XML 36 R17.htm IDEA: XBRL DOCUMENT
v3.10.0.1

Income Taxes | 12 Months Ended
--- | ---
Nov. 04, 2018
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes Components of Income (Loss) from Continuing Operations Before Income Taxes As a result of the Redomiciliation Transaction on April 4, 2018, the following references to domestic activities represent the U.S. for fiscal year 2018 and Singapore for fiscal years 2017 and 2016, respectively. The following table presents the components of income (loss) from continuing operations before income taxes for financial reporting purposes:
|  | Fiscal Year
|  | 2018 |  | 2017 |  | 2016
|  | (In millions)
Domestic income (loss) |  | $ | (705 | ) |  | $ | 2,102 |  |  | $ | 1,365 |
Foreign income (loss) |  | 5,250 |  |  | (277 | ) |  | (2,472 | )
Income (loss) from continuing operations before income taxes |  | $ | 4,545 |  |  | $ | 1,825 |  |  | $ | (1,107 | )
Components of Provision for (Benefit from) Income Taxes The benefit from income taxes in fiscal year 2018 was primarily due to income tax benefits recognized from the enactment of the 2017 Tax Reform Act and the Redomiciliation Transaction. The 2017 Tax Reform Act makes significant changes to the U.S. Internal Revenue Code, including, but not limited to, a decrease in the U.S. corporate tax rate from 35% to 21% effective for tax years beginning after December 31, 2017, the transition of U.S. international taxation from a worldwide tax system to a participation exemption regime, and the transition tax on the mandatory deemed repatriation of accumulated non-U.S. earnings of U.S. controlled foreign corporations, or the Transition Tax. On December 22, 2017, the SEC issued Staff Accounting Bulletin No. 118, or SAB 118, to address the application of GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the 2017 Tax Reform Act. The benefit from income taxes below for fiscal year 2018 represents reasonable estimates of the effects of the 2017 Tax Reform Act for which our analysis is not yet complete. As we complete our analysis of the 2017 Tax Reform Act, including collecting, preparing, and analyzing necessary information, performing and refining calculations, and obtaining additional guidance from standard setting and regulatory bodies on the 2017 Tax Reform Act, we may record adjustments to our benefit from income taxes, which may be material. In accordance with SAB 118, our accounting for the tax effects of the 2017 Tax Reform Act will be completed during the measurement period, which should not extend beyond one year from the enactment date. At November 4, 2018, there were no provisions for which we were unable to record a reasonable estimate of the impact. However, all income tax effects are provisional, including accounting for global intangible low tax income and foreign derived intangible income deductions, in addition to those effects discussed below. As a result of the 2017 Tax Reform Act, we recorded a total provisional benefit of $7,278 million. This provisional benefit included $7,212 million related to the Transition Tax, which was primarily due to a reduction of $10,457 million in our federal deferred income tax liabilities on accumulated non-U.S. earnings, partially offset by $2,133 million of federal provisional long-term Transaction Tax payable and $1,112 million of unrecognized federal tax benefits related to the Transition Tax. The provisional benefit also included $66 million related to the remeasurement of certain deferred tax assets and liabilities, which were based on the tax rates at which they were expected to be reversed in the future as a result of the 2017 Tax Reform Act. Additionally, in connection with the Brocade Merger, we established $846 million of net deferred tax liabilities on the excess of book basis over the tax basis of acquired identified intangible assets and investments in certain foreign subsidiaries that have not been indefinitely reinvested, partially offset by acquired tax attributes. We also recognized discrete benefits from the recognition of $181 million of excess tax benefits from stock-based awards that were vested or exercised during fiscal year 2018. The impact of the Redomiciliation Transaction and the related internal reorganizations included tax benefits of $1,162 million from the remeasurement of withholding taxes on undistributed earnings, partially offset by a $167 million tax provision on foreign earnings and profits subject to U.S. tax. The income tax provision for fiscal year 2017 was primarily due to profit before tax and a discrete expense of $76 million resulting from entity reorganizations partially offset by the recognition of $273 million of excess tax benefits from stock-based awards that vested or were exercised during fiscal year 2017 and, to a lesser extent, the recognition of previously unrecognized tax benefits primarily as a result of audit settlements. The income tax provision for fiscal year 2016 was primarily the result of tax associated with our undistributed earnings, partially offset by income tax benefits from losses from continuing operations and the recognition of previously unrecognized tax benefits as a result of audit settlements. In addition, we obtained several tax incentives