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Income Taxes | 12 Months Ended
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Dec. 31, 2018
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes Consolidated pre-tax (loss) income consists of the following:
| For the Year Ended
| December 31, 2018 |  | December 31, 2017 |  | December 31, 2016
| (In thousands)
U.S. operations | $ | (344,443 | ) |  | $ | (269,244 | ) |  | $ | 4,979 |
Foreign operations | (72,660 | ) |  | (232,001 | ) |  | 397,063 |
| $ | (417,103 | ) |  | $ | (501,245 | ) |  | $ | 402,042 |
The provision for current and deferred income taxes consists of the following:
| For the Year Ended
| December 31, 2018 |  | December 31, 2017 |  | December 31, 2016
| (In thousands)
Current |  |  |  |  |
Federal | $ | 3,935 |  |  | $ | (3,153 | ) |  | $ | (3,041 | )
State | 1,340 |  |  | 1,885 |  |  | 2,455 |
Foreign | 95,404 |  |  | 113,315 |  |  | 91,070 |
| 100,679 |  |  | 112,047 |  |  | 90,484 |
Deferred |  |  |  |  |
Federal | (4,630 | ) |  | 422,397 |  |  | (6,094 | )
State | (3,368 | ) |  | 38,819 |  |  | 2,557 |
Foreign | 23,515 |  |  | (19,929 | ) |  | 2,187 |
| 15,517 |  |  | 441,287 |  |  | (1,350 | )
Provision for income taxes | $ | 116,196 |  |  | $ | 553,334 |  |  | $ | 89,134 |
Deferred income taxes are provided principally for tax credit carryforwards, net operating loss carryforwards, research and development expenses, employee compensation-related expenses, and certain other reserves that are recognized in different years for financial statement and income tax reporting purposes. Mattel’s deferred income tax assets (liabilities) are composed of the following:
| December 31, 2018 |  | December 31, 2017
| (In thousands)
Tax credit carryforwards | $ | 64,895 |  |  | $ | 222,353 |
Research and development expenses | 76,906 |  |  | 92,443 |
Net operating loss carryforwards | 187,741 |  |  | 139,544 |
Allowances and reserves | 94,168 |  |  | 178,930 |
Deferred compensation | 63,641 |  |  | 49,616 |
Postretirement benefits | 24,666 |  |  | 30,564 |
Intangible assets | 419 |  |  | 6,096 |
Other | 48,262 |  |  | 50,554 |
Gross deferred income tax assets | 560,698 |  |  | 770,100 |
Intangible assets | (196,012 | ) |  | (175,921 | )
Other | (15,782 | ) |  | — |
Gross deferred income tax liabilities | (211,794 | ) |  | (175,921 | )
Deferred income tax asset valuation allowances | (365,820 | ) |  | (580,937 | )
Net deferred income tax (liabilities) assets | $ | (16,916 | ) |  | $ | 13,242 |
Net deferred income tax assets (liabilities) are reported in the consolidated balance sheets as follows:
| December 31, 2018 |  | December 31, 2017
| (In thousands)
Other noncurrent assets | $ | 49,937 |  |  | $ | 77,740 |
Other noncurrent liabilities | (66,853 | ) |  | (64,498 | )
| $ | (16,916 | ) |  | $ | 13,242 |
As of December 31, 2018, Mattel had federal, state and foreign loss carryforwards totaling $662.0 million and tax credit carryforwards of $64.9 million, which excludes carryforwards that do not meet the threshold for recognition in the financial statements. Utilization of these loss and tax credit carryforwards is subject to annual limitations. Mattel’s loss and tax credit carryforwards expire in the following periods:
| Loss Carryforwards |  | Tax Credit Carryforwards
| (In thousands)
2019–2023 | $ | 8,190 |  |  | $ | 2,837 |
Thereafter | 213,629 |  |  | 39,871 |
No expiration date | 440,191 |  |  | 22,149 |
Total | $ | 662,010 |  |  | $ | 64,857 |
Periodically, Mattel considers both positive and negative evidence related to the likelihood of realization of the deferred tax assets to determine, based on the weight of available evidence, whether it is more likely-than-not that some or all of the deferred tax assets will not be realized. During the third quarter of 2017, Mattel established a valuation allowance on U.S. deferred tax assets that will more than likely not be realized due to the determination that negative evidence outweighed the positive evidence. As of December 31, 2018, Mattel's valuation allowance on its federal and state deferred tax assets was approximately $291 million. Changes in the valuation allowance in 2018 primarily related to the utilization of loss and credit carryforwards against the tax on the inclusion of accumulated foreign earnings under the U.S. Tax Act, offset by current year losses and credits generated. In addition, management determined that a valuation allowance of approximately $75 million was required as of December 31, 2018 for certain foreign deferred tax assets that will more than likely not be realized due to the determination that negative evidence outweighed the positive evidence. Changes in the valuation allowance for 2018 primarily related to increases in the valuation allowance related to losses without benefits, offset by decreases in the valuation allowance for certain deferred tax assets and expirations of tax loss and/or tax credit carryforwards. For the remaining foreign deferred tax assets without a valuation allowance, management believes it is more-likely-than-not that Mattel will generate sufficient taxable income in the appropriate future periods to realize the benefit of the remaining deferred income tax assets. Differences between the provision for income taxes at the U.S. federal statutory income tax rate and the provision in the consolidated statements of operations are as follows:
