v3.6.0.2

Taxes on Earnings | 12 Months Ended
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Oct. 31, 2016
Income Tax Disclosure [Abstract] |
Taxes on Earnings | Taxes on Earnings Prior to the Separation, Hewlett Packard Enterprise's operating results were included in former Parent's various consolidated U.S. federal and state income tax returns, as well as non-U.S. tax filings. For the purposes of the Company's Consolidated and Combined Financial Statements for periods prior to the Separation, income tax expense and deferred tax balances have been recorded as if the Company filed tax returns on a standalone basis separate from former Parent. The Separate Return Method applies the accounting guidance for income taxes to the standalone financial statements as if the Company was a separate taxpayer and a standalone enterprise for fiscal 2015 and prior. Provision for Taxes The domestic and foreign components of earnings before taxes were as follows:
| For the fiscal years ended October 31,
| 2016 |  | 2015 |  | 2014
| In millions
U.S. | $ | (368 | ) |  | $ | 192 |  |  | $ | 878 |
Non-U.S. | 4,447 |  |  | 1,278 |  |  | 1,366 |
| $ | 4,079 |  |  | $ | 1,470 |  |  | $ | 2,244 |
The provision for (benefit from) taxes on earnings were as follows:
| For the fiscal years ended October 31,
| 2016 |  | 2015 |  | 2014
| In millions
U.S. federal taxes: |  |  |  |  |  |  |  |
Current | $ | 1,133 |  |  | $ | 1,647 |  |  | $ | 481 |
Deferred | (1,162 | ) |  | (3,508 | ) |  | (460 | )
Non-U.S. taxes: |  |  |  |  |  |  |  |
Current | 1,085 |  |  | 492 |  |  | 375 |
Deferred | 35 |  |  | 527 |  |  | 197 |
State taxes: |  |  |  |  |  |  |  |
Current | 72 |  |  | 47 |  |  | 45 |
Deferred | (245 | ) |  | (196 | ) |  | (42 | )
| $ | 918 |  |  | $ | (991 | ) |  | $ | 596 |
The differences between the U.S. federal statutory income tax rate and the Company's effective tax rate were as follows:
| For the fiscal years ended October 31,
| 2016 |  | 2015 |  | 2014
U.S. federal statutory income tax rate | 35.0 | % |  | 35.0 | % |  | 35.0 | %
State income taxes, net of federal tax benefit | (0.4 | )% |  | 14.1 | % |  | 2.4 | %
Lower rates in other jurisdictions, net | (26.8 | )% |  | (53.6 | )% |  | (9.6 | )%
Valuation allowance | (5.8 | )% |  | (75.7 | )% |  | 3.2 | %
Uncertain tax positions | 23.7 | % |  | 5.8 | % |  | (0.7 | )%
Other, net | (3.2 | )% |  | 7.0 | % |  | (3.7 | )%
| 22.5 | % |  | (67.4 | )% |  | 26.6 | %
The jurisdictions with favorable tax rates that had the most significant impact on the Company's effective tax rate in the periods presented include Puerto Rico, China and Singapore. The Company plans to reinvest earnings of these jurisdictions indefinitely outside the U.S., and therefore has not provided for U.S. taxes on those indefinitely reinvested earnings. In fiscal 2016, the Company recorded $249 million of net income tax charges related to items unique to the year. These amounts primarily included $714 million of income tax charges related to pre-Separation tax matters, of which $647 million is related to the effect of the potential settlement of certain pre-Separation Hewlett-Packard Company income tax liabilities, and $169 million of income tax charges resulting from a gain on H3C divestiture, the effects of which were partially offset by $270 million of income tax benefits on Acquisition and other related charges, and Separation costs, $212 million of income tax benefits on restructuring charges, and $124 million of income tax benefits resulting from a gain on MphasiS divestiture. In fiscal 2015, the Company recorded $1.6 billion of net income tax benefits related to items unique to the year. These amounts primarily included $1.8 billion of income tax benefits due to the release of valuation allowances pertaining to certain U.S. deferred tax assets, $447 million of income tax benefits related to restructuring and Separation-related costs, and $131 million of income tax benefits related to uncertain tax positions, the effects of which were partially offset by $486 million of tax charges to record valuation allowances on certain foreign deferred tax assets and $217 million of income tax charges related to state tax impacts of the separation of deferred taxes under the Separate Return Method. In fiscal 2014, the Company recorded $113 million of net income tax benefits related to items unique to the year. These amounts included $66 million of income tax benefits related to provision to return adjustments and $35 million of income tax benefits related to state rate