from the Singapore Economic Development Board, an agency of the Government of Singapore, which provide that qualifying income earned in Singapore is subject to tax incentive or reduced rates of Singapore income tax. Each tax incentive was separate and distinct from the others, and may be granted, withheld, extended, modified, truncated, complied with or terminated independently without any effect on the other incentives. During fiscal year 2018, one of our tax incentives was no longer in effect due to reorganizations made in connection with the Redomiciliation Transaction. Subject to our compliance with the conditions specified in these incentives and legislative developments, the remaining Singapore tax incentive is presently expected to expire in fiscal year 2020, subject in certain cases to potential extensions, which we may or may not be able to obtain. We also obtained a tax holiday on our qualifying income in Malaysia, which is scheduled to expire in fiscal year 2028. The tax holiday that we negotiated in Malaysia is also subject to our compliance with various operating and other conditions. If we cannot, or elect not to, comply with the conditions specified, we will lose the related tax benefits and we could be required to refund previously realized material tax benefits. The effect of these tax incentives and tax holiday was to increase the benefit from income taxes by approximately $590 million and increase diluted net income per share by $1.37 for fiscal year 2018. For fiscal years 2017 and 2016, the effect of these tax incentives and tax holiday, in the aggregate, was to reduce the overall provision for income taxes by approximately $237 million and $169 million, respectively, increase diluted net income per share by $0.56 for fiscal year 2017, and reduce diluted net loss per share by $0.44 for fiscal year 2016. Significant components of the provision for (benefit from) income taxes are as follows:
|  | Fiscal Year
|  | 2018 |  | 2017 |  | 2016
|  | (In millions)
Current tax expense: |  |  |  |  |  |  |  |  |
Domestic |  | $ | 293 |  |  | $ | 112 |  |  | $ | 59 |
Foreign |  | 171 |  |  | 158 |  |  | 165 |
|  | 464 |  |  | 270 |  |  | 224 |
Deferred tax expense (benefit): |  |  |  |  |  |  |  |  |
Domestic |  | (8,769 | ) |  | (1 | ) |  | 9 |
Foreign |  | 221 |  |  | (234 | ) |  | 409 |
|  | (8,548 | ) |  | (235 | ) |  | 418 |
Total provision for (benefit from) income taxes |  | $ | (8,084 | ) |  | $ | 35 |  |  | $ | 642 |
Rate Reconciliation
|  | Fiscal Year
|  | 2018 |  | 2017 |  | 2016
Statutory tax rate |  | 21.0 | % |  | 17.0 | % |  | 17.0 | %
2017 Tax reform |  | (160.1 | ) |  | — |  |  | — |
Withholding tax |  | (25.6 | ) |  | — |  |  | — |
Foreign income taxed at different rates |  | (16.3 | ) |  | (0.8 | ) |  | (89.7 | )
Excess tax benefits from stock-based compensation |  | (4.0 | ) |  | — |  |  | — |
Research and development credit |  | (2.9 | ) |  | — |  |  | — |
Deemed inclusion of foreign earnings |  | 4.7 |  |  | — |  |  | — |
Tax holidays and concessions |  | — |  |  | (13.0 | ) |  | 15.3 |
Other, net |  | 5.3 |  |  | (1.3 | ) |  | (0.6 | )
Actual tax rate on income (loss) before income taxes |  | (177.9 | )% |  | 1.9 | % |  | (58.0 | )%
Summary of Deferred Income Taxes
|  | November 4, 2018 |  | October 29, 2017
|  | (In millions)
Deferred income tax assets: |  |  |  |  |  |
Depreciation and amortization |  | $ | 7 |  |  | $ | 8 |
Employee benefits |  | 119 |  |  | 145 |
Employee stock awards |  | 159 |  |  | 180 |
Net operating loss carryovers and credit carryovers |  | 1,421 |  |  | 2,356 |
Other deferred income tax assets |  | 100 |  |  | 70 |
Gross deferred income tax assets |  | 1,806 |  |  | 2,759 |
Less valuation allowance |  | (1,347 | ) |  | (1,447 | )
Deferred income tax assets |  | 459 |  |  | 1,312 |
Deferred income tax liabilities: |  |  |  |
Depreciation and amortization |  | 316 |  |  | 96 |
Other deferred income tax liabilities |  | 12 |  |  | 12 |
Foreign earnings not indefinitely reinvested |  | 16 |  |  | 11,202 |
Deferred income tax liabilities |  | 344 |  |  | 11,310 |
Net deferred income tax assets (liabilities) |  | $ | 115 |  |  | $ | (9,998 | )
Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and their basis for income tax purposes and the tax effects of net operating losses and tax credit carryforwards. The decrease in foreign earnings not indefinitely reinvested results from the 2017 Tax Reform Act and the Redomiciliation Transaction. The following table presents net deferred income tax assets (liabilities) as reflected on the consolidated balance sheets:
|  | November 4, 2018 |  | October 29, 2017
|  | (In millions)
Other long-term assets |  | $ | 284 |  |  | $ | 21 |
Other long-term liabilities |  | (169 | ) |  | (10,019 | )
Net long-term income tax assets (liabilities) |  | $ | 115 |  |  | $ | (9,998 | )
