XML 133 R22.htm IDEA: XBRL DOCUMENT
v3.20.1

Income Taxes | 12 Months Ended
--- | ---
Apr. 24, 2020
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes The income tax (benefit) provision is based on income before income taxes reported for financial statement purposes. The components of income before income taxes, based on tax jurisdiction, are as follows:
| Fiscal Year |  |  |  |
(in millions) | 2020 |  | 2019 |  | 2018
U.S. | $ | 466 |  |  | $ | 877 |  |  | $ | (958) |
International | 3,589 |  |  | 4,320 |  |  | 6,633 |
Income before income taxes | $ | 4,055 |  |  | $ | 5,197 |  |  | $ | 5,675 |
The income tax (benefit) provision consists of the following:
| Fiscal Year |  |  |  |
(in millions) | 2020 |  | 2019 |  | 2018
Current tax expense: |  |  |  |  |
U.S. | $ | 151 |  |  | $ | 579 |  |  | $ | 2,899 |
International | 375 |  |  | 406 |  |  | 796 |
Total current tax expense | 526 |  |  | 985 |  |  | 3,695 |
Deferred tax expense (benefit): |  |  |  |  |
U.S. | (138) |  |  | (310) |  |  | 45 |
International | (1,139) |  |  | (128) |  |  | (1,160) |
Net deferred tax benefit | (1,277) |  |  | (438) |  |  | (1,115) |
Income tax (benefit) provision | $ | (751) |  |  | $ | 547 |  |  | $ | 2,580 |
Tax assets (liabilities), shown before jurisdictional netting of deferred tax assets (liabilities), are comprised of the following:
(in millions) | April 24, 2020 |  | April 26, 2019
Deferred tax assets: |  |  |
Net operating loss, capital loss, and credit carryforwards | $ | 6,432 |  |  | $ | 6,574 |
Other accrued liabilities | 390 |  |  | 389 |
Accrued compensation | 285 |  |  | 315 |
Pension and post-retirement benefits | 350 |  |  | 300 |
Stock-based compensation | 136 |  |  | 162 |
Other | 338 |  |  | 339 |
Inventory | 191 |  |  | 194 |
Lease obligations | 101 |  |  | — |
Federal and state benefit on uncertain tax positions | 96 |  |  | 83 |
Interest limitation | 236 |  |  | 111 |
Unrealized loss on available-for-sale securities and derivative financial instruments | — |  |  | 17 |
Gross deferred tax assets | 8,555 |  |  | 8,484 |
Valuation allowance | (5,482) |  |  | (6,300) |
Total deferred tax assets | 3,073 |  |  | 2,184 |
Deferred tax liabilities: |  |  |
Intangible assets | (1,017) |  |  | (1,614) |
Realized loss on derivative financial instruments | (65) |  |  | (70) |
Other | (110) |  |  | (152) |
Right of use leases | (97) |  |  | — |
Unrealized gain on available-for-sale securities and derivative financial instruments | (12) |  |  | — |
Accumulated depreciation | (87) |  |  | (38) |
Outside basis difference of subsidiaries | (77) |  |  | (119) |
Total deferred tax liabilities | (1,465) |  |  | (1,993) |
Prepaid income taxes | 449 |  |  | 363 |
Income tax receivables | 381 |  |  | 335 |
Tax assets, net | $ | 2,438 |  |  | $ | 889 |
Reported as (after valuation allowance and jurisdictional netting): |  |  |
Other current assets | $ | 780 |  |  | $ | 648 |
Tax assets | 2,832 |  |  | 1,519 |
Deferred tax liabilities | (1,174) |  |  | (1,278) |
Tax assets, net | $ | 2,438 |  |  | $ | 889 |
No deferred taxes have been provided on the approximately $69.9 billion and $64.1 billion of undistributed earnings of the Company’s subsidiaries at April 24, 2020 and April 26, 2019, respectively, since these earnings have been, and under current plans will continue to be, permanently reinvested in these subsidiaries. During fiscal year 2018, the Company removed its permanently reinvested assertion on the undistributed earnings subject to the transition tax of foreign subsidiaries with a U.S. parent. Due to the number of legal entities and jurisdictions involved, the complexity of the legal entity structure of the Company, and the complexity of the tax laws in the relevant jurisdictions, the Company believes it is not practicable to estimate, within any reasonable range, the amount of additional taxes which may be payable upon distribution of these undistributed earnings. At April 24, 2020, the Company had approximately $25.1 billion of net operating loss carryforwards in certain non-U.S. jurisdictions, of which $22.1 billion