HP 2014 Annual Report Download - page 134

HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Note 6: Taxes on Earnings (Continued)
Current and long-term deferred tax assets and liabilities included in the Consolidated Balance
Sheets as follows:
As of October 31
2014 2013
In millions
Current deferred tax assets .......................................... $2,754 $ 3,893
Current deferred tax liabilities ....................................... (284) (375)
Long-term deferred tax assets ........................................ 740 1,346
Long-term deferred tax liabilities ..................................... (1,124) (2,668)
Net deferred tax assets net of deferred tax liabilities ....................... $2,086 $ 2,196
Tax deficits of approximately $43 million, $149 million and $175 million were recorded as a result
of employee stock program activity and exercise of employee stock options, as a decrease in
stockholders’ equity in fiscal 2014, 2013 and 2012, respectively.
HP periodically engages in intercompany licensing arrangements that may result in advance
payments between subsidiaries in different tax jurisdictions. When the local tax treatment of the
intercompany licensing arrangements differs from their U.S. GAAP treatment, deferred taxes are
recognized. During fiscal 2014, HP executed a multi-year intercompany licensing arrangement on which
advanced royalty payments of $10.4 billion were received in the U.S., the result of which was the
recognition of net U.S. long-term deferred tax assets of $1.3 billion. The remaining intercompany
royalty revenues of $9.9 billion will be recognized over the life of the arrangement through 2029 in the
respective legal entities and eliminated in consolidation. The amortization expense related to the
licensing rights will also be eliminated in consolidation. The decrease in deferred tax assets for credit
carryforwards and increase in deferred tax assets for intercompany transactions excluding inventory
include the deferred tax attributable to this transaction. This results in an increase in long-term
deferred tax assets which is presented as a component of HP’s long-term deferred tax liabilities due to
the effects of jurisdictional netting.
As of October 31, 2014, HP had $858 million, $4.2 billion and $29.7 billion of federal, state and
foreign net operating loss carryforwards, respectively. Amounts included in federal net operating loss
carryforwards will begin to expire in fiscal 2021 and amounts included in state and foreign net
operating loss carryforwards will begin to expire in 2015. HP also has a capital loss carryforward of
approximately $272 million which will expire in fiscal 2015. HP has provided a valuation allowance of
$133 million and $8.7 billion for deferred tax assets related to state and foreign net operating losses
carryforwards, respectively and $104 million for deferred tax assets related to capital loss carryforwards
that HP does not expect to realize.
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