|9 Months Ended|
Dec. 31, 2020
|Income Tax Disclosure [Abstract]|
During the interim period ended December 31, 2020, the Company estimated its annual effective income tax rate based on projected income from continuing operations, excluding discrete items. In accordance with accounting guidance for interim reporting of income taxes, jurisdictions with a projected loss for the fiscal year for which no tax benefit can be recognized due to a valuation allowance are excluded from the Company’s estimated annual effective income tax rate. The tax impact of such an exclusion could result in fluctuations in the effective tax rate in a particular quarter. In addition, the relationship between the Company’s provision for or benefit from income taxes and the Company’s pre-tax book income can vary significantly from period to period considering, among other factors, (a) the overall level of pre-tax book income, including impairments and asset sales, (b) changes in the blend of income that is taxed based on gross revenues or at high effective tax rates versus pre-tax book income or at low effective tax rates and (c) the Company’s geographical blend of pre-tax book income. Consequently, the Company’s income tax expense or benefit does not change proportionally with changes in pre-tax book income or loss and may make quarterly comparisons not meaningful.
During the three and nine months ended December 31, 2020 (Successor), the Company’s effective tax rate was (30.7)% and 383.4%, respectively. The Company’s effective income tax rate for the three and nine months ended December 31, 2020 (Successor) fluctuated primarily due to the Company’s impairment of foreign investments that do not generate an income tax benefit; adjustment to valuation allowances against future realization of deductible business interest expense and nondeductible professional fees related to the Merger. During the three and nine months ended December 31, 2020 (Successor), the Company’s provision for income taxes were $13.4 million and $18.7 million, respectively.
For the Predecessor periods the Company prepared the provision for income taxes using a discrete effective tax rate method due to small changes in estimated annual pre-tax income or loss potentially resulting in significant changes in the estimated annual effective tax rate. For the two months ended December 31, 2019 (Successor), the Company estimated the post-emergence annual effective tax rate from continuing operations and applied this rate to the two-month post-emergence
losses from continuing operations. In addition, the Company separately calculated the tax impact of unusual or infrequent items. The tax impacts of such unusual or infrequent items were treated discretely in the quarter in which they occurred.
During the two months ended December 31, 2019 (Successor), one month ended October 31, 2019 (Predecessor), and seven months ended October 31, 2019 (Predecessor), the Company’s effective tax rates were (8.2)%, 2.7% and 5.8%, respectively.
The benefit of an uncertain tax position taken or expected to be taken on an income tax return is recognized in the condensed consolidated financial statements at the largest amount that is more likely than not to be sustained upon examination by the relevant taxing authority. Interest and penalties, if any, related to uncertain tax positions would be recorded in interest expense and other expense, respectively.
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.
Reference 1: http://www.xbrl.org/2003/role/disclosureRef