| For the Year Ended
| December 31, 2018 |  | December 31, 2017 |  | December 31, 2016
| (In thousands)
(Benefit) provision at U.S. federal statutory rate | $ | (87,592 | ) |  | $ | (175,436 | ) |  | $ | 140,715 |
Increase (decrease) resulting from: |  |  |  |  |
U.S. valuation allowance | 64,907 |  |  | 558,976 |  |  | — |
Foreign earnings taxed at different rates, including foreign losses without benefit | 103,231 |  |  | 266,807 |  |  | (43,010 | )
U.S. Tax Act (a) | 3,709 |  |  | (107,049 | ) |  | — |
State and local taxes, net of U.S. federal (expense) benefit | (2,028 | ) |  | 2,254 |  |  | 3,319 |
Adjustments to previously accrued taxes | 6,621 |  |  | 5,159 |  |  | (12,537 | )
Change in indefinite reinvestment assertion | 14,566 |  |  | — |  |  | — |
Other (b) | 12,782 |  |  | 2,623 |  |  | 647 |
Provision for income taxes | $ | 116,196 |  |  | $ | 553,334 |  |  | $ | 89,134 |
(a) | For 2018, U.S. Tax Act expense was netted with utilization of carryover tax attributes and current year generated tax attributes.
(b) | For 2018, Other includes $8.1 million of tax credit expiration.
In assessing whether uncertain tax positions should be recognized in its financial statements, Mattel first determines whether it is more-likely-than-not that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. In evaluating whether a tax position has met the more-likely-than-not recognition threshold, Mattel presumes that the position will be examined by the appropriate taxing authority that would have full knowledge of all relevant information. For tax positions that meet the more-likely-than-not recognition threshold, Mattel measures the amount of benefit recognized in the financial statements at the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. Mattel recognizes unrecognized tax benefits in the first financial reporting period in which information becomes available indicating that such benefits will more-likely-than-not be realized. Mattel records a reserve for unrecognized tax benefits for U.S. federal, state, local, and foreign tax positions related primarily to transfer pricing, tax credits claimed, tax nexus, and apportionment. For each reporting period, management applies a consistent methodology to measure unrecognized tax benefits, and all unrecognized tax benefits are reviewed periodically and adjusted as circumstances warrant. Mattel’s measurement of its reserve for unrecognized tax benefits is based on management’s assessment of all relevant information, including prior audit experience, the status of audits, conclusions of tax audits, lapsing of applicable statutes of limitations, identification of new issues, and any administrative guidance or developments. A reconciliation of the reserve for unrecognized tax benefits is as follows:
| For the Year Ended
| December 31, 2018 |  | December 31, 2017 |  | December 31, 2016
| (In thousands)
Unrecognized tax benefits at January 1 | $ | 116,070 |  |  | $ | 109,347 |  |  | $ | 118,099 |
Increases for positions taken in current year | 7,548 |  |  | 4,171 |  |  | 2,925 |
Increases for positions taken in a prior year | 25,239 |  |  | 19,318 |  |  | 921 |
Decreases for positions taken in a prior year | (1,813 | ) |  | (5,637 | ) |  | (1,706 | )
Decreases for settlements with taxing authorities | (1,143 | ) |  | (2,349 | ) |  | (1,097 | )
Decreases for lapses in the applicable statute of limitations | (26,083 | ) |  | (8,780 | ) |  | (9,795 | )
Unrecognized tax benefits at December 31 | $ | 119,818 |  |  | $ | 116,070 |  |  | $ | 109,347 |
Of the $119.8 million of unrecognized tax benefits as of December 31, 2018, $81.7 million would impact the effective tax rate if recognized, of which $38.1 million would result in an increase in the valuation allowance. Mattel recognized an increase of interest and penalties of approximately $8 million in 2018, an increase of $2 million in 2017, and a decrease of $2 million in 2016, related to unrecognized tax benefits, which are reflected in provision for income taxes in the consolidated statements of operations. As of December 31, 2018, Mattel accrued $26.4 million in interest and penalties related to unrecognized tax benefits, all of which would impact the effective tax rate if recognized. As of December 31, 2017, Mattel accrued $18.6 million in interest and penalties related to unrecognized tax benefits, $17.7 million of which would impact the effective tax rate if recognized. Effects of the U.S. Tax Act were required to be accounted for in the period of enactment (the fourth quarter of 2017) for calendar year-end companies. Staff Accounting Bulletin ("SAB") 118 was issued shortly thereafter to address the application of U.S. GAAP in the period of enactment when a company is unable to complete the accounting for certain income tax effects of the U.S. Tax Act, extending the "measurement period" to one year from the enactment date (i.e. extended to the fourth quarter of 2018). Revisions to the tax impact for the period of enactment should be accounted for each period (not to extend beyond one-year) as the estimate is refined. The U.S. Tax Act significantly revises the