized tax benefits, excluding potential interest and penalties, for the fiscal years ended December 27, 2020, December 29, 2019, and December 30, 2018 is as follows:
| 2020 |  | 2019 |  | 2018
Balance at beginning of year | $ | 36,651 |  |  | 46,074 |  |  | 84,244 |
Gross increases in prior period tax positions | 12,659 |  |  | 2,031 |  |  | 4,449 |
Gross increase from acquisition | 13,717 |  |  | — |  |  | — |
Gross decreases in prior period tax positions | — |  |  | — |  |  | (55,752) |
Gross increases in current period tax positions | 11,758 |  |  | 4,152 |  |  | 16,987 |
Decreases related to settlements with tax authorities | — |  |  | (12,037) |  |  | (1,102) |
Decreases from the expiration of statute of limitations | (6,962) |  |  | (3,569) |  |  | (2,752) |
Balance at end of year | $ | 67,823 |  |  | 36,651 |  |  | 46,074 |
Unrecognized tax benefits as of December 27, 2020, December 29, 2019 and December 30, 2018, were $67,823, $36,651, and $46,074, respectively, and are recorded within other liabilities, prepaid expenses and other current assets, and other assets in the Company's consolidated balance sheets. If recognized, these tax benefits would have affected our income tax provision for fiscal years 2020, 2019, and 2018, by approximately $57,000, $36,000, and $45,000, respectively. During 2020, 2019, and 2018, the Company recognized $3,652, $1,766, and $3,101, respectively, of potential interest and penalties, which are included as a component of income taxes in the accompanying consolidated statements of operations. At December 27, 2020, December 29, 2019, and December 30, 2018, the Company had accrued potential interest and penalties of $11,596, $5,547, and $4,200, respectively. The Company and its subsidiaries file income tax returns in the United States and various state and international jurisdictions. In the normal course of business, the Company is regularly audited by U.S. federal, state and local and international tax authorities in various tax jurisdictions. The Company is no longer subject to U.S. federal income tax examinations for years before 2012. With few exceptions, the Company is no longer subject to U.S. state or local and non-U.S. income tax examinations by tax authorities in its major jurisdictions for years before 2014. In May 2019, a public referendum held in Switzerland approved the Swiss Federal Act on Tax Reform and AHV Financing (TRAF) proposals previously approved by the Swiss Parliament. The Swiss tax reform measures were effective on January 1, 2020. Changes in tax reform include the abolishment of preferential tax regimes for holding companies, domicile companies and mixed companies at the cantonal level. The enacted changes in Swiss federal tax were not material to the Company’s financial statements. Swiss cantonal tax was enacted in December 2019. The Company is still assessing the transitional provision options it may elect; however, the legislation is not expected to have a material effect on the Company’s financial statements. The Company believes it is reasonably possible that a decrease of approximately $5,000 - $13,000 in gross unrecognized tax benefits may be necessary within the coming year as a result of expected tax return settlements and lapse of statute of limitations.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 + Details
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