Summary
Monster Beverage Corporation (MNST) filed an 8-K on January 16, 2018, to disclose the estimated impact of the Tax Cuts and Jobs Act (Tax Act) enacted on December 22, 2017. The most significant financial implication discussed is the mandatory re-valuation of deferred tax assets and liabilities due to the reduction in the U.S. federal corporate tax rate from 35% to 21%. The company estimates this re-valuation will result in a reduction of its net deferred tax assets by approximately $55 million, which will be recognized in its fourth quarter 2017 earnings.
Key Highlights
- 1Impact of Tax Cuts and Jobs Act (Tax Act) on Monster Beverage Corp.
- 2Reduction in U.S. federal corporate tax rate from 35% to 21% effective January 1, 2018.
- 3Estimated $55 million reduction in net deferred tax assets due to re-valuation.
- 4The estimated reduction will be recorded in the fourth quarter of 2017 earnings.
- 5Anticipated future effective tax rate in the mid-twenties starting in Q1 2018.
- 6Company notes that actual impacts may vary materially due to uncertainties and further analysis of the Tax Act.
Frequently Asked Questions
This 8-K filing is primarily to disclose the estimated financial impact of the Tax Cuts and Jobs Act (Tax Act), which was enacted in late December 2017 and significantly reduced the U.S. federal corporate tax rate.
Monster Beverage estimates that the re-valuation of its deferred tax assets and liabilities, required by U.S. GAAP due to the lower corporate tax rate, will result in a reduction of its net deferred tax assets by approximately $55 million. This impact will be recorded in the company's fourth quarter 2017 earnings.
Following the Tax Act's implementation, Monster Beverage estimates its future effective tax rate will be in the mid-twenties, beginning in the first quarter of 2018. This is a significant reduction from the previous rate.
No, the company cautions that the actual impact on net deferred tax assets and the future effective tax rate may vary materially from these estimates. This is due to several uncertainties, including the completion of their 2017 financial statements and the need for further analysis and clarification of the Tax Act.