DFIN 2017 Annual Report

Notes to the Consolidated and Combined Financial Statements (in millions, except per share data, unless otherwise indicated) On December 22, 2017, the SEC staff issued Staff Accounting Bulletin No. 118 (“SAB 118”), which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period of one year from the Tax Act enactment date for companies to complete their accounting. In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the Act for which the accounting is complete. To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply its accounting on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act. As a result of the reduction in the U.S. corporate income tax rate from 35% to 21% effective January 1, 2018, the Company has revalued its U.S. deferred tax assets and liabilities as of December 31, 2017. The Company has recorded a reduction in the value of its net U.S. deferred tax asset of approximately $8.2 million, which has been recorded as additional deferred income tax expense in the Company’s consolidated statement of operations for the year ended December 31, 2017 and represents an income tax rate increase of 14.8%. Due to the transition to a territorial tax system under the Tax Act, the Company will be deemed to repatriate its foreign subsidiaries’ untaxed accumulated earnings and pay a mandatory U.S. federal tax (“the transition tax”) of 15.5% on the portion of the earnings that are in cash and cash equivalents and 8% on the portion of earnings that are in non-cash and non-cash equivalent assets. The Company has estimated this tax liability (federal and state) to be approximately $14.2 million which has been recorded as income tax expense in the consolidated statement of operations for the year ended December 31, 2017 and represents an income tax rate increase of 25.3%. In accordance with SAB 118, the impact of the revaluation of deferred tax assets ($8.2 million) and the transition tax ($14.2 million) are recorded in the Company’s financial statements for the year ended December 31, 2017 as provisional amounts as the Company was able to reasonably estimate the impact of these items. As the Company continues to analyze the full effects of the Tax Act on its financial statements, the impact of the Tax Act may differ from these provisional estimates due to, among other things, changes in interpretations and assumptions the Company has made, Department of the U.S. Treasury Internal Revenue Service (“IRS”) guidance and regulations that may be issued and actions the Company may take as a result. Pursuant to SAB 118, the Company will complete the accounting for these items within the twelve month measurement period. As available under the Tax Act, the Company will make an election to pay the transition tax liability in installments over eight years. Consequently, $13.1 million of this liability has been recorded as noncurrent taxes payable and $1.1 million as current taxes payable in the Company’s consolidated balance sheet as of December 31, 2017. Along with the change to a territorial tax system, the Tax Act creates the global intangible low-taxed income (“GILTI”) provision. The GILTI provision imposes a tax on foreign income in excess of a deemed return on tangible assets of foreign subsidiary corporations. The Company may be subject to the GILTI tax in a given year, but currently does not expect that it should have a material impact to the Company’s tax provision. The determination of whether the Company is subject to the GILTI provision will be an annual analysis of several factors under the provision, including the amount of foreign income generated by the Company’s foreign subsidiaries and whether the Company has income subject to the GILTI tax, which may change from year to year. In January 2018, the Financial Accounting Standards Board (“FASB”) released guidance on the accounting for GILTI tax, which allows an accounting policy election for companies to either account for deferred taxes related to GILTI inclusions or to treat any taxes on GILTI inclusions as period costs. The Company has not yet adopted its accounting policy with respect to GILTI tax; however, will do so within the twelve month measurement period pursuant to SAB 118. F-22