Symantec 2016 Annual Report Download - page 129

Tax expense in fiscal 2016 was primarily driven by (1) $1.1 billion of tax expense for providing U.S. taxes
on certain undistributed foreign earnings, primarily those attributable to the sale of Veritas, and (2) $10 million
of tax expense attributable to recording valuation allowances for certain deferred tax assets.
The tax expense in fiscal 2015 was reduced by the following benefits: (1) $59 million for tax benefits
related to the settlement of the Symantec 2009 through 2013 Internal Revenue Service (“IRS”) audit, (2) $21
million in tax benefits resulting from tax settlements and lapses of statutes of limitations, (3) $14 million in tax
benefits related to certain foreign operations, and (4) $14 million in tax benefits resulting from deductible
separation costs.
The tax expense in fiscal 2014 was reduced by the following benefits: (1) $33 million for the resolution of a
tax matter related to the sale of our 49% ownership interest in the joint venture with Huawei during the fourth
quarter of fiscal 2012, (2) $24 million for tax benefits related to the settlement of the Symantec 2005 through
2008 IRS audit, (3) $15 million tax benefit related to certain foreign operations, and (4) $13 million from lapses
of statutes of limitation. These tax benefits were partially offset by $12 million in tax expense, resulting from the
sale of short-term investments.
The effective tax rates for all periods presented otherwise reflect the benefits of lower-taxed international
earnings, domestic manufacturing incentives, and research and development credits, partially offset by state
income taxes.
We are a U.S.-based multinational company subject to tax in multiple U.S. and international tax
jurisdictions. A substantial portion of our international earnings were generated from subsidiaries organized 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 11 of the Notes
to Consolidated Financial Statements in this annual report.
See Critical Accounting Policies and 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 is more likely than not
that some portion or all 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,
set forth in this annual report. We have concluded that this positive evidence outweighs the negative evidence
and, thus, that the deferred tax assets as of April 1, 2016 of $308 million, which are net of a valuation allowance
of $50 million, are realizable on a “more likely than not” basis.
On September 3, 2013, we settled and effectively settled matters with the IRS for the Symantec 2005
through 2008 fiscal years. The result of the settlements, effective settlements, and re-measurements resulted in a
reduction in the balance of our gross unrecognized tax benefits in fiscal year 2014 of $122 million.
On March 18, 2015, we settled and effectively settled matters with the IRS for the Symantec 2009 through
2013 fiscal years. The settlement and effective settlement resulted in a benefit to tax expense in fiscal year 2015
of $59 million. Additionally, the Company settled transfer price related matters of $158 million, a portion of
which was accounted for against deferred tax liabilities on unremitted foreign earnings. The Company has paid in
$155 million to cover the final tax and interest liability on the settlement.
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