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Income taxes | 12 Months Ended
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Jan. 29, 2022
Income Tax Disclosure [Abstract] |
Income taxes | Income taxes
(in millions) | Fiscal 2022 |  | Fiscal 2021 |  | Fiscal 2020
Income (loss) before income taxes: |  |  |  |  |
– US | $ | 665.9 |  |  | $ | (173.4) |  |  | $ | 32.3 |
– Foreign | 218.5 |  |  | 83.7 |  |  | 97.4 |
Total income (loss) before income taxes | $ | 884.4 |  |  | $ | (89.7) |  |  | $ | 129.7 |
Current taxation: |  |  |  |  |
– US | $ | 108.1 |  |  | $ | (222.2) |  |  | $ | 3.0 |
– Foreign | 7.6 |  |  | 0.7 |  |  | 1.9 |
Deferred taxation: |  |  |  |  |
– US | 8.4 |  |  | 158.4 |  |  | 17.0 |
– Foreign | (9.6) |  |  | (11.4) |  |  | 2.3 |
Total income tax expense (benefit) | $ | 114.5 |  |  | $ | (74.5) |  |  | $ | 24.2 |
As the statutory rate of corporation tax in Bermuda is 0%, the differences between the US federal income tax rate and the effective tax rates for Signet have been presented below:
| Fiscal 2022 |  | Fiscal 2021 |  | Fiscal 2020
US federal income tax rates | 21.0 | % |  | 21.0 | % |  | 21.0 | %
US state income taxes | 3.3 | % |  | 4.1 | % |  | 3.1 | %
Differences between US federal and foreign statutory income tax rates | (0.1) | % |  | 0.1 | % |  | 1.3 | %
Expenditures permanently disallowable for tax purposes, net of permanent tax benefits | — | % |  | (4.7) | % |  | 3.3 | %
Impact of global reinsurance arrangements | (2.2) | % |  | 14.1 | % |  | (20.3) | %
Impact of global financing arrangements | (0.6) | % |  | — | % |  | — | %
Impairment of goodwill | — | % |  | (2.4) | % |  | 7.5 | %
CARES Act | (1.4) | % |  | 111.9 | % |  | — | %
Valuation allowance | (6.5) | % |  | (55.5) | % |  | — | %
Other items | (0.6) | % |  | (5.5) | % |  | 2.8 | %
Effective tax rate | 12.9 | % |  | 83.1 | % |  | 18.7 | %
In Fiscal 2022, the Company’s effective tax rate was lower than the US federal income tax rate primarily due to the reversal of the valuation allowance recorded against certain state deferred tax assets, as well as additional benefits realized from the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) and the benefits from global reinsurance arrangements. During Fiscal 2022, the Company evaluated evidence to consider the reversal of the valuation allowance on its state net deferred tax assets and determined that there was sufficient positive evidence to conclude that it is more likely than not its state deferred tax assets are realizable. In determining the likelihood of future realization of the state deferred tax assets, the Company considered both positive and negative evidence. As a result, the Company believed that the weight of the positive evidence, including the cumulative income position in the three most recent years and forecasts for a sustained level of future taxable income, was sufficient to overcome the weight of the negative evidence, and thus recorded a $49.8 million tax benefit to release the valuation allowance against the Company's state deferred tax assets during Fiscal 2022. In Fiscal 2021, Signet’s effective tax rate was higher than the US federal income tax rate primarily due to the benefit from the CARES Act enacted on March 27, 2020, and the impact of Signet’s global reinsurance arrangement partially offset by the unfavorable impact of a valuation allowance recorded against certain state deferred tax assets and the impairment of goodwill which was nondeductible for tax purposes. The CARES Act provides a technical correction to the Tax Cuts and Jobs Act allowing fiscal year tax filers with federal net operating losses arising in the 2017/2018 tax year to be carried back two years to tax years that had a higher enacted tax rates which resulted in a tax benefit of $74.0 million. The CARES Act also provides for net operating losses incurred in Fiscal 2021 to be carried back five years to tax years with higher enacted tax rates which resulted in an anticipated tax benefit of $26.4 million, with an additional benefit recognized in the third quarter of Fiscal 2022 of $12.4 million. In addition, during Fiscal 2021, based on weighing all positive and negative evidence, management determined it was more likely than not that it would not be able to realize certain state deferred tax assets primarily related to state net operating losses and recorded a valuation allowance of $49.8 million. Deferred taxes Deferred tax assets (liabilities) consisted of the following:
| January 29, 2022 |  | January 30, 2021
(in millions) | Assets |  | (Liabilities) |  | Total |  | Assets |  | (Liabilities) |  | Total
Intangible assets | $ | — |  |  | $ | (77.0) |  |  | $ | (77.0) |  |  | $ | — |  |  | $ | (41.7) |  |  | $ | (41.7) |
US property, plant and equipment | — |  |  | (60.2) |  |  | (60.2) |  |  | — |  |  | (55.3) |  |  | (55.3) |
Foreign property, plant and equipment | 7.1 |  |  | — |  |  | 7.1 |  |  | 7.3 |  |  | — |  |  | 7.3 |
Inventory valuation | — |  |  | (237.8) |  |  | (237.8) |  |  | — |  |  | (230.4) |  |  | (230.4) |
Revenue deferral | 88.6 |  |  | — |  |  | 88.6 |  |  | 95.6 |  |  | — |  |  | 95.6 |
Derivative instruments | — |  |  | — |  |  | — |  |  | 0.3 |  |  | — |  |  | 0.3 |
Lease assets | — |  |  | (261.9) |  |  | (261.9) |  |  | — |  |  | (295.1) |  |  | (295.1) |
Lease liabilities | 284.3 |  |  | — |  |  | 284.3 |  |  | 331.5 |  |  | — |  |  | 331.5 |
Deferred compensation | 7.7 |  |  | — |  |  | 7.7 |  |  | 6.7 |  |  | — |  |  | 6.7 |
Retirement benefit obligations | 1.5 |  |  | — |  |  | 1.5 |  |  | — |  |  | (9.8) |  |  | (9.8) |
Share-based compensation | 8.4 |  |  | — |  |  | 8.4 |  |  | 4.4 |  |  | — |  |  | 4.4 |
Other temporary differences | 42.4 |  |  | — |  |  | 42.4 |  |  | 57.2 |  |  | — |  |  | 57.2 |
Net operating losses and foreign tax credits | 84.3 |  |  | — |  |  | 84.3 |  |  | 56.5 |  |  | — |  |  | 56.5 |
Value of capital losses | 16.9 |  |  | — |  |  | 16.9 |  |  | 13.9 |  |  | — |  |  | 13.9 |
Total gross deferred tax assets (liabilities) | $ | 541.2 |  |  | $ | (636.9) |  |  | $ | (95.7) |  |  | $ | 573.4 |  |  | $ | (632.3) |  |  | $ | (58.9) |
Valuation allowance | (27.9) |  |  | — |  |  | (27.9) |  |  | (83.9) |  |  | — |  |  | (83.9) |
Deferred tax assets (liabilities) | $ | 513.3 |  |  | $ | (636.9) |  |  | $ | (123.6) |  |  | $ | 489.5 |  |  | $ | (632.3) |  |  | $ | (142.8) |
Disclosed as: |  |  |  |  |  |  |  |  |  |  |
Non-current assets |  |  |  |  | $ | 37.3 |  |  |  |  |  |  | $ | 16.4 |
Non-current liabilities |  |  |  |  | (160.9) |  |  |  |  |  |  | (159.2) |
Deferred tax assets (liabilities) |  |  |  |  | $ | (123.6) |  |  |  |  |  |  | $ | (142.8) |
As of January 29, 2022, Signet had deferred tax assets associated with net operating loss carry forwards of $17.9 million, of which $9.3 million are subject to ownership change limitations rules under Section 382 of the Internal Revenue Code (“IRC”) and various US state regulations and expire between 2022 and 2039. Deferred tax assets associated with foreign tax credits also subject to Section 382 of the IRC total $2.1 million as of January 29, 2022, which expire between 2022 and 2024 and foreign net operating loss carryforwards of $23.9 million, which expire between 2022 and 2040. Additionally, Signet had an AMT Credit Carryforward of $40.5 million. Signet had foreign capital loss carryforward deferred tax assets of $14.2 million (Fiscal 2021: $11.2 million), which can be carried forward over an indefinite period and US capital loss carryforwards of $2.7 million which expire in 2022, both of which are only available to offset future capital gains. The decrease in the total valuation allowance in Fiscal 2022 was $56.0 million. The valuation allowance as of January 29, 2022 primarily relates to foreign tax credits, capital and foreign operating loss carry forwards that, in the judgment of management, are not more likely than not to be realized. Refer to further discussion above. Signet believes that it is more likely than not that deferred tax assets not subject to a valuation allowance as of January 29, 2022 will be offset where permissible by deferred tax liabilities or realized on future tax returns, primarily from the generation of future taxable income. Uncertain tax positions The following table summarizes the activity related to the Company’s unrecognized tax benefits for US federal, US state and non-US tax jurisdictions:
(in millions) | Fiscal 2022 |  | Fiscal 2021 |  | Fiscal 2020
Unrecognized tax benefits, beginning of period | $ | 25.4 |  |  | $ | 23.5 |  |  | $ | 18.1 |
Increases related to current year tax positions | 2.0 |  |  | 1.0 |  |  | 2.0 |
Increases related to prior year tax positions | 0.4 |  |  | 3.4 |  |  | 6.0 |
Lapse of statute of limitations | (2.9) |  |  | (2.6) |  |  | (2.6) |
Difference on foreign currency translation | — |  |  | 0.1 |  |  | — |
Unrecognized tax benefits, end of period | $ | 24.9 |  |  | $ | 25.4 |  |  | $ | 23.5 |
As of January 29, 2022, Signet had approximately $24.9 million of unrecognized tax benefits in respect to uncertain tax positions. The unrecognized tax benefits relate primarily to intercompany deductions including financing arrangements and intra-group charges which are subject to different and changing interpretations of tax law. Signet recognizes accrued interest and, where appropriate, penalties related to unrecognized tax benefits within income tax expense (benefit) in the consolidated statements of operations. As of January 29, 2022, Signet had accrued interest of $4.5 million and $0.6 million of accrued penalties. If all of these unrecognized tax benefits were settled in Signet’s favor, the effective income tax rate would be favorably impacted by $27.9 million. Over the next twelve months management believes that it is reasonably possible that there could be a reduction of some or all of the unrecognized tax benefits as of January 29, 2022 due to settlement of the uncertain tax positions with the tax authorities. Signet has business activity in all states within the US and files income tax returns for the US federal jurisdiction and all applicable states. Signet also files income tax returns in the UK, Canada and certain other foreign jurisdictions. Signet is subject to examinations by the US federal and state and Canadian tax authorities for tax years ending after November 1, 2011 and is subject to examination by the UK tax authority for tax years ending after February 1, 2014.

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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=121826272&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=122134291&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=121826272&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=122134291&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=121826272&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 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI http://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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