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Taxes | 3 Months Ended
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Mar. 31, 2020
Taxes |
Taxes | 9. Taxes ​ The effective tax rate for the three months ended March 31, 2020 was 42.6 percent compared to 26.6 percent for the three months ended March 31, 2019. The increase in the effective tax rate was driven by the 24 percent decrease in the value of the Mexican peso against the U.S. dollar during the three months ended March 31, 2020. Because the Company uses the U.S. dollar as the functional currency for its subsidiaries in Mexico, its effective tax rate is strongly influenced by the remeasurement of the Mexican peso financial statements into U.S. dollars. In addition, the decrease in value of the Mexican peso produced substantial taxable translation gains on net-U.S.-dollar-monetary assets held in Mexico for which there was no corresponding gain in pre-tax income. Consequently, the Company recorded a discrete tax expense of $22 million in the three months ended March 31, 2020, as compared to $1 million discrete tax benefit in the three months ended March 31, 2019. ​ In January 2019, the Company’s Brazilian subsidiary received a favorable decision from the Federal Court of Appeals in Sao Paulo, Brazil, related to certain indirect taxes collected in prior years. As a result of the decision, the Company expects to be entitled to indirect tax credits against its Brazilian federal tax payments in 2020 and future years. The Company finalized its calculation of the amount of the credits and interest due from the favorable decision, concluding that the Company could be entitled to approximately $86 million of credits spanning a period from 2005 to 2018. The Department of Federal Revenue of Brazil, however, issued an Internal Ruling in which it charged that the Company is entitled to only $22 million of the calculated indirect tax credits and interest for the period from 2005 to 2014. The Brazil National Treasury has filed a motion for clarification with the Brazilian Supreme Court, asking the Court, among other things, to modify the lower court’s decision to approve the Internal Ruling, which could impact the decision in favor of the Company. Due to the uncertainty arising from the issuance of the Internal Ruling, the Company recorded $22 million of credits in the three months ended December 31, 2019, in accordance with ASC 450, Contingencies. The $22 million of future tax credits, which was recorded in the Consolidated Income Statement in Other income, resulted in additional deferred income taxes of $8 million as of December 31, 2019. The income taxes will be paid as and when the tax credits are utilized. The Company continues to monitor the pending decisions within the Brazilian courts that may result in changes to the calculations and the timing of the recording of any additional gains and receipt of the benefits. ​

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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