Forward-looking pro forma earnings per share excludes the effect of certain discrete tax items and foreign currency gains and losses.
As discussed in the Pro Forma Net Income (Earnings) Per Share section above, management believes that net income (earnings) per share before the impact of foreign currency gains or losses is an important measure in order to permit a consistent comparison of the Company’s performance between periods. The estimated impact of such foreign currency gains and losses cannot be reasonably estimated on a forward-looking basis due to the high variability and low visibility with respect to non-operating foreign currency exchange gains and losses and the related tax effects of such gains and losses. The impact of such foreign currency gains and losses, net of tax effects, was $0.16 per share for the 13-weeks ended April 1, 2017.
Management believes certain discrete tax items may not be reflective of income tax expense incurred related to current period earnings. Therefore, in order to permit consistent comparison between periods, earnings per share before the effect of such discrete tax items is an important measure. In fiscal 2017, management believes certain discrete tax items will be recognized on a GAAP basis that will have an effect on the EPS comparability between periods:
- The fiscal 2017 pro forma EPS excludes certain tax effects from share-based compensation as a result of Accounting Standards Update No. 2016-09, Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Accounting (“ASU 2016-09”), which may have a material effect on the GAAP-basis effective tax rate. However, the Company is unable to project these amounts due to the dependency of this item on the underlying share price of the Company. The tax effect of ASU 2016-09 was immaterial for the 13-weeks ended April 1, 2017.
- The fiscal 2017 pro forma EPS excludes the $169 million income tax benefit resulting from the revaluation of certain Switzerland deferred tax assets as discussed in the Pro Forma Effective Tax Rate section above. The impact of this discrete tax item was ($0.89) per share for the 13-weeks ended April 1, 2017.
While management expects the above to have a significant impact on comparability, management is unable to determine if additional significant discrete tax items will be identified in fiscal 2017.