Taxes on Earnings

6 Months Ended

Apr. 30, 2021

Provision for Taxes

The Company's effective tax rate was 10.1% and 9.9% for the three months ended April 30, 2021 and 2020, respectively, and 2.2% and 8.4% for the six months ended April 30, 2021 and 2020, respectively. The effective tax rate generally differs from the U.S. federal statutory rate of 21% due to favorable tax rates associated with certain earnings from the Company’s operations in lower tax jurisdictions throughout the world but are also impacted by discrete tax adjustments during each fiscal period.

For the three and six months ended April 30, 2021, the Company recorded $33 million and $124 million of net income tax benefits, respectively, related to various items discrete to the period. For the three months ended April 30, 2021, this amount primarily included $41 million of income tax benefits related to transformation costs, and acquisition, disposition and other related charges. For the six months ended April 30, 2021, this amount primarily included $107 million of income tax benefits related to transformation costs, and acquisition, disposition and other related charges and $30 million of income tax benefits related to the change in pre-Separation tax liabilities, primarily those for which we share joint and several liability with HP Inc. and for which we are indemnified by HP Inc.

For the three and six months ended April 30, 2020, the Company recorded $151 million and $167 million of net income tax benefits, respectively, related to various items discrete to the period. For the three months ended April 30 2020, this amount primarily included $57 million of income tax benefits related to Indian distribution tax rate changes, $48 million of income tax benefits related to transformation costs, and acquisition, disposition and other related charges, and $35 million of income tax benefits related to the change in pre-Separation tax liabilities for which the Company shares joint and several liability with HP Inc. and for which the Company is indemnified by HP Inc. For the six months ended April 30, 2020, the amount primarily included $57 million of income tax benefits related to Indian distribution tax rate changes, $56 million of income tax benefits related to the change in pre-Separation tax liabilities for which the Company shares joint and several liability with HP Inc. and for which the Company is indemnified by HP Inc., and $48 million of income tax benefits related to transformation costs, and acquisition, disposition and other related charges.

Uncertain Tax Positions

As of April 30, 2021 and October 31, 2020, the amount of unrecognized tax benefits was $2.1 billion and $2.2 billion, respectively, of which up to $704 million and $731 million, respectively, would affect the Company's effective tax rate if realized as of their respective periods.

For tax liabilities pertaining to unrecognized tax benefits, the Company recognizes interest income from favorable settlements and interest expense and penalties in (Provision) benefit for taxes in the Condensed Consolidated Statements of Earnings. As of April 30, 2021 and October 31, 2020, the Company had accrued $122 million and $119 million, respectively, for interest and penalties in the Condensed Consolidated Balance Sheets.

The Company engages in continuous discussions and negotiations with tax authorities regarding tax matters in various jurisdictions. The Company 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 issues involving resolution of certain intercompany transactions, joint and several tax liabilities and other matters. Accordingly, the Company believes it is reasonably possible that its existing unrecognized tax benefits may be reduced by an amount up to $50 million within the next 12 months.

Deferred Tax Assets and Liabilities

Deferred tax assets and liabilities included in the Condensed Consolidated Balance Sheets were as follows:


	As of
	April 30, 2021		October 31, 2020
	In millions
Deferred tax assets	$	1,895	$	1,778
Deferred tax liabilities	(318)		(290)
Deferred tax assets net of deferred tax liabilities	$	1,577	$	1,488

- 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.

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