Income Taxes (Tables)

12 Months Ended

Oct. 25, 2020

Income Tax Disclosure [Abstract]

Components of income from operations before income taxes

The components of income before income taxes for each fiscal year were as follows:

	2020		2019		2018
	(In millions)
U.S.	$	92	$	363	$	389
Foreign	4,074		2,906		4,007
	$	4,166	$	3,269	$	4,396

Components of the provision for income taxes

The components of the provision for income taxes for each fiscal year were as follows:

	2020		2019		2018
	(In millions)
Current:
U.S.	$	196	$	240	$	1,021
Foreign	263		260		117
State	20		12		22
	479		512		1,160
Deferred:
U.S.	(3)		8		151
Foreign	76		46		57
State	(5)		(3)		(10)
	68		51		198
	$	547	$	563	$	1,358

Effective income tax rate continuing operations tax rate reconciliation

A reconciliation between the statutory U.S. federal income tax rate and Applied’s actual effective income tax rate for each fiscal year is presented below:

	2020		2019		2018
Tax provision at U.S. statutory rate	21.0	%	21.0	%	23.4	%
Changes in U.S. tax law	—		—		25.3
Effect of foreign operations taxed at various rates	(5.9)		(5.9)		(15.6)
Changes in prior years’ unrecognized tax benefits	0.5		2.6		(0.9)
Resolutions of prior years’ income tax filings	(1.0)		(0.1)		0.2
Research and other tax credits	(1.3)		(1.1)		(0.8)
Other	(0.2)		0.7		(0.7)
	13.1	%	17.2	%	30.9	%

Components of deferred income tax assets and liabilities

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

	October 25, 2020		October 27, 2019
	(In millions)
Deferred tax assets:
Allowance for doubtful accounts	$	4	$	8
Inventory reserves and basis difference	119		117
Installation and warranty reserves	14		11
Intangible assets	1,355		1,472
Accrued liabilities	24		15
Deferred revenue	32		36
Tax credits	326		264
Deferred compensation	130		98
Share-based compensation	30		36
Lease liability	55		—
Other	96		58
Gross deferred tax assets	2,185		2,115
Valuation allowance	(314)		(257)
Total deferred tax assets	1,871		1,858
Deferred tax liabilities:
Fixed assets	(76)		(65)
Right of use assets	(54)		—
Undistributed foreign earnings	(39)		(38)
Total deferred tax liabilities	(169)		(103)
Net deferred tax assets	$	1,702	$	1,755

Summary of valuation allowance

Changes in the valuation allowance in each fiscal year were as follows:

	2020		2019		2018
	(In millions)
Beginning balance	$	257	$	230	$	227
Increases	57		27		8
Decreases	—		—		(5)
Ending balance	$	314	$	257	$	230

A reconciliation of gross unrecognized tax benefits

A reconciliation of the beginning and ending balances of gross unrecognized tax benefits in each fiscal year is as follows: 

	2020		2019		2018
	(In millions)
Beginning balance of gross unrecognized tax benefits	$	845	$	374	$	391
Settlements with tax authorities	(446)		(1)		(152)
Lapses of statutes of limitation	(3)		(2)		(37)
Increases in tax positions for current year	44		33		91
Increases in tax positions for prior years	91		441		83
Decreases in tax positions for prior years	(35)		—		(2)
Ending balance of gross unrecognized tax benefits	$	496	$	845	$	374