Income Taxes (Tables)

12 Months Ended

Dec. 31, 2015

Schedule of domestic and foreign income (loss) and income tax expense (benefit)

Domestic and foreign income (loss) before income taxes and details of the income tax expense (benefit) are as follows (amounts in millions):



	For the Years Ended December 31,
	2015			2014			2013
Income before income tax expense:
Domestic	$	355		$	325		$	626
Foreign	766			656			693
	$	1,121		$	981		$	1,319
Income tax expense (benefit):
Current:
Federal	$	169		$	146		$	110
State	31			12			7
Foreign	40			38			31
Total current	240			196			148
Deferred:
Federal	1			26			134
State	(21		)	(18		)	(12		)
Foreign	9			(58		)	39
Total deferred	(11		)	(50		)	161

Income tax expense	$	229		$	146		$	309

Reconciliation of income taxes at the U.S. federal statutory rate to income tax expense (benefit)

The items accounting for the difference between income taxes computed at the U.S. federal statutory income tax rate and the income tax expense (benefit) at the effective tax rate for each of the years are as follows (amounts in millions):



	For the Years Ended December 31,
	2015					2014					2013
Federal income tax provision at statutory rate	$	392		35	%	$	343		35	%	$	462		35	%
State taxes, net of federal benefit	5			—		5			—		6			—
Research and development credits	(26		)	(2	)	(24		)	(2	)	(49		)	(4	)
Foreign rate differential	(228		)	(20	)	(245		)	(25	)	(174		)	(13	)
Change in tax reserves	136			12		128			13		89			7
Net operating loss tax attribute assumed from the Purchase Transaction	(63		)	(6	)	(52		)	(5	)	(16		)	(1	)
Other	13			1		(9		)	(1	)	(9		)	(1	)
Income tax expense	$	229		20	%	$	146		15	%	$	309		23	%

Schedule of the components of the net deferred tax assets (liabilities)

Deferred income taxes reflect the net tax effects of temporary differences between the amounts of assets and liabilities for accounting purposes and the amounts used for income tax purposes. The components of the net deferred tax assets (liabilities) are as follows (amounts in millions):



	As of December 31,
	2015			2014
Deferred tax assets:
Allowance for sales returns and price protection	$	66		$	74
Inventory reserve	11			9
Accrued expenses	40			38
Deferred revenue	288			291
Tax credit carryforwards	58			50
Net operating loss carryforwards	10			10
Stock-based compensation	54			69
Transaction costs	9			9
Other	19			13
Deferred tax assets	555			563
Valuation allowance	—			—
Deferred tax assets, net of valuation allowance	555			563
Deferred tax liabilities:
Intangibles	(166		)	(169		)
Prepaid royalties	(30		)	(22		)
Capitalized software development expenses	(81		)	(84		)
State taxes	(7		)	(34		)
Other	(6		)	—
Deferred tax liabilities	(290		)	(309		)
Net deferred tax assets	$	265		$	254

Reconciliation of unrecognized tax benefits for the period

As of December 31, 2015, we had approximately $552 million of gross unrecognized tax benefits, of which $529 million would affect our effective tax rate if recognized. A reconciliation of total gross unrecognized tax benefits for the years ended December 31, 2015, 2014, and 2013 is as follows (amounts in millions):



	For the Years Ended December 31,
	2015			2014			2013
Unrecognized tax benefits balance at January 1	$	419		$	294		$	207
Gross increase for tax positions of prior-years	8			2			1
Gross decrease for tax positions of prior-years	(11		)	—			—
Gross increase for tax positions of current year	136			125			91
Settlement with taxing authorities	—			(2		)	—
Lapse of statute of limitations	—			—			(5		)
Unrecognized tax benefits balance at December 31	$	552		$	419		$	294