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Income Taxes | 6 Months Ended
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Mar. 31, 2019
Income Tax Disclosure [Abstract] |
Income Taxes |
13. Income Taxes
In calculating the provision for income taxes, Adient uses an estimate of the annual effective tax rate based upon the facts and circumstances known at each interim period. On a quarterly basis, the actual effective tax rate is adjusted, as appropriate, based on changes in facts and circumstances, if any, as compared to those forecasted at the beginning of the fiscal year and each interim period thereafter. For the three and six months ended March 31, 2019, Adient’s income tax expense (benefit) was $64 million equating to an effective tax rate of (103%) and $74 million equating to an effective tax rate of (180%), respectively. The three and six month income tax expense was higher than the statutory rate impact of 12.5% primarily due to the recognition of a valuation allowance in Poland and the impact of recognizing no tax benefit for losses in jurisdictions with valuation allowances. The six month income tax expense was partially offset by a tax rate change benefit in China. For the three and six months ended March 31, 2018, Adient’s income tax expense (benefit) was $(28) million equating to an effective tax rate of 16% and $237 million equating to an effective tax rate of (232%), respectively. The three month income tax benefit was higher than the statutory rate impact of 12.5% primarily due to the goodwill impairment charge and foreign exchange. The six month income tax expense was higher than the statutory rate impact primarily due to the charge to recognize the impact of the U.S. tax reform legislation. Valuation Allowances As a result of Adient's second quarter fiscal 2019 analysis of the realizability of its worldwide deferred tax assets, and after considering tax planning initiatives and other positive and negative evidence (including the long-lived asset impairment recorded in the second quarter of fiscal 2019), Adient determined that it was more likely than not that deferred tax assets within certain Poland entities would not be realized and recorded a net income tax expense of $43 million in the second quarter of fiscal 2019 to establish a valuation allowance. Adient reviews the realizability of its deferred tax assets on a quarterly basis, or whenever events or changes in circumstances indicate that a review is required. In determining the requirement for a valuation allowance, the historical and projected financial results of the legal entity or combined group recording the net deferred tax asset are considered, along with any other positive or negative evidence. All of the factors that Adient considers in evaluating whether and when to establish or release all or a portion of the deferred tax asset valuation allowance involve significant judgment. Since future financial results may differ from previous estimates, periodic adjustments to Adient's valuation allowances may be necessary. As a result of the external refinancing that occurred in the third quarter of fiscal 2019, Adient will reevaluate its internal financing structure. Adient may conclude that it is more likely than not that a material portion of our deferred tax assets will not be realized as a result of this evaluation. As such, it is possible that a change to valuation allowances in certain jurisdictions may result in a material increase to income tax expense during the next twelve months. In addition, the effective tax rate in subsequent periods would also increase. Uncertain Tax Positions At March 31, 2019, Adient had gross tax effected unrecognized tax benefits of $280 million. If recognized, $131 million of Adient's unrecognized tax benefits would impact the effective tax rate. Total net accrued interest at March 31, 2019 was approximately $8 million (net of tax benefit). The interest and penalties accrued during the three and six months ended March 31, 2019 was not material. Adient recognizes interest and penalties related to unrecognized tax benefits as a component of income tax expense. Impacts of Tax Legislation and Change in Statutory Tax Rates During the first quarter of fiscal 2019, Adient completed its accounting for the Tax Cuts and Jobs Act Base Erosion and Anti-avoidance Tax valuation allowance resulting in no change to the $100 million income tax impact estimated in fiscal 2018. During the first quarter of fiscal 2019, Guangzhou Adient Automotive Seating Co., Ltd. ("GAAS”) was approved for High and New Tech Enterprise status for the three-year period of 2018 to 2020, thereby reducing their tax rate from 25% to 15%. As a result, a $7 million income tax benefit was recorded on the reduction of deferred tax liabilities and a reduction of 2018 calendar year income taxes. Other tax legislation was adopted during the quarter in various jurisdictions, which did not have a material impact on Adient’s consolidated financial statements. Other Tax Matters During the second quarter of fiscal 2019, Adient recognized a pre-tax impairment charge on long-lived assets of $66 million. Refer to Note 12 "Restructuring and Impairment Costs," of the notes to the consolidated financial statements for additional information. The tax benefit associated with the impairment charge was $2 million, which was negatively impacted by geographic mix and Adient’s current tax position in these jurisdictions. During the second quarter of fiscal 2018, Adient recognized a pre-tax goodwill impairment charge of $299 million related to the former SS&M segment. Refer to Note 12, "Restructuring and Impairment Costs," of the notes to the consolidated financial statements for additional information. The tax benefit associated with the goodwill impairment charge was $20 million.

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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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