|
INCOME TAXES
|
3 Months Ended |
|---|---|
|
Jan. 31, 2015
|
|
| Income Tax Disclosure [Abstract] | |
| INCOME TAXES | 5. INCOME TAXES The company’s effective tax rate from continuing operations was 9.3 percent and (24.7) percent for the three months ended January 31, 2015 and 2014, respectively. The income tax expense was $11 million for the three months ended January 31, 2015 and an income tax benefit of $24 million for the three months ended January 31, 2014. The income tax provision from continuing operations for the three months ended January 31, 2015 included a net discrete tax benefit of $12 million. Current period items included in this total are $6 million of tax benefit for the extension, which occurred in the first quarter of 2015, of the U.S. research and development tax credit attributable to the company's prior fiscal year, and $3 million of other discrete tax expense items. In addition, the net discrete benefit included out of period adjustments for a $13 million tax benefit related to a tax rate change in Denmark and $4 million of tax expense attributable to an error discovered on a prior year U.S. tax return. These corrections are not considered to be material to current or prior periods. The income tax provision for the three months ended January 31, 2014 included a net discrete benefit of $50 million due to the settlement of an Internal Revenue Service ("IRS") audit in the U.S. offset by the recognition of tax expense related to the repatriation of dividends to the U.S. On November 1, 2014, Agilent transferred deferred tax assets of $238 million, deferred tax liabilities of $37 million, current income tax payable of $40 million, and other long-term liabilities related to uncertain tax positions totaling $8 million to Keysight as part of its separation from Agilent. A current prepaid income tax asset of $19 million and long-term prepaid income tax asset of $3 million related to sales of intercompany assets was also transferred to Keysight upon separation from Agilent. In the U.S., tax years remain open back to the year 2008 for federal income tax purposes and the year 2000 for significant states. On January 29, 2014 we reached an agreement with the IRS for the tax years 2006 through 2007. The settlement resulted in the recognition, within the continuing operations, of previously unrecognized tax benefits of $111 million, offset by a tax liability on foreign distributions of approximately $61 million principally related to additional foreign earnings that were recognized in conjunction with the settlement. Agilent's U.S. federal income tax returns for 2008 through 2011 are currently under audit by the IRS. In connection with the settlement of the 2006-2007 IRS audit, we identified during the first quarter of fiscal year 2014 an overstatement of approximately $65 million in our long-term tax liabilities. The overstatement was recorded in 2008 as a cumulative effect of a change in accounting principle when we adopted Accounting Standard Codification 740-10, Income Taxes. Accordingly, we corrected the error by reducing long-term tax liabilities and increasing retained earnings by $65 million in the first quarter of fiscal 2014. The correction had no impact on net income or cash flows in any prior period and is not considered material to total liabilities or equity in any prior period. In other major jurisdictions where the company conducts business, the tax years generally remain open back to the year 2003. With these jurisdictions and the U.S., it is reasonably possible that there could be significant changes to our unrecognized tax benefits in the next twelve months due to either the expiration of a statute of limitation or a tax audit settlement. Given the number of years and numerous matters that remain subject to examination in various tax jurisdictions, management is unable to estimate the range of possible changes to the balance of our unrecognized tax benefits. |