have no expiration, and the remaining $3.0 billion will expire during fiscal years 2021 through 2040. Included in these net operating loss carryforwards are $17.5 billion of net operating losses related to a subsidiary of the Company, substantially all of which were recorded in fiscal year 2008 as a result of the receipt of a favorable tax ruling from certain non-U.S. taxing authorities. The Company has recorded a full valuation allowance against these net operating losses, as management does not believe that it is more likely than not that these net operating losses will be utilized. Certain of the remaining non-U.S. net operating loss carryforwards of $7.6 billion have a valuation allowance recorded against the carryforwards, as management does not believe that it is more likely than not that these net operating losses will be utilized. At April 24, 2020, the Company had $524 million of U.S. federal net operating loss carryforwards, of which $102 million have no expiration. The remaining loss carryforwards will expire during fiscal years 2021 through 2038. For U.S. state purposes, the Company had $1.4 billion of net operating loss carryforwards at April 24, 2020, which will expire during fiscal years 2021 through 2040. At April 24, 2020, the Company also had $200 million of tax credits available to reduce future income taxes payable, of which $96 million have no expiration. The remaining credits will expire during fiscal years 2021 through 2040. The Company has established valuation allowances of $5.5 billion and $6.3 billion at April 24, 2020 and April 26, 2019, respectively, primarily related to the uncertainty of the utilization of certain deferred tax assets which are primarily comprised of tax loss and credit carryforwards in various jurisdictions. The decrease in the valuation allowance during fiscal year 2020 is primarily related to the utilization of certain net operating losses in connection with a planned intercompany sale of intellectual property and the effects of currency fluctuations. These valuation allowances would result in a reduction to the income tax provision in the consolidated statements of income if they are ultimately not required. The Company’s effective income tax rate varied from the U.S. federal statutory tax rate as follows:
| Fiscal Year |  |  |  |
| 2020 |  | 2019 |  | 2018
U.S. federal statutory tax rate | 21.0 | % |  | 21.0 | % |  | 30.5 | %
Increase (decrease) in tax rate resulting from: |  |  |  |  |
U.S. state taxes, net of federal tax benefit | 0.5 |  |  | 0.9 |  |  | 0.8 |
Research and development credit | (2.1) |  |  | (1.2) |  |  | (0.8) |
Puerto Rico Excise Tax | (1.5) |  |  | (1.6) |  |  | (1.1) |
International | (10.0) |  |  | (10.7) |  |  | (18.9) |
U.S. Tax Reform | — |  |  | 0.2 |  |  | 43.0 |
Stock based compensation | (1.5) |  |  | (1.0) |  |  | (1.0) |
Other, net | 0.4 |  |  | (0.5) |  |  | 1.6 |
Interest on uncertain tax positions | 1.3 |  |  | 0.9 |  |  | 1.4 |
Base Erosion Anti-Abuse Tax | 2.6 |  |  | 0.1 |  |  | — |
Foreign Derived Intangible Income Benefit | (1.2) |  |  | (0.6) |  |  | — |
Divestiture-related | — |  |  | (0.4) |  |  | (3.8) |
Certain tax adjustments | (30.8) |  |  | (0.6) |  |  | (8.9) |
U.S. tax on foreign earnings | 2.8 |  |  | 4.0 |  |  | 2.7 |
Effective tax rate | (18.5) | % |  | 10.5 | % |  | 45.5 | %
During fiscal year 2020, certain tax adjustments of $1.2 billion, recognized in income tax (benefit) provision in the consolidated statements of income, included the following: •A net benefit of $63 million related to the finalization of certain state tax impacts from U.S. Tax Reform, and the issuance of certain final U.S. Treasury Regulations associated with U.S. Tax Reform. The primary impact of these regulations resulted in the Company re-establishing its permanently reinvested assertion on certain foreign earnings and reversing the previously accrued tax liability. This benefit was partially offset by additional tax associated with a previously executed internal reorganization of certain foreign subsidiaries. •A benefit of $252 million