HP 2011 Annual Report Download - page 133

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HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Note 14: Taxes on Earnings (Continued)
The total amount of gross unrecognized tax benefits was $2.1 billion as of October 31, 2011. A
reconciliation of unrecognized tax benefits is as follows:
Balance at October 31, 2008 ................................................. $2,333
Increases:
For current year’s tax positions ........................................... 115
For prior years’ tax positions ............................................. 626
Decreases:
For prior years’ tax positions ............................................. (762)
Statute of limitations expiration ........................................... (293)
Settlements with taxing authorities ......................................... (131)
Balance at October 31, 2009 ................................................. $1,888
Increases:
For current year’s tax positions ........................................... 27
For prior years’ tax positions ............................................. 347
Decreases:
For prior years’ tax positions ............................................. (120)
Statute of limitations expiration ........................................... (1)
Settlements with taxing authorities ......................................... (56)
Balance at October 31, 2010 ................................................. $2,085
Increases:
For current year’s tax positions ........................................... 384
For prior years’ tax positions ............................................. 426
Decreases:
For prior years’ tax positions ............................................. (159)
Statute of limitations expiration ........................................... (20)
Settlements with taxing authorities ......................................... (598)
Balance at October 31, 2011 ................................................. $2,118
Up to $1.1 billion, $1.0 billion and $950 million of HP’s unrecognized tax benefits at October 31,
2011, 2010 and 2009, respectively, would affect HP’s effective tax rate if realized.
HP recognizes interest income from favorable settlements and income tax receivables and interest
expense and penalties accrued on unrecognized tax benefits within income tax expense. As of
October 31, 2011, HP had accrued a net $205 million payable for interest and penalties. During fiscal
2011, HP recognized net interest expense net of tax on net deficiencies of $24 million.
HP engages in continuous discussion and negotiation with taxing authorities regarding tax matters
in various jurisdictions. HP does not expect complete resolution of any 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 transfer pricing and other matters.
Accordingly, HP believes it is reasonably possible that its existing unrecognized tax benefits may be
reduced by an amount up to $249 million within the next 12 months.
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