HP 2012 Annual Report Download - page 143

HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Note 14: Taxes on Earnings (Continued)
HP is subject to income tax in the United States and approximately 80 foreign 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 state and foreign tax authorities. The IRS began an audit of HP’s 2009
income tax return during 2011. HP has received from the IRS Notices of Deficiency for its fiscal 1999,
2000, 2003, 2004 and 2005 tax years, and Revenue Agent’s Reports (‘‘RAR’’) for its fiscal 2001, 2002,
2006, 2007 and 2008 tax years. The proposed IRS adjustments for these tax years would, if sustained,
reduce the benefits of tax refund claims HP has filed for net operating loss carrybacks to earlier fiscal
years and tax credit carryforwards to subsequent years by approximately $589 million. HP has filed
petitions with the United States Tax Court regarding certain proposed IRS adjustments regarding tax
years 1999 through 2003 and is continuing to contest additional adjustments proposed by the IRS for
other tax years. The United States Tax Court has recently ruled against HP regarding one of the IRS
adjustments. HP intends to appeal the decision. HP believes that it has provided adequate reserves for
any tax deficiencies or reductions in tax benefits that could result from the IRS actions. With respect to
major foreign and state tax jurisdictions, HP is no longer subject to tax authority examinations for years
prior to 1999. HP believes that adequate accruals have been provided for all open tax years.
Tax years of HP’s U.S. group of subsidiaries providing enterprise services through 2002 have been
audited by the IRS, and all proposed adjustments have been resolved. RARs have been received for
exam years 2003, 2004, 2005, 2006, 2007 and the short period ended August 26, 2008, proposing total
tax deficiencies of $320 million. HP is contesting certain issues and believes it has provided adequate
reserves for any tax deficiencies or reductions in tax benefits that could result from the IRS actions.
The IRS began an audit in 2011 of the 2009 income tax return of HP’s U.S. group of subsidiaries
providing Enterprise Services, and has issued an RAR for the short period ended October 31, 2008
proposing a total tax deficiency of $17 million. HP is contesting certain issues and believes it has
provided adequate reserves for any tax deficiencies or reductions in tax benefits that could result from
the IRS actions.
HP has not provided for U.S. federal income and foreign withholding taxes on $33.4 billion of
undistributed earnings from non-U.S. operations as of October 31, 2012 because HP intends to reinvest
such earnings indefinitely outside of the United States. If HP were to distribute these earnings, foreign
tax credits may become available under current law to reduce the resulting U.S. income tax liability.
Determination of the amount of unrecognized deferred tax liability related to these earnings is not
practicable. HP will remit non-indefinitely reinvested earnings of its non-US subsidiaries for which
deferred U.S. federal and withholding taxes have been provided where excess cash has accumulated and
it determines that it is advantageous for business operations, tax or cash management reasons.
Note 15: Stockholders’ Equity
Dividends
The stockholders of HP common stock are entitled to receive dividends when and as declared by
HP’s Board of Directors. Dividends are paid quarterly. Dividends declared were $0.50 per common
share in fiscal 2012, $0.40 per common share in fiscal 2011 and $0.32 per common share in fiscal 2010.
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