related to tax legislative changes in Switzerland which abolished certain preferential tax regimes the Company benefited from and replaced them with a new set of internationally accepted measures. The legislation provided for higher effective tax rates but allowed for a transitional period whereby an amortizable asset was created for Swiss federal income tax purposes which will be amortized and deducted over a 10-year period. •A benefit of $658 million related to the release of a valuation allowance previously recorded against certain net operating losses. Luxembourg enacted tax legislation during the year which required the Company to reassess the realizability of certain net operating losses. The Company evaluated both the positive and negative evidence and released valuation allowance equal to the expected benefit from the utilization of certain net operating losses in connection with a planned intercompany sale of intellectual property. •A benefit of $269 million associated with the intercompany sale of intellectual property and the establishment of a deferred tax asset. During fiscal year 2019, certain tax adjustments of $40 million, recognized in income tax (benefit) provision in the consolidated statements of income, included the following: •A net benefit of $30 million associated with the finalization of the transition tax liability and the Tax Act impact to deferred tax assets, liabilities, and valuation allowances. •A charge of $42 million related to the recognition of a prepaid tax expense resulting from the reduction in the U.S. statutory tax rate under the Tax Act and the current year sale of U.S. manufactured inventory held as of April 27, 2018. •A benefit of $32 million related to intercompany legal entity restructuring. •A net benefit of $20 million with the finalization of certain income tax aspects of the divestiture of the Patient Care, Deep Vein Thrombosis, and Nutritional Insufficiency businesses. During fiscal year 2018, certain tax adjustments of $1.9 billion, recognized in income tax (benefit) provision in the consolidated statements of income, included the following: •A net charge of $2.4 billion associated with U.S. tax reform, inclusive of the transition tax, remeasurement of U.S. Federal deferred tax assets and liabilities, and the decrease in the U.S. statutory tax rate. •A charge of $73 million associated with an internal reorganization of certain foreign subsidiaries. •A net benefit of $579 million associated with the intercompany sale of intellectual property. Currently, the Company’s operations in Puerto Rico, Singapore, Dominican Republic, Costa Rica, China, and Israel have various tax holidays and tax incentive grants. The tax reductions as compared to the local statutory rate favorably impacted earnings by $231 million, $437 million, and $446 million in fiscal years 2020, 2019, and 2018, respectively, and diluted earnings per share by $0.17, $0.32, and $0.33 in fiscal years 2020, 2019, and 2018, respectively. The tax holidays are conditional upon the Company meeting certain thresholds required under statutory law. The tax incentive grants, unless extended, will expire between fiscal years 2021 and 2030. The Company’s historical practice has been to renew, extend, or obtain new tax incentive grants upon expiration of existing tax incentive grants. If the Company is not able to renew, extend, or obtain new tax incentive grants, the expiration of existing tax incentive grants could have a material impact on the Company’s financial results in future periods. The tax incentive grants which expired during fiscal year 2020 did not have a material impact on the Company's consolidated financial statements. The Company had $1.9 billion, $1.8 billion, and $1.7 billion of gross unrecognized tax benefits at April 24, 2020, April 26, 2019, and April 27, 2018, respectively. A reconciliation of the beginning and ending amount of unrecognized tax benefits for fiscal years 2020, 2019, and 2018 is as follows:
| Fiscal Year |  |  |  |
(in millions) | 2020 |  | 2019 |  | 2018
