Broadcom's tax expense volatility in 2024 was primarily caused by higher amortization expenses and restructuring charges related to the VMware acquisition1:
- Amortization Expenses: These expenses are a result of the acquisition of VMware. When companies acquire other firms, they often have to record the acquisition at a higher amount than the cash paid, recognizing the value of the acquired company's assets and intellectual property. This difference is amortized over time as an expense. The higher amortization expenses in 2024 reflect the increased value assigned to the acquisition.
- Restructuring Charges: These charges are also a direct consequence of the VMware acquisition. When companies merge, they often need to reorganize their operations, which can involve severance payments, restructuring of operations, and other one-time expenses. These charges are recognized in the financial year in which they are incurred.
In summary, Broadcom's tax expense volatility in 2024 was due to the company's acquisition activities, specifically the VMware acquisition, which led to higher amortization expenses and restructuring charges.
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