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SEC Filings

10-Q
TERRAFORM GLOBAL, INC. filed this Form 10-Q on 08/09/2017
Entire Document
 

8. INCOME TAXES
The income tax provision consisted of the following:
 
Three Months Ended
June 30,
Six Months Ended
 June 30,
(In thousands, except effective tax rate)
2017
 
2016
2017
 
2016
(Loss) income before income tax expense
$
(15,260
)
 
$
7,742

$
(14,748
)
 
$
2,352

Income tax expense
2,485

 
2,061

4,950

 
2,919

Effective tax rate
(16.3
)%
 
26.6
%
(33.6
)%
 
124.1
%
The Company records income tax expense each quarter using its best estimate of the full year’s effective tax rate. The Company regularly reviews its deferred tax assets for realizability, taking into consideration all available evidence, both positive and negative, including cumulative losses, projected future pre-tax and taxable income (losses), the expected timing of the reversals of existing temporary differences and the expected impact of tax planning strategies.
As of June 30, 2017, TerraForm Global, Inc. owned 64.8% of Global LLC and consolidates the results of Global LLC through its controlling interest. The Company records SunEdison's 35.2% ownership of Global LLC as a non-controlling interest in the financial statements. Global LLC is treated as a partnership for income tax purposes.
For the six months ended June 30, 2017, the overall effective tax rate was different than the statutory rate of 35.0% primarily due to valuation allowances, tax holiday benefits, taxes on non-operating income in Thailand and presumed profits taxes in Brazil. As of June 30, 2017, most jurisdictions were in a net deferred tax asset position. A valuation allowance is recorded against the deferred tax assets where appropriate, primarily because of the historical losses in those jurisdictions.
9. DERIVATIVES
As part of the Company’s risk management strategy, the Company has entered into derivative instruments which include interest rate swaps, cross currency swaps, and foreign currency contracts to mitigate interest rate and foreign currency exposure. If the Company elects to do so and if the instrument meets the criteria specified in ASC 815, Derivatives and Hedging, the Company designates its derivative instruments as cash flow hedges. The Company enters into interest rate swap agreements in order to hedge the variability of expected future cash interest payments. Cross currency swaps are used to reduce risks arising from the change in fair value of certain foreign currency denominated assets and liabilities in order to minimize the impact of foreign currency fluctuations on operating results. Foreign currency contracts are used to mitigate the economic and financial market risks of fluctuations in foreign currency exchange rates. The Company does not use derivative instruments for speculative purposes.
Activities related to derivative instruments were reported in the line items as of and for the periods indicated, as follows:
(In thousands)
 
 
Fair Value As of
Type of Instrument
Balance Sheet Classification
 
June 30, 2017
 
December 31,
2016
Derivatives designated as hedging:
 
 
 
 
Interest rate swaps
Other liabilities, net
 
$
(4,654
)
 
$
(2,237
)
 
Accumulated other comprehensive loss
 
4,654

 
2,237

Cross currency swaps
Other assets, net
 
34,646

 
41,752

 
Accumulated other comprehensive loss
 
5,450

 
6,688

 
 
 
 
 
 
Derivatives not designated as hedging:
 


 


Interest rate swaps
Other liabilities
 
$
(1,871
)
 
$
(68
)
Foreign currency forward contracts
Other liabilities
 
(18,073
)
 
(13,299
)

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