Gross unrecognized tax benefits at beginning of fiscal year | $ | 1,836 |  |  | $ | 1,727 |  |  | $ | 1,896 |
Gross increases: |  |  |  |  |
Prior year tax positions | 12 |  |  | 34 |  |  | 13 |
Current year tax positions | 55 |  |  | 109 |  |  | 63 |
Gross decreases: |  |  |  |  |
Prior year tax positions | (9) |  |  | (14) |  |  | (120) |
Settlements | (5) |  |  | — |  |  | (80) |
Statute of limitation lapses | (27) |  |  | (20) |  |  | (45) |
Gross unrecognized tax benefits at end of fiscal year | 1,862 |  |  | 1,836 |  |  | 1,727 |
Cash advance paid to taxing authorities | (859) |  |  | (859) |  |  | (859) |
Gross unrecognized tax benefits at end of fiscal year, net of cash advance | $ | 1,003 |  |  | $ | 977 |  |  | $ | 868 |
If all of the Company’s unrecognized tax benefits at April 24, 2020, April 26, 2019, and April 27, 2018 were recognized, $1.8 billion, $1.8 billion, and $1.7 billion would impact the Company’s effective tax rate, respectively. Although the Company believes that it has adequately provided for liabilities resulting from tax assessments by taxing authorities, positions taken by these tax authorities could have a material impact on the Company’s effective tax rate in future periods. The Company has recorded gross unrecognized tax benefits, net of cash advance, of $911 million as a noncurrent liability. The Company estimates that within the next 12 months it is reasonably possible that its uncertain tax positions excluding interest, could decrease by as much as $115 million, net as a result of the resolution of tax matters with the IRS and other taxing authorities as well as statute of limitation lapses. The Company recognizes interest and penalties related to income tax matters in income tax (benefit) provision in the consolidated statements of income and records the liability in the current or noncurrent accrued income taxes in the consolidated balance sheets, as appropriate. The Company had $225 million, $172 million, and $128 million of accrued gross interest and penalties at April 24, 2020, April 26, 2019, and April 27, 2018, respectively. During fiscal years 2020, 2019, and 2018, the Company recognized gross interest expense of approximately $53 million, $48 million, and $84 million, respectively, in income tax (benefit) provision in the consolidated statements of income. During fiscal year 2018, the Company made a $1.1 billion advance payment to the IRS in connection with certain tax matters for fiscal years 2005 through 2014. This payment was comprised of $859 million of tax and $285 million of interest. The Company’s reserves for uncertain tax positions related to unresolved matters with the IRS and other taxing authorities. These reserves are subject to a high degree of estimation and management judgment. Resolution of these significant unresolved matters, or positions taken by the IRS or other tax authorities during future tax audits, could have a material impact on the Company’s financial results in future periods. The Company continues to believe that its reserves for uncertain tax positions are appropriate and that it has meritorious defenses for its tax filings and will vigorously defend them during the audit process, appellate process, and through litigation in courts, as necessary. The major tax jurisdictions where the Company conducts business which remain subject to examination are as follows:
Jurisdiction |  | Earliest Year Open
United States - federal and state |  | 2005
Australia |  | 2016
Brazil |  | 2015
Canada |  | 2012
China |  | 2009
Costa Rica |  | 2016
Dominican Republic |  | 2017
Germany |  | 2014
India |  | 2002
Ireland |  | 2012
Israel |  | 2010
Italy |  | 2005
Japan |  | 2017
Korea |  | 2017
Luxembourg |  | 2014
Mexico |  | 2007
Puerto Rico |  | 2011
Singapore |  | 2013
Switzerland |  | 2012
United Kingdom |  | 2016
See Note 19 for additional information regarding the status of current tax audits and proceedings.

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://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 + Details
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration