v2.4.0.6

Income Taxes | 12 Months Ended
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Jul. 28, 2012
Income Taxes | 15. Income Taxes (a) Provision for Income Taxes The provision for income taxes consists of the following (in millions):
Years Ended |  | July 28, 2012 |  |  | July 30, 2011 |  |  | July 31, 2010 |
Federal: |  |  |  |  |  |  |  |  |  |  |  |
Current |  | $ | 1,836 |  |  | $ | 914 |  |  | $ | 1,469 |
Deferred |  |  | (270 | ) |  |  | (168 | ) |  |  | (435 | )
|  |  | 1,566 |  |  |  | 746 |  |  |  | 1,034 |
State: |  |  |  |  |  |  |  |  |  |  |  |
Current |  |  | 119 |  |  |  | 49 |  |  |  | 186 |
Deferred |  |  | (53 | ) |  |  | 83 |  |  |  | — |
|  |  | 66 |  |  |  | 132 |  |  |  | 186 |
Foreign: |  |  |  |  |  |  |  |  |  |  |  |
Current |  |  | 477 |  |  |  | 529 |  |  |  | 470 |
Deferred |  |  | 9 |  |  |  | (72 | ) |  |  | (42 | )
|  |  | 486 |  |  |  | 457 |  |  |  | 428 |
Total |  | $ | 2,118 |  |  | $ | 1,335 |  |  | $ | 1,648 |
Income before provision for income taxes consists of the following (in millions):
Years Ended |  | July 28, 2012 |  |  | July 30, 2011 |  |  | July 31, 2010 |
United States |  | $ | 3,235 |  |  | $ | 1,214 |  |  | $ | 1,102 |
International |  |  | 6,924 |  |  |  | 6,611 |  |  |  | 8,313 |
Total |  | $ | 10,159 |  |  | $ | 7,825 |  |  | $ | 9,415 |
The items accounting for the difference between income taxes computed at the federal statutory rate and the provision for income taxes consist of the following:
Years Ended |  | July 28, 2012 |  |  | July 30, 2011 |  |  | July 31, 2010 |
Federal statutory rate |  |  | 35.0 | % |  |  | 35.0 | % |  |  | 35.0 | %
Effect of: |  |  |  |  |  |  |  |  |  |  |  |
State taxes, net of federal tax benefit |  |  | 0.4 |  |  |  | 1.5 |  |  |  | 1.4 |
Foreign income at other than U.S. rates |  |  | (15.6 | ) |  |  | (19.4 | ) |  |  | (19.3 | )
Tax credits |  |  | (0.4 | ) |  |  | (3.0 | ) |  |  | (0.5 | )
Transfer pricing adjustment related to share-based compensation |  |  | — |  |  |  | — |  |  |  | (1.7 | )
Nondeductible compensation |  |  | 1.8 |  |  |  | 2.5 |  |  |  | 2.0 |
Other, net |  |  | (0.4 | ) |  |  | 0.5 |  |  |  | 0.6 |
Total |  |  | 20.8 | % |  |  | 17.1 | % |  |  | 17.5 | %
During fiscal 2011, the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 reinstated the U.S. federal R&D tax credit through December 31, 2011, retroactive to January 1, 2010. As a result, the tax provision in fiscal 2011 includes a tax benefit of $65 million related to the R&D tax credit for fiscal 2010. During fiscal 2010, the U.S. Court of Appeals for the Ninth Circuit (the “Ninth Circuit”) withdrew its prior holding and reaffirmed the 2005 U.S. Tax Court ruling in Xilinx, Inc. v. Commissioner. This final decision impacted the tax treatment of share-based compensation expenses for the purpose of determining intangible development costs under a company’s research and development cost-sharing arrangement. While the Company was not a named party to the case, this decision resulted in a change in the Company’s tax benefits recognized in its financial statements. As a result of the decision, the Company recognized in fiscal 2011 a combined tax benefit of $724 million, of which $158 million was recorded as a reduction to the provision for income taxes and $566 million was recorded as an increase to additional paid-in capital. U.S. income taxes and foreign withholding taxes associated with the repatriation of earnings of foreign subsidiaries were not provided for on a cumulative total of $41.3 billion of undistributed earnings for certain foreign subsidiaries as of the end of fiscal 2012. The Company intends to reinvest these earnings indefinitely in its foreign subsidiaries. If these earnings were distributed to the United States in the form of dividends or otherwise, or if the shares of the relevant foreign subsidiaries were sold or otherwise transferred, the Company would be subject to additional U.S. income taxes (subject to an adjustment for foreign tax credits) and foreign withholding taxes. Determination of the amount of unrecognized deferred income tax liability related to these earnings is not practicable. As a result of certain employment and capital investment actions, the Company’s income in certain foreign countries is subject to reduced tax rates and in some cases is wholly exempt from taxes. A portion of these tax incentives will expire at the end of fiscal 2015, and the majority of the remaining balance will expire at the end of fiscal 2025. The gross income tax benefit attributable to tax incentives were estimated to be $1.3 billion ($0.24 per diluted share) in fiscal 2012, of which, approximately $0.5 billion ($0.09 per diluted share) is based on tax incentives that will expire at the end of fiscal 2015. As of the end of fiscal 2011 and fiscal 2010, the gross income tax benefits attributable to tax incentives were estimated to be $1.3 billion ($0.24 per diluted share) and $1.7 billion ($0.30 per diluted share), for the respective years. The gross income tax benefits for the respective years were partially offset by accruals of U.S. income taxes on undistributed earnings. (b) Unrecognized Tax Benefits The aggregate changes in the balance of gross unrecognized tax benefits were as follows (in millions):
Years Ended |  | July 28, 2012 |  |  | July 30, 2011 |  |  | July 31, 2010 |
Beginning balance |  | $ | 2,948 |  |  | $ | 2,677 |  |  | $ | 2,816 |
