HP 2015 Annual Report Download - page 46

Table of Contents
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The process of completing the Separation was highly complex and involved significant costs and expenses. Accordingly, we incurred separation costs
and foreign tax expenses associated with separating into two companies. In fiscal 2015, we recorded nonrecurring separation costs and net foreign tax
expenses of $1.6 billion, which were primarily related to third-party consulting, contractor fees and other incremental costs directly associated with the
separation process. We expect total separation charges and net foreign tax expenses to be approximately $180 million in fiscal 2016. Additionally, the
separation into two independent companies is expected to result in total dis-synergies of approximately $400 million to $450 million annually, which costs
are primarily associated with corporate functions such as finance, legal, IT, real estate and human resources. Such dis-synergies are expected to be divided
approximately equally between HP Inc. and Hewlett Packard Enterprise.
We recorded a deferred tax asset on these costs and expenses as they were incurred through fiscal 2015. We expect a portion of these deferred tax assets
associated with separation costs and expenses will be eliminated, given that some will be non-deductible, at the time the Separation is executed. Furthermore,
we concluded on the legal form of the Separation and in May 2015 announced that Hewlett Packard Enterprise will be the spinnee company in the United
States ("U.S."). Accordingly, we implemented certain internal reorganizations of, and transactions among, our wholly-owned subsidiaries and operating
activities in preparation for the legal form of separation. As a result, we recognized gross incremental foreign tax expenses related to the separation of foreign
legal entities of approximately $300 million and foreign tax credits of approximately $100 million in fiscal 2015 with additional tax credit amounts
expected over several years. As of October 31, 2015, we also expect separation-related capital expenditures of approximately $30 million in fiscal 2016.
In connection with the Separation, we and Hewlett Packard Enterprise have entered into a separation and distribution agreement as well as various other
agreements that provide a framework for the relationships between the parties going forward, including among others a tax matters agreement, an employee
matters agreement, a transition service agreement, a real estate matters agreement, a master commercial agreement and an information technology service
agreement. In the fourth quarter of fiscal 2015, we transferred substantially all of the assets, liabilities and operations of enterprise technology infrastructure,
software, services and financing businesses to Hewlett Packard Enterprise in the fourth fiscal quarter of 2015.
The historical results of operations and the financial position of Hewlett Packard Enterprise are included in the consolidated financial statements of
HP Inc. for each of the fiscal years included in this report and will be reported as discontinued operations beginning in the first quarter of fiscal 2016.
Beginning November 1, 2015, we no longer consolidate Hewlett Packard Enterprise within our financial results or reflect the financial results of Hewlett
Packard Enterprise within our continuing results of operations.
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As of October 31, 2015, we were a leading global provider of products, technologies, software, solutions and services to individual consumers, small- and
medium-sized businesses ("SMBs") and large enterprises, including customers in the government, health and education sectors. Our offerings span the
following:
•personal computing and other access devices;
•imaging- and printing-related products and services;
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Source: HP INC, 10-K, December 16, 2015 Powered by Morningstar® Document Research℠
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