Income Taxes

6 Months Ended

Jun. 30, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Mattel's provision for income taxes was $26.6 million and $50.5 million for the three and six months ended June 30, 2022, respectively, and $20.6 million and $40.9 million for the three and six months ended June 30, 2021, respectively. During the three and six months ended June 30, 2022, Mattel recognized a net discrete tax expense of $2.4 million and net discrete tax expense of $14.6 million, respectively, primarily related to income taxes recorded on a discrete basis in various jurisdictions and reassessments of tax liabilities from prior years. During the three and six months ended June 30, 2021, Mattel

recognized a net discrete tax expense of $12.2 million and net discrete tax expense of $19.5 million, respectively, primarily related to income taxes recorded on a discrete basis in various jurisdictions, tax rate changes impacting deferred tax assets, and reassessments of tax liabilities from prior years.

Evaluating the need for and the amount of a valuation allowance for deferred tax assets often requires significant judgment and extensive analysis of all available evidence to determine whether it is more-likely-than-not that these assets will be realizable. Mattel routinely assesses the positive and negative evidence for this realizability, including the evaluation of sustained profitability and three years of cumulative pretax income for each tax jurisdiction. For the three and six months ended June 30, 2021, Mattel had a valuation allowance on U.S. federal, state, and certain foreign deferred tax assets. During the second half of 2021, Mattel released the valuation allowances related to U.S. federal, state, and certain foreign deferred tax assets, except for certain tax assets that are primarily expected to expire before utilization. Valuation allowance releases resulted in the recognition of $540.8 million of deferred tax assets as of December 31, 2021. Mattel's valuation allowance position has remained unchanged as of June 30, 2022.

In the normal course of business, Mattel is regularly audited by federal, state, and foreign tax authorities. Based on the current status of federal, state, and foreign audits, Mattel believes it is reasonably possible that in the next 12 months, the total unrecognized tax benefits could decrease by approximately $18.4 million related to the settlement of tax audits and/or the expiration of statutes of limitations. The ultimate settlement of any particular issue with the applicable taxing authority could have a material impact on Mattel's consolidated financial statements.

During the three and six months ended June 30, 2022, Mattel has recorded on a discrete basis a deferred tax liability on certain foreign subsidiaries of approximately $7.1 million and $14.8 million, respectively. For remaining undistributed foreign earnings, Mattel has not provided any deferred taxes with respect to items such as foreign withholding taxes, state income tax or foreign exchange gain or loss that would be due when cash is actually repatriated to the U.S. because those foreign earnings are considered indefinitely reinvested in the business or may be remitted substantially free of any additional local taxes. The determination of any incremental tax liability associated with these earnings is not practicable due to the complexity of local country withholding rules and interactions with tax treaties, foreign exchange considerations, and the diversity of state income tax treatment on actual distribution. Mattel will remit reinvested earnings of its foreign subsidiaries for which a deferred tax liability has been recorded when Mattel determines that it is advantageous for business operations or cash management purposes.