Symantec 2012 Annual Report Download - page 124

Provision for income taxes
Fiscal 2012 Fiscal 2011 Fiscal 2010
($ in millions)
Provision for income taxes ............................. $298 $105 $112
Effective tax rate on earnings ........................... 20% 15% 14%
Our effective tax rate was approximately 20%, 15%, and 14% in fiscal 2012, 2011, and 2010, respectively.
The tax expense in fiscal 2012 was reduced by the following benefits: (1) $52 million tax benefit arising
from the Veritas 2002 through 2005 IRS Appeals matters, (2) $14 million from lapses of statutes of limitation,
(3) $17 million from settlements and effective settlements with tax authorities and related remeasurements, and
(4) $5 million tax benefit from adjustments related to prior year items. This benefit was partially offset by a $5
million tax expense resulting from a change in valuation allowance for certain deferred tax assets.
The tax expense in fiscal 2011 was reduced by the following benefits: (1) $49 million arising from the
Veritas v Commissioner Tax Court decision further discussed below, (2) $15 million from the reduction of our
valuation allowance for certain deferred tax assets, and (3) $21 million tax benefit from lapses of statutes of
limitation, and (4) $7 million tax benefit from the conclusion of U.S. and foreign audits.
The tax expense in fiscal 2010 was significantly reduced by the following benefits: (1) $79 million tax
benefit arising from the Veritas v. Commissioner Tax Court decision, (2) $11 million tax benefit from the
reduction of our valuation allowance for certain deferred tax assets, (3) $17 million tax benefit from lapses of
statutes of limitation, (4) $9 million tax benefit from the conclusion of U.S. and foreign audits, (5) $7 million tax
benefit to adjust taxes provided in prior periods, and (6) $6 million tax benefit from current year discrete events.
The change in the valuation allowance follows discussions with Irish Revenue in the third quarter of fiscal 2010,
the result of which accelerates the timing of the use of certain Irish tax loss carryforwards in the future.
The effective tax rates for all periods presented otherwise reflects the benefits of lower-taxed international
earnings and losses from our joint venture with Huawei Technologies Co., Limited, domestic manufacturing
incentives, and research and development credits (the U.S. federal R&D tax credit expired on December 31,
2011), partially offset by state income taxes. Pretax income from international operations increased significantly
due to the sale of our 49% ownership interest in the joint venture to Huawei on March 30, 2012 for $526
million. A significant portion of the sale proceeds was attributable to international tax jurisdictions resulting in a
20% tax rate on the sale of the joint venture reducing the overall tax rate by 3%.
We are a U.S.-based multinational company subject to tax in multiple U.S. and international tax
jurisdictions. Substantially all of our international earnings were generated by subsidiaries in Ireland and
Singapore. Our results of operations would be adversely affected to the extent that our geographical mix of
income becomes more weighted toward jurisdictions with higher tax rates and would be favorably affected to the
extent the relative geographic mix shifts to lower tax jurisdictions. Any change in our mix of earnings is
dependent upon many factors and is therefore difficult to predict.
For further information on the impact of foreign earnings on our effective tax rate, see Note 12 of the Notes
to Consolidated Financial Statements.
See Critical Accounting Estimates above for additional information about our provision for income taxes.
In assessing the ability to realize our deferred tax assets, we considered whether it was more likely than not
that some portion or all of the deferred tax assets will not be realized. We considered the following: we have
historical cumulative book income, as measured by the current and prior two years, we have strong, consistent
taxpaying history, we have substantial U.S. federal income tax carryback potential; and we have substantial
amounts of scheduled future reversals of taxable temporary differences from our deferred tax liabilities. Levels of
future taxable income are subject to the various risks and uncertainties discussed in Part I, Item 1A, Risk Factors,
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