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SEC Filings

EQUINIX INC filed this Form 10-Q on 11/02/2018
Entire Document

Basis of Presentation and Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared by Equinix, Inc. ("Equinix" or the "Company") and reflect all adjustments, consisting only of normal recurring adjustments, which in the opinion of management are necessary to fairly state the financial position and the results of operations for the interim periods presented. The condensed consolidated balance sheet data as of December 31, 2017 has been derived from audited consolidated financial statements as of that date. The condensed consolidated financial statements have been prepared in accordance with the regulations of the Securities and Exchange Commission ("SEC"), but omit certain information and footnote disclosure necessary to present the statements in accordance with generally accepted accounting principles in the United States of America ("U.S. GAAP"). For further information, refer to the Consolidated Financial Statements and Notes thereto included in Equinix’s Form 10-K as filed with the SEC on February 26, 2018. Results for the interim periods are not necessarily indicative of results for the entire fiscal year.
The accompanying unaudited condensed consolidated financial statements include the accounts of Equinix and its subsidiaries, including the acquisitions of Metronode from April 18, 2018, Infomart Dallas from April 2, 2018, Itconic from October 9, 2017, the Zenium data center from October 6, 2017, the Verizon data center business from May 1, 2017, and the IO UK data center operating business from February 3, 2017. All intercompany accounts and transactions have been eliminated in consolidation.
Income Taxes
The Company elected to be taxed as a real estate investment trust for federal income tax purposes ("REIT") beginning with its 2015 taxable year. As a result, the Company may deduct the distributions made to its stockholders from taxable income generated by the Company and its qualified REIT subsidiaries ("QRSs"). The Company’s dividends paid deduction generally eliminates the U.S. taxable income of the Company and its QRSs, resulting in no U.S. income tax due. However, the Company's taxable REIT subsidiaries ("TRSs") will continue to be subject to income taxes on any taxable income generated by them. In addition, the foreign operations of the Company will continue to be subject to local income taxes regardless of whether the foreign operations are operated as QRSs or TRSs.
The Company provides for income taxes during interim periods based on the estimated effective tax rate for the year. The effective tax rate is subject to change in the future due to various factors such as the operating performance of the Company, tax law changes and future business acquisitions.
The Company's effective tax rates were 14.0% and 12.9% for the nine months ended September 30, 2018 and 2017, respectively. The increase in the effective tax rate for the nine months ended September 30, 2018 as compared to the same period in 2017 is primarily due to increased profits in higher tax rate jurisdictions, which is partially offset by a release of valuation allowance as a result of a legal entity reorganization in the Company’s Americas region during the nine months ended September 30, 2018.
The Company’s accounting for deferred taxes involves weighing positive and negative evidence relating to the realizability of deferred tax assets in each tax jurisdiction. A release of valuation allowance results in the recognition of certain deferred tax assets and a decrease to income tax expense for the period in which the event occurs. The Company recognized a tax benefit of approximately $33.0 million in the nine months ended September 30, 2018 as a result of concluding that the valuation allowances were no longer required in certain foreign jurisdictions after considering such evidence as the nature, frequency, severity of current and cumulative financial reporting losses, and sources of future taxable incomes and tax planning strategies.