Taxes on Earnings (Tables)

12 Months Ended

Oct. 31, 2018

The domestic and foreign components of earnings from continuing operations before taxes were as follows:



	For the fiscal years ended October 31,
	2018			2017			2016
	In millions
U.S.⁽¹⁾	$	(2,805	)	$	(1,929	)	$	(1,758	)
Non-U.S.⁽¹⁾	3,073			2,201			5,618
	$	268		$	272		$	3,860


(1)	Fiscal 2017 and 2016 amounts have been reclassified to conform with the current period presentation.

The Benefit (provision) for taxes on earnings from continuing operations were as follows:



	For the fiscal years ended October 31,
	2018			2017			2016
	In millions
U.S. federal taxes:
Current	$	(2,177	)	$	560		$	940
Deferred	150			(1,366		)	(959		)
Non-U.S. taxes:
Current	419			64			874
Deferred	(188		)	25			(58		)
State taxes:
Current	52			(107		)	36
Deferred	—			660			(210		)
	$	(1,744	)	$	(164	)	$	623

The differences between the U.S. federal statutory income tax rate and the Company's effective tax rate were as follows:



	For the fiscal years ended October 31,
	2018		2017		2016
U.S. federal statutory income tax rate	23.3	%	35.0	%	35.0	%
State income taxes, net of federal tax benefit	4.3	%	3.0	%	1.0	%
Lower rates in other jurisdictions, net	(121.4	)%	(426.3	)%	(24.5	)%
Valuation allowance	(59.8	)%	310.0	%	(14.7	)%
U.S. permanent differences	39.3	%	27.8	%	(2.3	)%
Uncertain tax positions	(694.8	)%	(8.4	)%	23.1	%
Impacts of the Tax Act⁽¹⁾	158.0	%	—	%	—	%
Other, net	0.4	%	(1.4	)%	(1.5	)%
	(650.7	)%	(60.3	)%	16.1	%


(1)	Impacts of the Tax Act is inclusive of valuation allowances recorded as a result of the U.S. law change.

A reconciliation of unrecognized tax benefits is as follows:



	As of October 31,
	2018			2017			2016
	In millions
Balance at beginning of year	$	11,262		$	11,411		$	4,901
Increases:
For current year's tax positions	163			28			1,456
For prior years' tax positions	66			311			820
Net transfers from former Parent through equity	—			—			4,455
Decreases:
For prior years' tax positions	(82		)	(202		)	(114		)
Statute of limitations expiration	(86		)	(70		)	(47		)
Settlements with taxing authorities	(2		)	(216		)	(60		)
Settlements related to joint and several positions of former Parent	(2,495		)	—			—
Balance at end of year	$	8,826		$	11,262		$	11,411

The significant components of deferred tax assets and deferred tax liabilities were as follows:



	As of October 31,
	2018			2017
	In millions
Deferred tax assets:
Loss and credit carry-forwards⁽¹⁾	$	9,149		$	4,775
Inventory valuation	77			79
Intercompany transactions—royalty prepayments⁽²⁾	48			4,267
Intercompany transactions—excluding royalty prepayments	63			129
Warranty	81			156
Employee and retiree benefits	498			661
Restructuring	101			186
Deferred revenue	518			757
Intangible assets	48			—
Other	432			593
Total deferred tax assets	11,015			11,603
Valuation allowance⁽³⁾	(8,209		)	(2,789		)
Total deferred tax assets net of valuation allowance	2,806			8,814
Deferred tax liabilities:
Unremitted earnings of foreign subsidiaries⁽⁴⁾	(161		)	(3,824		)
Fixed assets	(470		)	(385		)
Intangible assets	—			(46		)
Total deferred tax liabilities	(631		)	(4,255		)
Net deferred tax assets and liabilities	$	2,175		$	4,559


(1)	The increase is primarily due to certain foreign loss carryforwards recognized in the current year and increases in U.S. domestic capital loss carryforwards recognized in the current year.


(2)	During fiscal 2018, the Company executed an intercompany sale transaction that resulted in the reversal of $2.1 billion of deferred tax assets attributable to deferred revenue. The tax impacts of the transaction are considered prepaid under FASB guidance applicable to fiscal 2018. The additional decrease is primarily a result of deferred tax remeasurement related to the Tax Act.


(3)	The increase is primarily due to certain foreign loss carryforwards recognized in the current year and increases in U.S. domestic capital loss carryforwards recognized in the current year against which valuation allowances were required as well as a partial valuation allowance recorded against U.S. foreign tax credits carryforwards as a result of the Tax Act.


(4)	The decrease is primarily due to $3.7 billion benefit from the reversal of previous deferred tax recognized on foreign earnings and profits as a result of the Tax Act.

Deferred tax assets and liabilities included in the Consolidated Balance Sheets are as follows:



	As of October 31,
	2018			2017
	In millions
Deferred tax assets	$	2,403		$	4,663
Deferred tax liabilities	(228		)	(104		)
Deferred tax assets net of deferred tax liabilities	$	2,175		$	4,559

As of October 31, 2018, Hewlett Packard Enterprise had recorded deferred tax assets for various tax credit carryforwards as follows:



	Carryforward		Valuation Allowance			Initial Year of Expiration
	In millions
U.S. foreign tax credits	$	1,832	$	(687	)	2021
U.S. research and development and other credits	122		—			2019
Tax credits in state and foreign jurisdictions	158		(124		)	2020
Balance at end of year	$	2,112	$	(811	)

The deferred tax asset valuation allowance and changes were as follows:



	As of October 31,
	2018			2017			2016
	In millions
Balance at beginning of year	$	2,789		$	2,095		$	1,572
Income tax expense	(166		)	848			(203		)
Income tax expense related to the Tax Act	687			—			—
Valuation allowance offsetting current year losses recorded	5,028			—			—
Other comprehensive income, currency translation and charges to other accounts	(129		)	(154		)	726
Balance at end of year	$	8,209		$	2,789		$	2,095