Income Taxes (Tables)

12 Months Ended

Oct. 31, 2021

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:

 

	2021		2020		2019
	(In millions)
U.S.	$	512	$	92	$	363
Foreign	6,259		4,074		2,906
	$	6,771	$	4,166	$	3,269

Components of the provision for income taxes

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

	2021		2020		2019
	(In millions)
Current:
U.S.	$	462	$	196	$	240
Foreign	344		263		260
State	17		20		12
	823		479		512
Deferred:
U.S.	(3)		(3)		8
Foreign	67		76		46
State	(4)		(5)		(3)
	60		68		51
	$	883	$	547	$	563

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:

 

	2021		2020		2019
Tax provision at U.S. statutory rate	21.0	%	21.0	%	21.0	%
Effect of foreign operations taxed at various rates	(7.0)		(5.9)		(5.9)
Changes in prior years’ unrecognized tax benefits	0.2		0.5		2.6
Resolutions of prior years’ income tax filings	(0.1)		(1.0)		(0.1)
Research and other tax credits	(0.9)		(1.3)		(1.1)
Other	(0.2)		(0.2)		0.7
	13.0	%	13.1	%	17.2	%

Components of deferred income tax assets and liabilities

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

	October 31, 2021		October 25, 2020
	(In millions)
Deferred tax assets:
Allowance for doubtful accounts	$	4	$	4
Inventory reserves and basis difference	112		119
Installation and warranty reserves	29		14
Intangible assets	1,281		1,355
Accrued liabilities	31		24
Deferred revenue	25		32
Tax credits	369		326
Deferred compensation	133		130
Share-based compensation	34		30
Lease liability	61		55
Other	89		96
Gross deferred tax assets	2,168		2,185
Valuation allowance	(361)		(314)
Total deferred tax assets	1,807		1,871
Deferred tax liabilities:
Fixed assets	(93)		(76)
Right of use assets	(62)		(54)
Undistributed foreign earnings	(37)		(39)
Total deferred tax liabilities	(192)		(169)
Net deferred tax assets	$	1,615	$	1,702

Summary of valuation allowance

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

	2021		2020		2019
	(In millions)
Beginning balance	$	314	$	257	$	230
Increases	47		57		27
Decreases	—		—		—
Ending balance	$	361	$	314	$	257

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: 

	2021		2020		2019
	(In millions)
Beginning balance of gross unrecognized tax benefits	$	496	$	845	$	374
Settlements with tax authorities	—		(446)		(1)
Lapses of statutes of limitation	(4)		(3)		(2)
Increases in tax positions for current year	26		44		33
Increases in tax positions for prior years	23		91		441
Decreases in tax positions for prior years	(4)		(35)		—
Ending balance of gross unrecognized tax benefits	$	537	$	496	$	845