changes. As a result of certain employment actions and capital investments the Company has undertaken, income from manufacturing and services in certain countries is subject to reduced tax rates, and in some cases is wholly exempt from taxes, through 2024. The gross income tax benefits attributable to these actions and investments were estimated to be $401 million ($0.23 diluted net EPS) in fiscal 2016, $260 million ($0.14 diluted net EPS) in fiscal 2015 and $546 million ($0.30 diluted net EPS) in fiscal 2014. For comparative purposes, the number of shares used to compute the diluted net EPS as of October 31, 2015 is used for calculation of diluted net EPS as of October 31, 2014. Refer Note 16, "Net Earnings Per Share" for details on shares used to compute diluted net EPS. A reconciliation of unrecognized tax benefits is as follows:
| As of October 31,
| 2016 |  | 2015 |  | 2014
| In millions
Balance at beginning of year | $ | 4,901 |  |  | $ | 2,067 |  |  | $ | 1,925 |
Increases: |  |  |  |  |  |  |  |
For current year's tax positions | 1,481 |  |  | 1,449 |  |  | 273 |
For prior years' tax positions | 863 |  |  | 3,591 |  |  | 533 |
Net transfers from former Parent through equity | 4,540 |  |  | — |  |  | — |
Decreases: |  |  |  |  |  |  |  |
For prior years' tax positions | (115 | ) |  | (554 | ) |  | (328 | )
Statute of limitations expiration | (47 | ) |  | (12 | ) |  | (121 | )
Settlements with taxing authorities | (73 | ) |  | (54 | ) |  | (215 | )
Net transfers to former Parent through equity | — |  |  | (1,586 | ) |  | — |
Balance at end of year | $ | 11,550 |  |  | $ | 4,901 |  |  | $ | 2,067 |
Up to $3.1 billion, $0.6 billion and $1.4 billion of Hewlett Packard Enterprise's unrecognized tax benefits at October 31, 2016, 2015 and 2014, respectively, would affect the Company's effective tax rate if realized. The $6.6 billion increase in the amount of unrecognized tax benefits for the year ended October 31, 2016, is primarily related to certain pre-Separation income tax liabilities for which the Company is joint and severally liable under the Tax Matters Agreement entered in to with HP Inc. effective November 1, 2015, as well as the unrecognized tax benefits related to the timing of intercompany royalty revenue recognition, which does not affect the Company's effective tax rate. For fiscal 2015 and prior, the unrecognized tax benefits reflected in the Company's Consolidated and Combined Financial Statements have been determined using the Separate Return Method. The $2.8 billion increase in the amount of unrecognized tax benefits for the year ended October 31, 2015, primarily relates to the timing of intercompany royalty revenue recognition, which does not affect the Company’s effective tax rate. Hewlett Packard Enterprise recognizes interest income from favorable settlements and interest expense and penalties accrued on unrecognized tax benefits in Provision for taxes in the Consolidated and Combined Statements of Earnings. The Company had accrued $423 million and $269 million for interest and penalties as of October 31, 2016 and 2015, respectively. Hewlett Packard Enterprise engages in continuous discussion and negotiation with taxing authorities regarding tax matters in various jurisdictions. Hewlett Packard Enterprise does not expect complete resolution of any U.S. Internal Revenue Service ("IRS") audit cycle within the next 12 months. However, it is reasonably possible that certain federal, foreign and state tax issues may be concluded in the next 12 months, including resolution of certain intercompany transactions, joint and several tax liabilities and other matters. Accordingly, Hewlett Packard Enterprise believes it is reasonably possible that its existing unrecognized tax benefits may be reduced by an amount up to $2.5 billion within the next 12 months. Hewlett Packard Enterprise is subject to income tax in the U.S. and approximately 110 other countries and is subject to routine corporate income tax audits in many of these jurisdictions. Revenue Agent Reports (“RAR”) have been received from the IRS for tax years 2005 - 2009 related to the Company's U.S. Enterprise Services subsidiaries, proposing total tax deficiencies of $336 million. HPE is contesting certain of these issues. The IRS is also conducting an audit of the 2010 tax return and a limited audit of the 2011 and 2012 amended income tax returns for the Company’s U.S. Enterprise Services subsidiaries. With respect to major foreign tax jurisdictions, HPE is no longer subject to tax authority