Additions based on tax positions related to the current year |  |  | 155 |  |  |  | 374 |  |  |  | 246 |
Additions for tax positions of prior years |  |  | 54 |  |  |  | 93 |  |  |  | 60 |
Reductions for tax positions of prior years |  |  | (226 | ) |  |  | (60 | ) |  |  | (250 | )
Settlements |  |  | (41 | ) |  |  | (56 | ) |  |  | (140 | )
Lapse of statute of limitations |  |  | (71 | ) |  |  | (80 | ) |  |  | (55 | )
Ending balance |  | $ | 2,819 |  |  | $ | 2,948 |  |  | $ | 2,677 |
As of July 28, 2012, $2.4 billion of the unrecognized tax benefits would affect the effective tax rate if realized. During fiscal 2012, the Company recognized $146 million of net interest expense and $21 million of penalties. During fiscal 2011, the Company recognized $38 million of net interest expense and $9 million of penalties. The Company’s total accrual for interest and penalties was $381 million and $214 million as of the end of fiscal 2012 and 2011, respectively. The Company is no longer subject to U.S. federal income tax audit for returns covering tax years through fiscal 2001. With limited exceptions, the Company is no longer subject to foreign income tax audits for returns covering tax years through fiscal 2000 and state and local income tax audits for returns covering tax years through fiscal 1997. During fiscal 2010, the Ninth Circuit withdrew its prior holding and reaffirmed the 2005 U.S. Tax Court ruling in Xilinx, Inc. v. Commissioner. As a result of this final decision in fiscal 2010, the Company decreased the amount of gross unrecognized tax benefits by approximately $220 million and decreased the amount of accrued interest by $218 million. The Company regularly engages in discussions and negotiations with tax authorities regarding tax matters in various jurisdictions. The Company believes it is reasonably possible that certain federal, foreign, and state tax matters may be concluded in the next 12 months. Specific positions that may be resolved include issues involving transfer pricing and various other matters. The Company estimates that the unrecognized tax benefits at July 28, 2012 could be reduced by approximately $1.1 billion in the next 12 months. (c) Deferred Tax Assets and Liabilities The following table presents the breakdown between current and noncurrent net deferred tax assets (in millions):
|  | July 28, 2012 |  |  | July 30, 2011 |
Deferred tax assets—current |  | $ | 2,294 |  |  | $ | 2,410 |
Deferred tax liabilities—current |  |  | (123 | ) |  |  | (131 | )
Deferred tax assets—noncurrent |  |  | 2,270 |  |  |  | 1,864 |
Deferred tax liabilities—noncurrent |  |  | (133 | ) |  |  | (264 | )
Total net deferred tax assets |  | $ | 4,308 |  |  | $ | 3,879 |
The components of the deferred tax assets and liabilities are as follows (in millions):
|  | July 28, 2012 |  |  | July 30, 2011 |
ASSETS |  |  |  |  |  |  |  |
Allowance for doubtful accounts and returns |  | $ | 433 |  |  | $ | 413 |
Sales-type and direct-financing leases |  |  | 162 |  |  |  | 178 |
Inventory write-downs and capitalization |  |  | 127 |  |  |  | 160 |
Investment provisions |  |  | 261 |  |  |  | 226 |
IPR&D, goodwill, and purchased intangible assets |  |  | 119 |  |  |  | 106 |
Deferred revenue |  |  | 1,618 |  |  |  | 1,634 |
Credits and net operating loss carryforwards |  |  | 721 |  |  |  | 713 |
Share-based compensation expense |  |  | 1,059 |  |  |  | 1,084 |
Accrued compensation |  |  | 481 |  |  |  | 507 |
Other |  |  | 583 |  |  |  | 590 |
Gross deferred tax assets |  |  | 5,564 |  |  |  | 5,611 |
Valuation allowance |  |  | (60 | ) |  |  | (82 | )
Total deferred tax assets |  |  | 5,504 |  |  |  | 5,529 |
LIABILITIES |  |  |  |  |  |  |  |
Purchased intangible assets |  |  | (809 | ) |  |  | (997 | )
Depreciation |  |  | (131 | ) |  |  | (298 | )
Unrealized gains on investments |  |  | (222 | ) |  |  | (265 | )
Other |  |  | (34 | ) |  |  | (90 | )
Total deferred tax liabilities |  |  | (1,196 | ) |  |  | (1,650 | )
Total net deferred tax assets |  | $ | 4,308 |  |  | $ | 3,879 |
As of July 28, 2012, the Company’s federal, state, and foreign net operating loss carryforwards for income tax purposes were $321 million, $1.5 billion, and $240 million, respectively. A significant amount of the federal net operating loss carryforwards relate to acquisitions and, as a result, is limited in the amount that can be recognized in any one year. If not utilized, the federal net operating loss will begin to expire in fiscal 2019 and the foreign and state net operating loss carryforwards will begin to expire in fiscal 2013. The Company has provided a valuation allowance of $55 million for deferred tax assets related to foreign net operating losses that are not expected to be realized. As of July 28, 2012, the Company’s federal, state and foreign tax credit carryforwards for income tax purposes were approximately $6 million, $562 million and $4 million, respectively. The federal and foreign tax credit carryforwards will begin to expire in fiscal 2019 and 2027, respectively. The majority of state tax credits can be carried forward indefinitely.

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- 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://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 136, 172 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 43, 44, 45, 46, 47, 48, 49 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=6881521&loc=d3e23780-122690 + Details
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