Income Taxes (Tables)

12 Months Ended

May. 31, 2015

Schedule of Income before Income Tax, Domestic and Foreign

Income before income taxes is as follows:



	Year Ended May 31,
(In millions)	2015		2014		2013
Income before income taxes:
United States	$	1,967	$	3,066	$	1,231
Foreign	2,238		478		2,025
TOTAL INCOME BEFORE INCOME TAXES	$	4,205	$	3,544	$	3,256

Schedule of Components of Income Tax Expense (Benefit)

The provision for income taxes is as follows:



	Year Ended May 31,
(In millions)	2015			2014			2013
Current:
United States
Federal	$	596		$	259		$	378
State	80			104			79
Foreign	369			499			442
Total	1,045			862			899
Deferred:
United States
Federal	(66		)	19			(4		)
State	(11		)	(3		)	(4		)
Foreign	(36		)	(27		)	(86		)
Total	(113		)	(11		)	(94		)
TOTAL INCOME TAX EXPENSE	$	932		$	851		$	805

Schedule of Effective Income Tax Rate Reconciliation

A reconciliation from the U.S. statutory federal income tax rate to the effective income tax rate is as follows:



	Year Ended May 31,
	2015		2014		2013
Federal income tax rate	35.0	%	35.0	%	35.0	%
State taxes, net of federal benefit	0.9	%	1.8	%	1.4	%
Foreign earnings	-15.7	%	2.2	%	-11.8	%
Deferred charge	0.9	%	-14.6	%	0.0	%
Other, net	1.1	%	-0.4	%	0.1	%
EFFECTIVE INCOME TAX RATE	22.2	%	24.0	%	24.7	%

Schedule of Deferred Tax Assets and Liabilities

Deferred tax assets and (liabilities) comprise the following:



	As of May 31,
(In millions)	2015			2014
Deferred tax assets:
Allowance for doubtful accounts	$	11		$	11
Inventories	59			49
Sales return reserves	143			113
Deferred compensation	258			211
Stock-based compensation	179			162
Reserves and accrued liabilities	92			95
Net operating loss carry-forwards	10			16
Undistributed earnings of foreign subsidiaries	149			194
Other	76			51
Total deferred tax assets	977			902
Valuation allowance	(9		)	(9		)
Total deferred tax assets after valuation allowance	968			893
Deferred tax liabilities:
Property, plant and equipment	(220		)	(237		)
Intangibles	(93		)	(94		)
Other	(38		)	(2		)
Total deferred tax liability	(351		)	(333		)
NET DEFERRED TAX ASSET	$	617		$	560

Unrecognized Tax Benefits Reconciliation

The following is a reconciliation of the changes in the gross balance of unrecognized tax benefits:



	As of May 31,
(In millions)	2015			2014			2013
Unrecognized tax benefits, beginning of the period	$	506		$	447		$	285
Gross increases related to prior period tax positions⁽¹⁾	32			814			77
Gross decreases related to prior period tax positions⁽¹⁾	(123		)	(166		)	(3		)
Gross increases related to current period tax positions	82			125			130
Gross decreases related to current period tax positions	(9		)	(30		)	(9		)
Settlements⁽¹⁾	(27		)	(676		)	—
Lapse of statute of limitations	(10		)	(4		)	(21		)
Changes due to currency translation	(13		)	(4		)	(12		)
UNRECOGNIZED TAX BENEFITS, END OF THE PERIOD	$	438		$	506		$	447

(1)

During the fourth quarter of the fiscal year ended May 31, 2014, the Company reached a resolution with the IRS on a U.S. Unilateral Advanced Pricing Agreement that covers intercompany transfer pricing for fiscal years 2011 through 2020. As a result, the Company recorded a gross increase in unrecognized tax benefits related to prior period tax positions, a gross decrease in unrecognized tax benefits related to prior period tax positions and a settlement. The net impact of these items resulted in a decrease to unrecognized tax benefits.

Summary of Operating Loss Carryforwards

The Company has available domestic and foreign loss carry-forwards of $36 million at May 31, 2015. Such losses will expire as follows:



	Year Ending May 31,
(In millions)	2016		2017		2018		2019		2020-2035		Indefinite		Total
Net operating losses	$	—	$	—	$	4	$	1	$	17	$	14	$	36