XML 30 R13.htm IDEA: XBRL DOCUMENT
v3.10.0.1

Taxes on Earnings | 12 Months Ended
--- | ---
Oct. 31, 2018
Income Tax Disclosure [Abstract] |
Taxes on Earnings | Taxes on Earnings Provision for Taxes On December 22, 2017, the TCJA was signed by the President of the United States and enacted into law. The law includes significant changes to the U.S. corporate income tax system, including a federal corporate rate reduction from 35% to 21%, limitations on the deductibility of interest expense and executive compensation, and the transition of U.S. international taxation from a worldwide tax system to a territorial tax system. ASC 740, Accounting for Income Taxes, requires companies to recognize the effect of tax law changes in the period of enactment even though the effective date for most provisions is for tax years beginning after December 31, 2017 (the “Effective Date”), or in the case of certain other provisions, January 1, 2018. When a U.S. federal tax rate change occurs during a fiscal year, taxpayers are required to compute a weighted daily average rate for the fiscal year of enactment. As a result of the TCJA, HP has calculated a blended U.S. federal statutory corporate income tax rate of 23% for the fiscal year ending October 31, 2018. The blended U.S. federal statutory corporate income tax rate of 23% is the weighted daily average rate between the pre-enactment U.S. federal statutory tax rate of 35% applicable to HP’s 2018 fiscal year prior to the Effective Date and the post-enactment U.S. federal statutory tax rate of 21% applicable to the 2018 fiscal year thereafter. HP expects the U.S. federal statutory rate to be 21% for fiscal years beginning after October 31, 2018. Given the significance of the legislation, the SEC staff issued Staff Accounting Bulletin No. 118 (SAB 118), which allows registrants to record provisional amounts during a one year “measurement period”. During the measurement period, impacts of the TCJA are expected to be recorded at the time a reasonable estimate for all or a portion of the effects can be made, and provisional amounts can be recognized and adjusted as information becomes available, prepared or analyzed. SAB 118 summarizes a three-step process to be applied at each reporting period to account for and qualitatively disclose: (1) the effects of the change in tax law for which accounting is complete; (2) provisional amounts (or adjustments to provisional amounts) for the effects of the tax law where accounting is not complete, but that a reasonable estimate has been determined; and (3) a reasonable estimate cannot yet be made and therefore taxes are reflected in accordance with law prior to the enactment of the TCJA. As of October 31, 2018, HP has not completed its accounting for the tax effects of the TCJA, however, in certain cases HP has made a reasonable estimate of the effects for remeasurement on its existing deferred tax balances and the one-time transition tax, updated for recently proposed treasury regulations. With respect to the Global Intangible Low Taxed Income (“Global Minimum Tax”) provisions, further discussed below, HP has not been able to make a reasonable estimate and continues to account for this item based on its existing accounting under ASC 740, Income Taxes, and the provisions of the tax laws that were in effect immediately prior to enactment. The impact of the TCJA may differ materially from this estimate due to changes in interpretations and assumptions HP has made, additional guidance that may be issued and actions HP may take as a result of the TCJA. The impacts of HP's estimates are described further below. While HP has not yet completed its analysis to the impact on its deferred tax balances, as of October 31, 2018 HP recorded provisional income tax expense of $1.2 billion related to the remeasurement of its deferred tax assets and liabilities at the new statutory rate and $317 million related to remeasurement of its U.S. deferred tax assets that are expected to be realized at a lower rate by recording a valuation allowance. HP is still analyzing certain aspects of the TCJA and refining its calculations, which could potentially affect the measurement of these balances or potentially give rise to new deferred tax amounts. The TCJA also includes a one-time mandatory deemed repatriation transition tax on the net accumulated post-1986 earnings and profits (“E&P”) of a U.S. taxpayer’s foreign subsidiaries. HP has computed a provisional deemed repatriation tax of approximately $3.3 billion, of which more than half is expected to be offset with tax attributes, reducing HP’s cash outlay. The U.S. Treasury Department recently issued proposed regulations related to this one-time mandatory deemed repatriation. While HP has not yet completed its analysis of these proposed regulations, it believes there will be no material changes to its provisional amounts as reported for the period ending October 31, 2018. Once HP completes its evaluation of the potential impact of the proposed regulations, HP will finalize its provisional amount next quarter when the measurement period is closed. Companies may elect to pay this tax over 8 years, and HP intends to make this election. HP has not yet completed its calculation of the total post-1986 E&P for its foreign subsidiaries. Further, the transition tax is based, in part, on the amount of those earnings held in cash and other specified assets. This amount may change when HP finalizes the calculation of post-1986 E&P previously deferred from U.S. federal taxation and finalizes the amounts held in cash or other specified assets. No additional income taxes have been provided for any remaining undistributed foreign earnings not subject to the transition tax, or any additional outside basis difference inherent in these entities, as these amounts continue to be indefinitely reinvested in foreign operations. As a result of the deemed repatriation tax noted above, which is based on HP’s total post-1986 deferred foreign income, HP redetermined $5.6 billion of its U.S. deferred tax liability on those unremitted earnings with a provisional tax payable of $3.3 billion, as noted above. This resulted in a net benefit. This tax benefit is provisional as HP is still analyzing certain aspects of the legislation and refining calculations, which could potentially materially affect the measurement of these amounts. HP has not yet completed the accounting for the realizability of deferred tax assets. To calculate the realizability of deferred tax assets, HP has estimated when the existing deferred taxes will be settled or realized. The realizability of deferred tax assets included in the financial statements will be subject to further revisions if the current estimates are different from the actual future operating results. In January 2018, the FASB released guidance on the accounting for tax on the Global Minimum Tax provisions of TCJA. The Global Minimum Tax provisions impose a tax on foreign income in excess of a deemed return on tangible assets of foreign corporations. The guidance indicates that either accounting for deferred taxes related to Global Minimum Tax inclusions or to treat any taxes on Global Minimum Tax inclusions as period cost are both acceptable methods subject to an accounting policy election. HP is still evaluating whether to make a policy election to treat the Global Minimum Tax as a period cost or to provide U.S. deferred taxes on foreign temporary differences that are expected to generate Global Minimum Tax income when they reverse in future years. There could be additional changes to HP's deferred taxes once it completes its evaluations. The domestic and foreign components of earnings from continuing operations before taxes were as follows:
| For the fiscal years ended October 31
| 2018 |  | 2017 |  | 2016
| In millions
U.S. | $ | 242 |  |  | $ | (14 | ) |  | $ | 468 |
Non-U.S. | 2,771 |  |  | 3,290 |  |  | 3,293 |
| $ | 3,013 |  |  | $ | 3,276 |  |  | $ | 3,761 |
The (benefit from) provision for taxes on earnings from continuing operations was as follows:
| For the fiscal years ended October 31
| 2018 |  | 2017 |  | 2016
| In millions
U.S. federal taxes: |  |  |  |  |  |  |  |
Current | $ | 751 |  |  | $ | 189 |  |  | $ | 439 |
Deferred | (3,132 | ) |  | 197 |  |  | 470 |
Non-U.S. taxes: |  |  |  |  |  |  |  |
Current | 528 |  |  | 302 |  |  | 288 |
Deferred | (563 | ) |  | 4 |  |  | (123 | )
State taxes: |  |  |  |  |  |  |  |
Current | 61 |  |  | 20 |  |  | (35 | )
Deferred | 41 |  |  | 38 |  |  | 56 |
| $ | (2,314 | ) |  | $ | 750 |  |  | $ | 1,095 |
As a result of U.S. tax reform, HP revised its estimated annual effective tax rate to reflect the change in the U.S. federal statutory tax rate from 35% to 21%. Since HP has a fiscal year ending October 31, it is subject to transitional tax rate rules. Therefore, a blended rate of 23% was computed as effective for the current fiscal year. The differences between the U.S. federal statutory income tax rate and HP’s effective tax rate were as follows:
| For the fiscal years ended October 31
| 2018 |  | 2017 |  | 2016
U.S. federal statutory income tax rate from continuing operations | 23.3 | % |  | 35.0 | % |  | 35.0 | %
State income taxes from continuing operations, net of federal tax benefit | 0.5 | % |  | 1.4 | % |  | 1.1 | %
Lower rates in other jurisdictions, net | (10.9 | )% |  | (13.2 | )% |  | (9.3 | )%
U.S. Tax Reform impacts | (35.8 | )% |  | — | % |  | — | %
Research and development (“R&D”) credit | (0.7 | )% |  | (0.5 | )% |  | (2.4 | )%
Valuation allowances | (9.3 | )% |  | (1.9 | )% |  | (1.2 | )%
Uncertain tax positions and audit settlements | (50.3 | )% |  | 0.4 | % |  | 11.7 | %
Indemnification related items | 5.2 | % |  | (0.3 | )% |  | (4.1 | )%
Other, net | 1.2 | % |  | 2.0 | % |  | (1.7 | )%
| (76.8 | )% |  | 22.9 | % |  | 29.1 | %
The jurisdictions with favorable tax rates that have the most significant effective tax rate impact in the periods presented include Puerto Rico, Singapore, China, Malaysia and Ireland. The gross income tax benefits related to these favorable tax rates are in addition to transitional impacts of U.S. tax reform and resolution of various audits and tax litigation. To the extent that HP reinvest certain earnings of these jurisdictions indefinitely outside the United States, U.S. taxes have not been provided on those indefinitely reinvested earnings. In fiscal year 2018, HP recorded $2.8 billion of net income tax benefits related to discrete items in the provision for taxes which include impacts of the TCJA. As noted above HP has not yet completed its analysis of the full impact of the TCJA. However, as of October 31, 2018, HP recorded a provisional tax benefit of $760 million related to $5.6 billion net benefit for the decrease in its deferred tax liability on unremitted foreign earnings, partially offset by $3.3 billion net expense for the deemed repatriation tax payable in installments over eight years, a $1.2 billion net expense for the remeasurement of its deferred assets and liabilities to the new U.S. statutory tax rate and a $317 million valuation allowance on net expense related to deferred tax assets that are expected to be realized at a lower rate. HP also recorded tax benefits related to audit settlements of $1.5 billion and valuation allowance releases of $601 million pertaining to a change in our ability to utilize certain foreign and U.S. deferred tax assets due to a change in our geographic earnings mix. These benefits were partially offset by other net tax charges of $34 million. In fiscal year 2018, in addition to the discrete items mentioned above, HP recorded excess tax benefits of $42 million on stock options, restricted stock units and performance-adjusted restricted stock units. In fiscal year 2017, HP recorded $72 million of net income tax benefits related to discrete items in the provision for taxes. These amounts primarily include tax benefits of $84 million related to restructuring and other charges, $12 million related to U.S. federal provision to return adjustments, $45 million related to Samsung acquisition-related charges, and $13 million of other net tax benefits. In addition, HP recorded tax charges of $11 million related to changes in state valuation allowances, $22 million of state provision to return adjustments, and $49 million related to uncertain tax positions. In fiscal year 2017, in addition to the discrete items mentioned above, HP recorded excess tax benefits of $19 million on stock options, restricted stock units and performance-adjusted restricted stock units, which are reflected in the Consolidated Statements of Earnings as a component of the provision for income taxes. In fiscal year 2016, HP recorded $301 million of net income tax charges related to discrete items in the provision for taxes for continuing operations. These amounts primarily include uncertain tax positions charges of $525 million related to pre-separation tax matters. In addition, HP recorded $62 million of net tax benefits on restructuring and other charges, $52 million of net tax benefits related to the release of foreign valuation allowances and $41 million of net tax benefits arising from the retroactive research and development credit provided by the Consolidated Appropriations Act of 2016 signed into law in December 2015 and $70 million of other tax benefit. As a result of certain employment actions and capital investments HP 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 2027. The gross income tax benefits attributable to these actions and investments were estimated to be $578 million ($0.35 diluted EPS) in fiscal year 2018, $471 million ($0.28 diluted net EPS) in fiscal year 2017 and $341 million ($0.20 diluted net EPS) in fiscal year 2016. Uncertain Tax Positions A reconciliation of unrecognized tax benefits is as follows:
| As of October 31
| 2018 |  | 2017 |  | 2016
| In millions
Balance at beginning of year | $ | 10,808 |  |  | $ | 10,858 |  |  | $ | 6,546 |
Increases: |  |  |  |  |  |  |
For current year’s tax positions | 66 |  |  | 52 |  |  | 468 |
For prior years’ tax positions | 101 |  |  | 85 |  |  | 4,004 |
Decreases: |  |  |  |  |  |  |
For prior years’ tax positions | (248 | ) |  | (181 | ) |  | (62 | )
Statute of limitations expirations | (3 | ) |  | (1 | ) |  | — |
Settlements with taxing authorities | (2,953 | ) |  | (5 | ) |  | (98 | )
Balance at end of year | $ | 7,771 |  |  | $ | 10,808 |  |  | $ | 10,858 |
As of October 31, 2018, the amount of unrecognized tax benefits was $7.8 billion, of which up to $1.5 billion would affect HP’s effective tax rate if realized. As of October 31, 2017, the amount of unrecognized tax benefits was $10.8 billion of which up to $3.9 billion would affect HP’s effective tax rate if realized. The amount of unrecognized tax benefits decreased by $3.0 billion primarily related to the resolution of various audits. HP recognizes interest income from favorable settlements and interest expense and penalties accrued on unrecognized tax benefits in the provision for taxes in the Consolidated Statements of Earnings. As of October 31, 2018, 2017 and 2016, HP had accrued $160 million, $257 million and $193 million, respectively, for interest and penalties. HP engages in continuous discussion and negotiation with taxing authorities regarding tax matters in various jurisdictions. HP expects to complete resolution of certain tax years with various tax authorities within the next 12 months. It is also possible that other federal, foreign and state tax issues may be concluded within the next 12 months. HP believes it is reasonably possible that its existing unrecognized tax benefits may be reduced by an amount up to $6.4 billion within the next 12 months. These unrecognized tax benefits have associated gain contingencies which would be settled in the same period resulting in a net release of $740 million. HP is subject to income tax in the United States and approximately 60 other countries and is subject to routine corporate income tax audits in many of these jurisdictions. In addition, HP is subject to numerous ongoing audits by federal, state and foreign tax authorities. The U.S. Internal Revenue Service is conducting an audit of HP’s 2013, 2014 and 2015 income tax returns. The U.S. Tax Court ruled in May 2012 against HP related to certain tax attributes claimed by HP for the tax years 1999 through 2003. HP appealed the U.S. Tax Court determination by filing a formal Notice of Appeal with the Ninth Circuit Court of Appeals. This case was argued before the Ninth Circuit in November 2016. The Ninth Circuit Court of Appeals issued its opinion in November 2017 affirming the Tax Court determinations. HP decided against further appeal. With respect to major state and foreign tax jurisdictions, HP is no longer subject to tax authority examinations for years prior to 1999. No material tax deficiencies have been assessed in major state or foreign tax jurisdictions as of October 31, 2018. HP 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. HP regularly assesses the likely outcomes of these audits in order to determine the appropriateness of HP’s tax provision. HP 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 HP 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 income or cash flows. HP has not provided for U.S. federal income and foreign withholding taxes on $5.4 billion of undistributed earnings from non-U.S. operations as of October 31, 2018 because HP intends to reinvest such earnings indefinitely outside of the United States. Determination of the amount of unrecognized deferred tax liability related to these earnings is not practicable. The TCJA taxed HP’s historic earnings and profits of its non-U.S. subsidiaries. HP will remit these taxed reinvested earnings for which deferred U.S. federal and withholding taxes have been provided where excess cash has accumulated and HP determines that it is advantageous for business operations, tax or cash management reasons. Deferred Income Taxes The significant components of deferred tax assets and deferred tax liabilities were as follows:
| As of October 31
| 2018 |  | 2017
| In millions
Deferred Tax Assets |  |  |
Loss and credit carryforwards | $ | 8,204 |  |  | $ | 9,914 |
Intercompany transactions—excluding inventory | 994 |  |  | 1,901 |
Fixed assets | 151 |  |  | 256 |
Warranty | 194 |  |  | 219 |
Employee and retiree benefits | 401 |  |  | 519 |
Deferred Revenue | 164 |  |  | 231 |
Other | 422 |  |  | 511 |
Gross Deferred Tax Assets | 10,530 |  |  | 13,551 |
Valuation allowances | (7,906 | ) |  | (8,807 | )
Net Deferred Tax Assets | 2,624 |  |  | 4,744 |
Deferred Tax Liabilities |  |  |
Unremitted earnings of foreign subsidiaries | (31 | ) |  | (5,554 | )
Intangible assets | (229 | ) |  | (209 | )
Other | (33 | ) |  | (49 | )
Total Deferred Tax Liabilities | (293 | ) |  | (5,812 | )
Net Deferred Tax Assets (Liabilities) | $ | 2,331 |  |  | $ | (1,068 | )
Long-term deferred tax assets and liabilities included in the Consolidated Balance Sheets as follows:
| As of October 31
| 2018 |  | 2017
| In millions
Long-term deferred tax assets | $ | 2,431 |  |  | $ | 342 |
Long-term deferred tax liabilities | (100 | ) |  | (1,410 | )
Total | $ | 2,331 |  |  | $ | (1,068 | )
As of October 31, 2018, HP had recorded deferred tax assets for net operating loss carryforwards as follows:
| Gross NOLs |  | Deferred Taxes on NOLs |  | Valuation allowance | Initial Year of Expiration
| In millions |
Federal | $ | 456 |  |  | $ | 96 |  |  | — |  | 2023
State | 2,644 |  |  | 163 |  |  | (71 | ) | 2018
Foreign | 26,438 |  |  | 7,743 |  |  | (7,247 | ) | 2020
Balance at end of year | $ | 29,538 |  |  | $ | 8,002 |  |  | $ | (7,318 | ) |
As of October 31, 2018, HP 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 | $ | 7 |  |  | $ | — |  |  | 2027
U.S. R&D and other credits | 3 |  |  | — |  |  | 2020
Tax credits in state and foreign jurisdictions | 313 |  |  | (94 | ) |  | 2021
Balance at end of year | $ | 323 |  |  | $ | (94 | ) |  |
Deferred Tax Asset Valuation Allowance The deferred tax asset valuation allowance and changes were as follows:
| As of October 31
| 2018 |  | 2017 |  | 2016
| In millions
Balance at beginning of year | $ | 8,807 |  |  | $ | 8,520 |  |  | $ | 7,114 |
Income tax (benefit) expense | (897 | ) |  | 297 |  |  | 1,421 |
Other comprehensive income, currency translation and charges to other accounts | (4 | ) |  | (10 | ) |  | (15 | )
Balance at end of year | $ | 7,906 |  |  | $ | 8,807 |  |  | $ | 8,520 |
Gross deferred tax assets as of October 31, 2018, 2017 and 2016, were reduced by valuation allowances of $7.9 billion, $8.8 billion and $8.5 billion, respectively. Total valuation allowance decreased by $901 million in fiscal year 2018, associated primarily with foreign net operating losses and U.S. deferred tax assets that are anticipated to be realized at a lower effective rate than the federal statutory tax rate due to certain future U.S. international tax reform implications, and increased by $287 million and $1.4 billion in fiscal years 2017 and 2016, respectively, associated primarily with foreign net operating losses.

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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration