HP 2015 Annual Report Download - page 54

Table of Contents
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
expected increase in compensation levels and the expected long-term return on plan assets would have had on our net periodic benefit cost for fiscal 2015:
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We calculate our current and deferred tax provisions based on estimates and assumptions that could differ from the final positions reflected in our income
tax returns. We adjust our current and deferred tax provisions based on income tax returns which are generally filed in the third or fourth quarters of the
subsequent fiscal year.
We recognize deferred tax assets and liabilities for the expected tax consequences of temporary differences between the tax bases of assets and liabilities
and their reported amounts using enacted tax rates in effect for the year in which we expect the differences to reverse.
We record a valuation allowance to reduce deferred tax assets to the amount that we are more likely than not to realize. In determining the need for a
valuation allowance, we consider future market growth, forecasted earnings, future taxable income, the mix of earnings in the jurisdictions in which we
operate and prudent and feasible tax planning strategies. In the event we were to determine that it is more likely than not that we will be unable to realize all
or part of our deferred tax assets in the future, we would increase the valuation allowance and recognize a corresponding charge to earnings or other
comprehensive income in the period in which we make such a determination. Likewise, if we later determine that we are more likely than not to realize the
deferred tax assets, we would reverse the applicable portion of the previously recognized valuation allowance. In order for us to realize our deferred tax assets,
we must be able to generate sufficient taxable income in the jurisdictions in which the deferred tax assets are located.
Our effective tax rate includes the impact of certain undistributed foreign earnings for which we have not provided U.S. federal taxes because we plan to
reinvest such earnings indefinitely outside the U.S. We plan distributions of foreign earnings based on projected cash flow needs as well as the working
capital and long-term investment requirements of our foreign subsidiaries and our domestic operations. Based on these assumptions, we estimate the amount
we expect to indefinitely invest outside the U.S. and the amounts we expect to distribute to the U.S. and provide the U.S. federal taxes due on amounts
expected to be distributed to the U.S. Further, as a result of certain employment actions and capital investments we have undertaken, income from
manufacturing activities in certain jurisdictions is subject to reduced tax rates and, in some cases, is wholly exempt from taxes for fiscal years through 2026.
Material changes in our estimates of cash, working capital and long-term investment requirements in the various jurisdictions in which we do business could
impact how future earnings are repatriated to the U.S., and our related future effective tax rate.
We are subject to income taxes in the U.S. and approximately 105 other countries, and we are subject to routine corporate income tax audits in many of
these jurisdictions. We believe that positions
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 
Assumptions:
Discount rate (25) $ 88
Expected increase in compensation levels 25 $ 17
Expected long-term return on plan assets (25) $ 75
Source: HP INC, 10-K, December 16, 2015 Powered by Morningstar® Document Research℠
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