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Income Taxes

Anthropic, PBC
Notes to Consolidated Financial Statements
(Continued)

The Company uses the asset and liability method to account for income taxes. Current income tax expense or 
benefit represents the amount of income taxes expected to be payable or refundable for the current year. Under 
this  method,  deferred  income  tax  assets  and  liabilities  are  determined  based  on  differences  between  the 
financial  statement  reporting  and  tax  bases  of  assets  and  liabilities  and  net  operating  loss  and  credit 
carryforwards.  Deferred  tax  assets  and  liabilities  are  measured  using  enacted  tax  rates  applied  to  taxable 
income  in  the  years  in  which  those  temporary  differences  are  expected  to  be  recovered  or  settled.  Valuation 
allowances are established when necessary to reduce deferred tax assets to the amounts that are more-likely-
than-not expected to be realized based on the weighting of positive and negative evidence. Future realization of 
deferred tax assets ultimately depends on the existence of sufficient taxable income of the appropriate character 
(for example, ordinary income or capital gain) within the carryback or carryforward periods available under the 
applicable tax law. The Company regularly reviews the deferred tax assets for recoverability based on historical 
taxable  income,  projected  future  taxable  income,  the  expected  timing  of  the  reversals  of  existing  temporary 
differences and tax planning strategies. The Company’s judgment regarding future profitability may change due 
to many factors, including future market conditions and the ability to successfully execute the business plans 
and/or  tax  planning  strategies.  Should  there  be  a  change  in  the  ability  to  recover  deferred  tax  assets,  the 
Company’s income tax provision would increase or decrease in the period in which the assessment is changed. 
The Company treats Net CFC Tested Income (formerly referred to as Global Intangible Low-Taxed Income or 
“GILTI”) as a period cost.

The Company accounts for uncertain tax positions in accordance with ASC 740-10, Accounting for Uncertainty 
in Income Taxes. The Company recognizes the tax effects of an uncertain tax position only if such position is 
more likely than not to be sustained based solely on its technical merits as of the reporting date and only in an 
amount  more  likely  than  not  to  be  sustained  upon  review  by  the  tax  authorities.  The  Company  recognizes 
accrued  interest  and  penalties  related  to  unrecognized  tax  benefits  in  the  provision  for  income  taxes  in  the 
consolidated statements of operations.

Net Loss per Share

Basic and diluted net loss per share attributable to common stockholders is computed in conformity with the 
two-class  method  required  for  participating  securities.  The  two-class  method  requires  income  available  to 
common stockholders for the period to be allocated between common stock and participating securities based 
upon their respective rights to receive dividends as if all income for the period had been distributed.

The Company considers all series of its redeemable convertible preferred stock to be participating securities as 
the  holders  of  such  stock  have  the  right  to  participate  on  a  pari  passu  basis  in  any  distributions  to  common 
stockholders.

The  holders  of  the  redeemable  convertible  preferred  stock  would  be  entitled  to  dividends  in  preference  to 
common  stockholders,  at  specified  rates,  if  declared.  Any  remaining  dividend  amounts  would  then  be 
distributed  to  the  holders  of  common  stock,  restricted  common  stock,  and  the  holders  of  the  redeemable 
convertible  preferred  stock  on  a  pro-rata  basis  assuming  conversion  of  all  redeemable  convertible  preferred 
stock into common stock. These participating securities do not contractually require the holders of such shares 
to participate in the Company’s losses. As such, net losses for the periods presented were not allocated to the 
Company’s participating securities.

Basic  net  loss  per  share  is  computed  by  dividing  the  net  loss  attributable  to  common  stockholders  by  the 
weighted-average  number  of  shares  of  common  stock  outstanding  during  the  period,  less  shares  subject  to 
repurchase.  The  diluted  net  loss  per  share  is  computed  by  giving  effect  to  all  potentially  dilutive  securities 
outstanding for the period using the treasury stock method or the if-converted method if the effect is dilutive. 
For periods in which the Company reports net losses, diluted net loss per share is the same as basic net loss per 
share, because all potentially dilutive securities are anti-dilutive.

Recently Adopted Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 
(“ASU”)  2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 

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