The decrease in the valuation allowance from $1,447 million in fiscal year 2017 to $1,347 million in fiscal year 2018 was primarily due to restructuring activities, offset by increases due to the Brocade Merger, foreign deferred tax assets arising from foreign credits, and losses not expected to be realized. As of November 4, 2018, we had U.S. federal net operating loss carryforwards of $120 million, U.S. state net operating loss carryforwards of $2,434 million and other foreign net operating loss carryforwards of $884 million. U.S. federal and state net operating loss carryforwards begin to expire in fiscal year 2019. The other foreign net operating losses expire in various fiscal years beginning 2019. As of November 4, 2018, we had $349 million and $1,532 million of U.S. federal and state research and development tax credits, respectively, which if not utilized, begin to expire in fiscal year 2019. The U.S. Tax Reform Act of 1986 limits the use of net operating loss and tax credit carryforwards in the case of an “ownership change” of a corporation or separate return loss year limitations. Any ownership changes, as defined, may restrict utilization of carryforwards. As of November 4, 2018, we had approximately $120 million and $349 million of federal net operating loss and tax credit carryforwards, respectively, in the U.S. subject to an annual limitation. We do not expect these limitations to result in any permanent loss of our tax benefits. Uncertain Tax Positions Gross unrecognized tax benefits increased by $1,774 million during fiscal year 2018, resulting in gross unrecognized tax benefits of $4,030 million as of November 4, 2018. The increase in gross unrecognized tax benefits was primarily due to the recognition of uncertain tax positions of $1,112 million related to the Transition Tax, offset by a reduction of our federal deferred income tax liabilities on accumulated non-U.S. earnings. The increase in gross unrecognized tax benefits was also due to the Redomiciliation Transaction, and to a lesser extent, the Brocade Merger. Gross unrecognized tax benefits increased by $273 million during fiscal year 2017, resulting in gross unrecognized tax benefits of $2,256 million as of October 29, 2017. The increase in gross unrecognized tax benefits was primarily a result of restructuring activities in fiscal year 2017. During fiscal year 2017, we recognized $121 million of previously unrecognized tax benefits as a result of the audit settlement with taxing authorities, and $12 million as a result of the expiration of the statute of limitations for certain audit periods. Gross unrecognized tax benefits increased by $1,405 million during fiscal year 2016, resulting in gross unrecognized tax benefits of $1,983 million as of October 30, 2016. The increase in gross unrecognized tax benefits was primarily a result of the Broadcom Merger in fiscal year 2016. We recognize interest and penalties related to unrecognized tax benefits within provision for income taxes in the accompanying consolidated statements of operations. We recognized approximately $59 million of expense related to interest and penalties in fiscal year 2018. Accrued interest and penalties were included within other long-term liabilities on the consolidated balance sheets. As of November 4, 2018 and October 29, 2017, the combined amount of cumulative accrued interest and penalties was approximately $190 million and $132 million, respectively. The increase in cumulative accrued interest and penalties was primarily a result of an increase in interest accrual from various unrecognized tax benefit items. The following table reconciles the beginning and ending balance of gross unrecognized tax benefits:
|  | Fiscal Year
|  | 2018 |  | 2017 |  | 2016
|  | (In millions)
Beginning balance |  | $ | 2,256 |  |  | $ | 1,983 |  |  | $ | 578 |
Lapse of statute of limitations |  | (20 | ) |  | (12 | ) |  | (8 | )
Increases in balances related to tax positions taken during prior periods (including those related to acquisitions made during the year) |  | 361 |  |  | 47 |  |  | 1,325 |
Decreases in balances related to tax positions taken during prior periods |  | (289 | ) |  | (32 | ) |  | (1 | )
Increases in balances related to tax positions taken during current period |  | 1,726 |  |  | 391 |  |  | 138 |
Decreases in balances related to settlement with taxing authorities |  | (4 | ) |  | (121 | ) |  | (49 | )
Ending balance |  | $ | 4,030 |  |  | $ | 2,256 |  |  | $ | 1,983 |
A portion of our unrecognized tax benefits will affect our effective tax rate if they are recognized upon favorable resolution of the uncertain tax positions. As of November 4, 2018, approximately $4,220 million of the unrecognized tax benefits including accrued interest and penalties would affect our effective tax rate. As of October 29, 2017, approximately $2,388 million of the unrecognized tax benefits including accrued interest and penalties would have affected our effective tax rate. We are subject to U.S. income tax examination for fiscal years 2010 and later. Certain of our acquired companies are subject to tax examinations in major jurisdictions outside of the U.S. for fiscal years 2012 and later. It is possible that we may recognize up to $468 million of our existing unrecognized tax benefits within the next 12 months as a result of lapses of the statute of limitations for certain audit periods and/or audit examinations expected to be completed within the next 12 months.

X
- References No definition available. + Details
Name: | us-gaap_IncomeTaxDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration