XML 30 R18.htm IDEA: XBRL DOCUMENT
v3.19.2

Income Taxes | 6 Months Ended
--- | ---
Jun. 30, 2019
Components of Income Tax Expense (Benefit), Continuing Operations [Abstract] |
Income Taxes | Income Taxes Valaris plc, our parent company, is domiciled and resident in the U.K. Our subsidiaries conduct operations and earn income in numerous countries and are subject to the laws of taxing jurisdictions within those countries. The income of our non-U.K. subsidiaries is generally not subject to U.K. taxation. Income tax rates imposed in the tax jurisdictions in which our subsidiaries conduct operations vary, as does the tax base to which the rates are applied. In some cases, tax rates may be applicable to gross revenues, statutory or negotiated deemed profits or other bases utilized under local tax laws, rather than to net income. Therefore, we generally incur income tax expense in periods in which we operate at a loss. Our drilling rigs frequently move from one taxing jurisdiction to another to perform contract drilling services. In some instances, the movement of our drilling rigs among taxing jurisdictions will involve the transfer of ownership of the drilling rigs among our subsidiaries. As a result of frequent changes in the taxing jurisdictions in which our drilling rigs are operated and/or owned, changes in the overall level of our income and changes in tax laws, our consolidated effective income tax rate may vary substantially from one reporting period to another. Income tax rates and taxation systems in the jurisdictions in which our subsidiaries conduct operations vary and our subsidiaries are frequently subjected to minimum taxation regimes. In some jurisdictions, tax liabilities are based on gross revenues, statutory or negotiated deemed profits or other factors, rather than on net income and our subsidiaries are frequently unable to realize tax benefits when they operate at a loss. Accordingly, during periods of declining profitability, our consolidated income tax expense generally does not decline proportionally with consolidated income, which results in higher effective income tax rates. Furthermore, we generally continue to incur income tax expense in periods in which we operate at a loss on a consolidated basis. Historically, we calculated our provision for income taxes during interim reporting periods by applying the estimated annual effective tax rate for the full fiscal year to pre-tax income or loss, excluding discrete items, for the reporting period. We determined that since small changes in estimated pre-tax income or loss would result in significant changes in the estimated annual effective tax rate, the historical method would not provide a reliable estimate of income taxes for the three-month and six-month periods ended June 30, 2019 and 2018. We used a discrete effective tax rate method to calculate income taxes for the three-month and six-month periods ended June 30, 2019 and 2018. We will continue to evaluate income tax estimates under the historical method in subsequent quarters and employ a discrete effective tax rate method if warranted. Discrete income tax benefit for the three-month period ended June 30, 2019 was $1.2 million and was primarily attributable to the resolution of prior period tax matters. Discrete income tax benefit for the three-month period ended June 30, 2018 was $2.3 million and was primarily attributable to U.S. tax reform and a restructuring transaction, partially offset by discrete tax expense related to the repurchase and redemption of senior notes and unrecognized tax benefits associated with tax positions taken in prior years. Excluding the aforementioned discrete tax items, income tax expense for the three-month periods ended June 30, 2019 and 2018 was $33.8 million and $27.0 million, respectively. The 6.8 million increase in income tax expense as compared to the prior year quarter was primarily due to income tax associated with Rowan's operations from the Transaction Date. Discrete income tax benefit for the six-month period ended June 30, 2019 was $0.6 million and was primarily attributable to unrecognized tax benefits associated with tax positions taken in prior years and the resolution of other prior period tax matters. Discrete income tax benefit for the six-month period ended June 30, 2018 was $11.2 million and was primarily attributable to U.S. tax reform and a restructuring transaction, partially offset by discrete tax expense related to repurchase and redemption of senior notes, the effective settlement of liabilities for unrecognized tax benefits associated with tax positions taken in prior years and rig sales. Excluding the aforementioned discrete tax items, income tax expense for the six-month periods ended June 30, 2019 and 2018 was $64.7 million and $54.3 million, respectively. The $10.4 million increase in income tax expense as compared to the prior year period was primarily due to income tax associated with Rowan's operations from the Transaction Date and an increase in the U.S. base erosion anti-abuse tax rate and an increase in the relative components of our earnings generated in tax jurisdictions with higher tax rates. Recent Tax Assessments During the second quarter of 2019, the Luxembourg tax authorities issued aggregate tax assessments totaling approximately $159 million plus interest related to tax years 2014, 2015 and 2016 for several of Rowan’s Luxembourg subsidiaries. Although we are vigorously contesting these assessments, we have recorded an estimated liability for uncertain tax positions taken during these years as part of our acquisition accounting for the Rowan Transaction, which could change materially as we complete our evaluation of the filing positions. See Note 3 for additional information. Although the outcome of such assessments and related administrative proceedings cannot be predicted with certainty, an unfavorable outcome could result in a material adverse effect on our financial position, operating results and cash flows. During the second quarter of 2019, the Australian tax authorities issued aggregate tax assessments totaling approximately $69 million plus interest related to the examination of certain of our tax returns for years 2011 through 2016. We believe our tax returns are materially correct as filed, and we are vigorously contesting these assessments. Although the outcome of such assessments and related administrative proceedings cannot be predicted with certainty, we do not expect these matters to have a material adverse effect on our financial position, operating results and cash flows. Other Matters In July 2019, we began executing a series of restructuring transactions that we plan to complete in August 2019. In connection with this restructuring, we expect to recognize an approximate $900 million deferred tax asset for a U.S. capital loss, which will be subject to a full valuation allowance because we more-likely-than-not will be unable to realize a future benefit from such capital loss.

X
- References No definition available. + Details
Name: | us-gaap_ComponentsOfIncomeTaxExpenseBenefitContinuingOperationsAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- 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
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration