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Income Taxes | 12 Months Ended
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Sep. 03, 2015
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes
For the year ended |  | 2015 |  | 2014 |  | 2013
Income before income taxes, net income attributable to noncontrolling interests and equity in net income (loss) of equity method investees: |  |  |  |  |  |
Foreign |  | $ | 2,431 |  |  | $ | 2,619 |  |  | $ | 839 |
U.S. |  | 178 |  |  | 114 |  |  | 446 |
|  | $ | 2,609 |  |  | $ | 2,733 |  |  | $ | 1,285 |
Income tax (provision) benefit: |  |  |  |  |  |
Current: |  |  |  |  |  |
Foreign |  | $ | (93 | ) |  | $ | (46 | ) |  | $ | (17 | )
State |  | (1 | ) |  | (2 | ) |  | — |
U.S. federal |  | 6 |  |  | (3 | ) |  | — |
|  | (88 | ) |  | (51 | ) |  | (17 | )
Deferred: |  |  |  |  |  |
Foreign |  | (85 | ) |  | (81 | ) |  | 9 |
U.S. federal |  | 15 |  |  | 4 |  |  | — |
State |  | 1 |  |  | — |  |  | — |
|  | (69 | ) |  | (77 | ) |  | 9 |
Income tax (provision) benefit |  | $ | (157 | ) |  | $ | (128 | ) |  | $ | (8 | )
Income tax (provision) benefit computed using the U.S. federal statutory rate reconciled to income tax (provision) benefit was as follows:
For the year ended |  | 2015 |  | 2014 |  | 2013
U.S. federal income tax (provision) benefit at statutory rate |  | $ | (913 | ) |  | $ | (956 | ) |  | $ | (450 | )
Change in unrecognized tax benefits |  | (118 | ) |  | (152 | ) |  | 2 |
Foreign tax rate differential |  | 515 |  |  | 474 |  |  | 339 |
Change in valuation allowance |  | 260 |  |  | 544 |  |  | (418 | )
Noncontrolling investment transactions |  | 57 |  |  | — |  |  | — |
Tax credits |  | 53 |  |  | 11 |  |  | 36 |
State taxes, net of federal benefit |  | 19 |  |  | (39 | ) |  | 6 |
Gain on MMJ Acquisition |  | — |  |  | (11 | ) |  | 520 |
Transaction costs related to the MMJ Acquisition |  | — |  |  | — |  |  | (38 | )
Other |  | (30 | ) |  | 1 |  |  | (5 | )
Income tax (provision) benefit |  | $ | (157 | ) |  | $ | (128 | ) |  | $ | (8 | )
We operate in tax jurisdictions, including Singapore and Taiwan, where our earnings are indefinitely reinvested and are taxed at lower effective tax rates than the U.S. statutory rate. We operate in a number of locations outside the U.S., including Singapore and, to a lesser extent, Taiwan, where we have tax incentive agreements that are, in part, conditional upon meeting certain business operations and employment thresholds. The effect of tax incentive arrangements, which expire in whole or in part at various dates through 2030, reduced our tax provision for 2015, 2014, and 2013 by $338 million (benefitting our diluted earnings per share by $0.29), $286 million ($0.24 per diluted share), and $141 million ($0.13 per diluted share), respectively. Deferred income taxes reflect the net tax effects of temporary differences between the bases of assets and liabilities for financial reporting and income tax purposes as well as carryforwards. Deferred tax assets and liabilities consist of the following:
As of |  | 2015 |  | 2014
Deferred tax assets: |  |  |  |
Net operating loss and tax credit carryforwards |  | $ | 2,869 |  |  | $ | 3,162 |
Accrued salaries, wages and benefits |  | 143 |  |  | 152 |
Other accrued liabilities |  | 97 |  |  | 113 |
Property, plant and equipment |  | — |  |  | 284 |
Other |  | 86 |  |  | 104 |
Gross deferred tax assets |  | 3,195 |  |  | 3,815 |
Less valuation allowance |  | (2,051 | ) |  | (2,443 | )
Deferred tax assets, net of valuation allowance |  | 1,144 |  |  | 1,372 |
Deferred tax liabilities: |  |  |  |
Debt discount |  | (207 | ) |  | (291 | )
Unremitted earnings on certain subsidiaries |  | (162 | ) |  | (115 | )
Product and process technology |  | (43 | ) |  | (29 | )
Other |  | (57 | ) |  | (67 | )
Deferred tax liabilities |  | (469 | ) |  | (502 | )
Net deferred tax assets |  | $ | 675 |  |  | $ | 870 |
Reported as: |  |  |  |
Current deferred tax assets (included in other current assets) |  | $ | 104 |  |  | $ | 228 |
Noncurrent deferred tax assets |  | 597 |  |  | 816 |
Current deferred tax liabilities (included in accounts payable and accrued expenses) |  | (4 | ) |  | (4 | )
Noncurrent deferred tax liabilities (included in other noncurrent liabilities) |  | (22 | ) |  | (170 | )
Net deferred tax assets |  | $ | 675 |  |  | $ | 870 |
As of September 3, 2015, we had a valuation allowance of $1.16 billion against substantially all U.S. net deferred tax assets, primarily related to net operating loss carryforwards. The valuation allowance is based on our assessment of the deferred tax assets that are more likely than not to be realized. As of September 3, 2015, we had partial valuation allowances of $710 million for Japan and $177 million for our other foreign subsidiaries against net deferred tax assets, primarily related to net operating loss carryforwards. As of September 3, 2015, we had $3.81 billion of net operating loss carryforwards in Japan of which $2.19 billion is subject to a valuation allowance. Our valuation allowance decreased $392 million in 2015 primarily due to the utilization of U.S. and foreign net operating losses as well as adjustments based on management's assessment of the amount of foreign net operating losses that are more likely than not to be realized. We have a full valuation allowance for our net deferred tax asset associated with our U.S. operations. Management continues to evaluate future projected financial performance to determine whether such performance is sufficient evidence to support a reduction in or reversal of the valuation allowances. The amount of the deferred tax asset considered realizable could be adjusted if significant positive evidence increases. Income taxes on U.S. operations for 2015 and 2014 were substantially offset by changes in the valuation allowance. As of September 3, 2015, our federal, state, and foreign net operating loss carryforward amounts and expiration periods as reported to tax authorities, were as follows:
Year of Expiration |  | U.S. Federal |  | State |  | Japan |  | Other Foreign |  | Total
2016 - 2020 |  | $ | — |  |  | $ | 103 |  |  | $ | 1,311 |  |  | $ | 1,011 |  |  | $ | 2,425 |
2021 - 2025 |  | — |  |  | 265 |  |  | 2,499 |  |  | 294 |  |  | 3,058 |
2026 - 2030 |  | 2,022 |  |  | 1,028 |  |  | — |  |  | — |  |  | 3,050 |
2031 - 2035 |  | 1,999 |  |  | 652 |  |  | — |  |  | — |  |  | 2,651 |
Indefinite |  | — |  |  | — |  |  | — |  |  | 30 |  |  | 30 |
|  | $ | 4,021 |  |  | $ | 2,048 |  |  | $ | 3,810 |  |  | $ | 1,335 |  |  | $ | 11,214 |
As of September 3, 2015, our federal and state tax credit carryforward amounts and expiration periods as reported to tax authorities, were as follows:
Year of Tax Credit Expiration |  | Federal |  | State |  | Total
2016 - 2020 |  | $ | 20 |  |  | $ | 65 |  |  | $ | 85 |
2021 - 2025 |  | 99 |  |  | 43 |  |  | 142 |
2026 - 2030 |  | 65 |  |  | 61 |  |  | 126 |
2031 - 2035 |  | 119 |  |  | — |  |  | 119 |
Indefinite |  | — |  |  | 39 |  |  | 39 |
|  | $ | 303 |  |  | $ | 208 |  |  | $ | 511 |
We have not recognized deferred tax assets of $307 million for excess tax benefits that arose directly from tax deductions related to equity compensation greater than amounts recognized for financial reporting. These excess stock compensation benefits will be credited to additional capital if realized. We use the "with and without" method, as described in ASC 740, for purposes of determining when excess tax benefits have been realized. Provision has been made for deferred taxes on undistributed earnings of non-U.S. subsidiaries to the extent that dividend payments from such companies are expected to result in additional tax liabilities. Remaining undistributed earnings of $6.96 billion as of September 3, 2015 have been indefinitely reinvested; therefore, no provision has been made for taxes due on approximately $8.52 billion of the excess of the financial reporting amount over the tax basis of investments in foreign subsidiaries that are indefinitely reinvested. Generally, this amount becomes taxable upon a repatriation of assets from the subsidiary or a sale or liquidation of the subsidiary. Determination of the amount of unrecognized deferred tax liabilities related to investments in these foreign subsidiaries is not practicable. Below is a reconciliation of the beginning and ending amount of unrecognized tax benefits:
For the year ended |  | 2015 |  | 2014 |  | 2013
Beginning unrecognized tax benefits |  | $ | 228 |  |  | $ | 78 |  |  | $ | 77 |
Increases related to tax positions taken during current year |  | 119 |  |  | 152 |  |  | 4 |
Increases related to tax positions from prior years |  | 17 |  |  | — |  |  | — |
Foreign currency translation increases (decreases) to tax positions |  | (6 | ) |  | 1 |  |  | 4 |
Lapse of statute of limitations |  | (6 | ) |  | (1 | ) |  | — |
Settlements with tax authorities |  | (1 | ) |  | (1 | ) |  | (8 | )
Decreases related to tax positions from prior years |  | — |  |  | (1 | ) |  | — |
Unrecognized tax benefits acquired in current year |  | — |  |  | — |  |  | 1 |
Ending unrecognized tax benefits |  | $ | 351 |  |  | $ | 228 |  |  | $ | 78 |
Included in the unrecognized tax benefits balance as of September 3, 2015, August 28, 2014, and August 29, 2013 were $53 million, $66 million, and $63 million, respectively, of unrecognized income tax benefits, which if recognized, would affect our effective tax rate. The increase in unrecognized tax benefits in 2015 primarily related to transfer pricing and other matters which were substantially offset by changes in our deferred tax asset valuation allowance. We recognize interest and penalties related to income tax matters within income tax expense. As of September 3, 2015, August 28, 2014, and August 29, 2013, the amount accrued for interest and penalties related to uncertain tax positions was $16 million, $19 million, and $16 million, respectively. The resolution of tax audits or lapses of statute of limitations could also reduce our unrecognized tax benefits. Although the timing of final resolution is uncertain, the estimated potential reduction in our unrecognized tax benefits in the next 12 months ranges from $0 to $67 million, including interest and penalties. We and our subsidiaries file income tax returns with the U.S. federal government, various U.S. states and various foreign jurisdictions throughout the world. Our U.S. federal and state tax returns remain open to examination for 2011 through 2015. In addition, tax returns open to examination in multiple foreign taxing jurisdictions range from the years 2007 to 2015. We believe that adequate amounts of taxes and related interest and penalties have been provided for, and any adjustments as a result of examinations are not expected to materially adversely affect our business, results of operations or financial condition.

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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 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 2: 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 3: 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 4: 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 5: 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 + Details
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