examinations for years prior to 2005. HPE is subject to a foreign tax audit concerning an intercompany transaction for fiscal 2009. The relevant taxing authority has proposed an assessment of approximately $743 million. HPE is contesting this proposed assessment. With respect to major state tax jurisdictions, HPE is no longer subject to tax authority examinations for years prior to 2003. Hewlett Packard Enterprise believes it has provided adequate reserves for all tax deficiencies or reductions in tax benefits that could result from federal, state and foreign tax audits. The Company regularly assesses the likely outcomes of these audits in order to determine the appropriateness of the Company's tax provision. The Company adjusts its uncertain tax positions to reflect the impact of negotiations, settlements, rulings, advice of legal counsel, and other information and events pertaining to a particular audit. However, income tax audits are inherently unpredictable and there can be no assurance that the Company will accurately predict the outcome of these audits. The amounts ultimately paid on resolution of an audit could be materially different from the amounts previously included in the Provision for taxes and therefore the resolution of one or more of these uncertainties in any particular period could have a material impact on net earnings or cash flows. Hewlett Packard Enterprise is joint and severally liable for certain pre-Separation tax liabilities of HP Inc. HP Inc. is subject to numerous ongoing audits by federal, state and foreign tax authorities. The IRS is conducting an audit of former Parent’s 2009 - 2014 income tax returns. HP Inc. has received from the IRS Notices of Deficiency for its fiscal 1999 - 2000 and 2003 - 2005 tax years, and RARs for its fiscal 2001 - 2002 and 2006 - 2008 tax years. Hewlett Packard Enterprise has not provided for U.S. federal income and foreign withholding taxes on $26.2 billion of undistributed earnings from non-U.S. operations as of October 31, 2016 because the Company intends to reinvest such earnings indefinitely outside of the U.S. If the Company were to distribute these earnings, foreign tax credits may become available under current law to reduce the resulting U.S. income tax liability. Determination of the amount of unrecognized deferred tax liability related to these earnings is not practicable. The Company will remit non-indefinitely reinvested earnings of its non-U.S. subsidiaries for which deferred U.S. federal and withholding taxes have been provided where excess cash has accumulated and the Company determines that it is advantageous for business operations, tax or cash management reasons. Deferred Income Taxes Deferred income taxes result from temporary differences between the amount of assets and liabilities recognized for financial reporting and tax purposes. For the purposes of the Company's Consolidated and Combined Balance Sheets in the period prior to the Separation, deferred tax balances and tax carryforwards and credits have been recorded under the Separate Return Method. The deferred tax balances reflected in the Company's Consolidated Balance Sheets in the period prior to the Separation have been recorded on a consolidated return basis and include tax attributes allocated to the Company at the time of the Separation. The inclusion of these tax attributes resulted in tax carryforwards and credits, which generated higher deferred income tax assets for the Company in the period prior to the Separation. The significant components of deferred tax assets and deferred tax liabilities were as follows:
| As of October 31,
| 2016 |  | 2015
| Deferred Tax Assets |  | Deferred Tax Liabilities |  | Deferred Tax Assets |  | Deferred Tax Liabilities
| In millions
Loss and credit carryforwards | $ | 1,859 |  |  | $ | (26 | ) |  | $ | 1,706 |  |  | $ | — |
Unremitted earnings of foreign subsidiaries | — |  |  | (3,708 | ) |  | — |  |  | (3,362 | )
Inventory valuation | 94 |  |  | (1 | ) |  | 97 |  |  | (24 | )
Intercompany transactions—royalty prepayments | 5,237 |  |  | — |  |  | 5,598 |  |  | — |
Intercompany transactions—excluding royalty prepayments | 160 |  |  | — |  |  | 190 |  |  | (14 | )
Fixed assets | 128 |  |  | (128 | ) |  | 327 |  |  | (362 | )
Warranty | 164 |  |  | — |  |  | 171 |  |  | (2 | )
Employee and retiree benefits | 1,655 |  |  | (65 | ) |  | 772 |  |  | (48 | )
Accounts receivable allowance | 32 |  |  | — |  |  | 38 |  |  | (9 | )
Intangible assets | 53 |  |  | (176 | ) |  | — |  |  | (349 | )