U.S. corporate income tax by, among other things, lowering the federal corporate income tax rate from 35% to 21% effective January 1, 2018, implementing the territorial tax system, and imposing a transition tax on deemed repatriated earnings of foreign subsidiaries. There was no change in the 2017 tax charge related to the remeasurement of the U.S. net deferred tax assets recorded in 2017. As of the fourth quarter of 2018, at the close of the SAB 118 measurement period, Mattel recorded a $3.7 million tax expense related to the deemed repatriation of accumulated foreign earnings (net of related valuation allowance change). In January 2018, the FASB issued guidance stating that a company must make an accounting policy election of either (i) treating taxes due on future U.S. inclusions in taxable income related to Global Intangible Low-Taxed Income ("GILTI") as a current-period expense when incurred (the "period cost method") or (ii) factoring such amounts into a company’s measurement of its deferred taxes (the "deferred method"). Mattel has elected the period cost method and has considered the estimated 2018 GILTI impact in its 2018 tax expense. On January 1, 2018, Mattel adopted ASU 2016-16, Intra-Entity Transfers of Assets Other Than Inventory, which required Mattel to recognize the income tax effects of intercompany sales and transfers of assets other than inventory in the period in which the transfer occurs. Previously, the income tax effect of intercompany transfers of assets was deferred until the asset was sold to an outside party or otherwise recognized (e.g., depreciated, amortized, impaired). The new guidance requires Mattel to defer only the income tax effects of intercompany transfers of inventory. A cumulative effect adjustment of $9.4 million was recorded as an increase to beginning retained earnings in the first quarter of 2018. In the normal course of business, Mattel is regularly audited by federal, state, local and foreign tax authorities. Mattel remains subject to IRS examination for the 2015 through 2018 tax years. Mattel files multiple state and local income tax returns and remains subject to examination in various jurisdictions, including California for the 2008 through 2018 tax years, New York for the 2014 through 2018 tax years, and Wisconsin for the 2008 through 2018 tax years. Mattel files multiple foreign income tax returns and remains subject to examination in various foreign jurisdictions including Hong Kong for the 2012 through 2018 tax years, Brazil for the 2013 through 2018 tax years, Mexico for the 2013 through 2018 tax years, Netherlands for the 2013 through 2018 tax years, and Russia for the 2016 through 2018 tax years. Based on the current status of federal, state, local, and foreign audits, Mattel believes it is reasonably possible that in the next 12 months, the total unrecognized tax benefits could decrease by $4.3 million related to the settlement of tax audits and/or the expiration of statutes of limitations. The ultimate settlement of any issue with the applicable taxing authority could have a material impact on Mattel’s consolidated financial statements. Mattel's provision for income taxes was $116.2 million in 2018, as compared to $553.3 million in 2017 and $89.1 million in 2016. The 2018 income tax provision included a $14.6 million expense related to changes to Mattel's indefinite reinvestment assertion and a $3.7 million expense related to the deemed repatriation of accumulated foreign earnings (net of related valuation allowance change). The 2017 income tax provision included a net tax expense of $457.1 million, primarily related to the establishment of a valuation allowance in the third quarter of 2017 on U.S. deferred tax assets that will likely not be realized and a provisional estimate of the impact of the U.S. Tax Act related to the remeasurement of U.S. net deferred tax liabilities from 35% to 21% tax rate. The 2016 income tax provision included a net tax benefit of $16.8 million, primarily related to reassessments of prior years’ tax liabilities based on the status of audits and tax filings in various jurisdictions around the world, settlements, enacted tax law changes, and the adoption of ASU 2016-09. Mattel has not recorded a deferred tax liability related to undistributed earnings of its foreign subsidiaries as of December 31, 2018, except for a $14.6 million tax expense recorded in 2018 related to changes to the indefinite reinvestment assertion. Taxes have not been provided on the remaining $4.7 billion of undistributed foreign earnings taxed under the Tax Act. The determination of any incremental tax liability associated with these earnings is not practicable due to the complexity of local country withholding rules and interactions with tax treaties, foreign exchange considerations, and the diversity of state income tax treatment on actual distribution. Mattel will remit reinvested earnings of its foreign subsidiaries for which a deferred tax liability has been recorded when the Company determines that it is advantageous for business operations or cash management purposes.

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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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