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WESTERN DIGITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following is a tabular reconciliation of the total amounts of unrecognized tax benefits for the years ended
July 3, 2015, June 27, 2014 and June 28, 2013 (in millions):
2015 2014 2013
Unrecognized tax benefit at beginning of period .................................. $300 $240 $280
Gross increases related to current year tax positions ............................... 44 27 29
Gross increases related to prior year tax positions ................................. 6 26 10
Gross decreases related to prior year tax positions ................................. — (5) (8)
Settlements .............................................................. — — (64)
Lapse of statute of limitations ................................................ (3) — (7)
Acquisitions ............................................................. 3 12 —
Unrecognized tax benefit at end of period ....................................... $350 $300 $240
The Company’s unrecognized tax benefits are primarily included within long-term liabilities in the Company’s
consolidated balance sheets. The entire balance of unrecognized tax benefits at July 3, 2015, June 27, 2014 and
June 28, 2013, if recognized, would affect the effective tax rate, subject to certain future valuation allowance reversals.
The Company files U.S. Federal, U.S. state, and foreign tax returns. For both federal and state tax returns, with
few exceptions, the Company is subject to examination for fiscal years 2008 through 2014. In foreign jurisdictions,
with few exceptions, the Company is subject to examination for all years subsequent to fiscal 2008. The Company is
no longer subject to examination by the IRS for periods prior to 2008, although carry forwards generated prior to
those periods may still be adjusted upon examination by the IRS or state taxing authority if they either have been or
will be used in a subsequent period.
The IRS previously completed its field examination of the Company’s federal income tax returns for fiscal years
2006 and 2007, and the Company and the IRS reached agreement with respect to all matters except on the proposed
adjustments to income before income taxes relating to intercompany payable balances. The proposed adjustments
relating to intercompany payable balances for fiscal years 2006 and 2007 are addressed in conjunction with the IRS’s
examination of the Company’s fiscal years 2008 and 2009, which commenced in January 2012. The Company received
a Notice of Proposed Adjustment (“NOPA”) from the IRS for fiscal year 2009 relating to intercompany payable
balances and two NOPAs from the IRS for fiscal years 2008 and 2009 relating to transfer pricing with the Company’s
foreign subsidiaries. The NOPAs relating to intercompany payable balances and transfer pricing with the Company’s
foreign subsidiaries propose to increase the Company’s U.S. taxable income which would result in additional federal
tax expense of approximately $72 million and $723 million, respectively, subject to interest. The Company disagrees
with the proposed adjustments, believes that the tax positions are properly supported and will vigorously contest the
position taken by the IRS. In January 2012, the IRS commenced an examination of the 2007 fiscal period ended Sep-
tember 5, 2007 of Komag, which the Company acquired on September 5, 2007. The IRS examined calendar years
2010 and 2011 of HGST, which was acquired by the Company on March 8, 2012, and completed the examination
with no material adjustments.
The Company believes that adequate provision has been made for any adjustments that may result from tax
examinations. However, the outcome of tax examinations cannot be predicted with certainty. If any issues addressed in
the Company’s tax examinations are resolved in a manner not consistent with management’s expectations, the Com-
pany could be required to adjust its provision for income taxes in the period such resolution occurs. As of July 3,
2015, it is not possible to estimate the amount of change, if any, in the unrecognized tax benefits that is reasonably
possible within the next twelve months. Any significant change in the amount of the Company’s liability for
unrecognized tax benefits would most likely result from additional information or settlements relating to the
examination of the Company’s tax returns.
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