Restructuring | 258 |  |  | — |  |  | 210 |  |  | — |
Deferred revenue | 968 |  |  | (3 | ) |  | 1,152 |  |  | (196 | )
Other | 436 |  |  | — |  |  | 241 |  |  | — |
Gross deferred tax assets and liabilities | 11,044 |  |  | (4,107 | ) |  | 10,502 |  |  | (4,366 | )
Valuation allowance | (2,650 | ) |  | — |  |  | (2,252 | ) |  | — |
Net deferred tax assets and liabilities | $ | 8,394 |  |  | $ | (4,107 | ) |  | $ | 8,250 |  |  | $ | (4,366 | )
In the first quarter of fiscal 2016, the Company adopted the amendment to the existing accounting standards for income taxes issued by the FASB in November 2015, and elected to apply it on a retrospective basis. As a result, all of the Company's deferred tax assets and liabilities are classified as non-current as of October 31, 2016 and retrospectively as of October 31, 2015. See Note 1, "Overview and Summary of Significant Accounting Policies", for more details. Deferred tax assets and liabilities included in the Consolidated Balance Sheets are as follows:
| As of October 31,
| 2016 |  | 2015
| In millions
Deferred tax assets | $ | 4,430 |  |  | $ | 3,925 |
Deferred tax liabilities | (143 | ) |  | (41 | )
Deferred tax assets net of deferred tax liabilities | $ | 4,287 |  |  | $ | 3,884 |
The Company periodically engages in intercompany advanced royalty payment and licensing arrangements that may result in advance payments between subsidiaries in different tax jurisdictions. When the local tax treatment of the intercompany licensing arrangements differs from U.S. GAAP treatment, deferred taxes are recognized. Hewlett Packard Enterprise executed intercompany advanced royalty payment arrangements resulting in advanced payments of $3.7 billion and $5.0 billion during fiscal 2016 and 2015, respectively. In these transactions, the payments were received in the U.S. from a foreign consolidated affiliate, with a deferral of intercompany revenues over the term of the arrangements, approximately 5 years. Intercompany royalty revenue and the amortization expense related to the licensing rights are eliminated in consolidation. As of October 31, 2016, the Hewlett Packard Enterprise had $51 million, $1.9 billion and $6.0 billion of federal, state and foreign net operating loss carryforwards, respectively. Amounts included in state and foreign net operating loss carryforwards will begin to expire in 2017 and amounts included in federal net operating loss carryforwards will begin to expire in 2030. Hewlett Packard Enterprise has provided a valuation allowance of $38 million and $1.2 billion for deferred tax assets related to state and foreign net operating losses carryforwards, respectively. As of October 31, 2016, Hewlett Packard Enterprise had recorded deferred tax assets for various tax credit carryforwards as follows:
| Carryforward |  | Valuation Allowance |  | Initial Year of Expiration
| In millions
U.S. foreign tax credits | $ | 291 |  |  | $ | — |  |  | 2021
U.S. research and development and other credits | 99 |  |  | — |  |  | 2019
Tax credits in state and foreign jurisdictions | 205 |  |  | (160 | ) |  | 2019
Balance at end of year | $ | 595 |  |  | $ | (160 | ) |  |
Deferred Tax Asset Valuation Allowance The deferred tax asset valuation allowance and changes were as follows:
| As of October 31,
| 2016 |  | 2015 |  | 2014
| In millions
Balance at beginning of year | $ | 2,252 |  |  | $ | 3,912 |  |  | $ | 3,194 |
Income tax expense | (235 | ) |  | (1,155 | ) |  | 198 |
Other comprehensive income, currency translation and charges to other accounts | 633 |  |  | (505 | ) |  | 520 |
Balance at end of year | $ | 2,650 |  |  | $ | 2,252 |  |  | $ | 3,912 |
Total valuation allowances increased by $398 million in fiscal 2016, due primarily to the valuation allowance against foreign deferred tax assets related to pension assets and liabilities, partially offset by decreases in foreign deferred tax assets for net operating losses. Total valuation allowances decreased by $1.7 billion in fiscal 2015 due primarily to the release of a valuation allowance against deferred tax assets in the U.S. Tax Matters Agreement and Other Income Tax Matters In connection with the Separation, the Company entered into a Tax Matters Agreement with HP Inc., formerly Hewlett-Packard Company. See Note 18, "Guarantees, Indemnifications and Warranties", for a full description of the Tax Matters Agreement.

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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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