Ansys Announces Financial Results With Record Q4 and FY 2021 ACV and Revenue

This change in the Internal Revenue Code will require us to capitalize our annual deduction for R&E, whereas in the past we elected to deduct R&E expenditures in the current year. This change results in an increase to tax payments of $60.0 - $80.0 million in 2022 based on a capitalized R&E deduction schedule, whereas in the past, we would have avoided the increase to tax payments with a full R&E expenditure deduction in the current year.

Illustrative Examples

If for the year ended December 31, 2022 a company had $100 million of R&E expenditures in the U.S. and a 21% tax rate, the reduction in cash tax payments under the prior regulation (ability to elect to deduct R&E in current year) would be $21.0 million and under the amended regulation (R&E capitalized and amortized) would be $2.1 million, resulting in an increase to tax payments of $18.9 million, as illustrated in the table below:

Illustrative Example A-1
(Compares year one impact of prior regulation to amended regulation)



(in millions)
R&E Expense Election
(Prior Regulation)
  R&E Capitalized and Amortized
(Amended Regulation)
  Net Decrease to Operating Cash Flow in Year 1
R&E Expenditure $ 100.0  $ 100.0  
R&E Income Tax Deduction $ 100.0  $ 10.0  
Cash flow benefit from tax deduction $ 21.0  $ 2.1  $ (18.9 )

Additionally, under the amended regulation, the amortization schedule of capitalized U.S. R&E expenditures would be 10% in year 1, 20% in years 2 - 5, and the remaining 10% in year 6 , as illustrated in the table below:

Illustrative Example A-2
(Amortization impact in year one through year six under amended regulation)

(in millions)
  2022   2023   2024   2025   2026   2027   Total
R&E Expenditure $ 100.0                       $ 100.0
R&E Income Tax Deduction $ 10.0   $ 20.0   $ 20.0   $ 20.0   $ 20.0   $ 10.0   $ 100.0
Cash flow benefit from tax deduction $ 2.1   $ 4.2   $ 4.2   $ 4.2   $ 4.2   $ 2.1   $ 21.0

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