12. Income Taxes

Our effective tax rates for the periods presented were as follows:

Three Months Ended

July 29,

2016

July 31,

2015

Effective tax rates

30.4

(36.4

Our effective tax rates reflect the impact of a significant amount of our earnings, primarily income from our European operations which are headquartered in the Netherlands, being taxed in foreign jurisdictions at rates below the U.S. statutory tax rate. The differences in effective tax rates for the three months ended July 29, 2016 and July 31, 2015 were mainly a result of differences in year-to-date profits before tax, primarily the loss reported in the prior year, and the impacts of discrete events as described below.

During the three months ended July 29, 2016, we adopted a new accounting standard that simplifies stock-based compensation income tax accounting and presentation within the financial statements. During the three months ended July 29, 2016, we recorded a discrete charge of $13 million following the post-adoption rules which require that all excess tax benefits and deficiencies from stock-based compensation be recognized as a component of income tax expense. See Note 1 – Description of Business and Significant Accounting Policies for more details regarding the adoption of this accounting standard.

In June 2015, the Internal Revenue Service (IRS) signed a closing agreement on our fiscal 2008 to 2010 transfer pricing arrangements. During the three months ended July 31, 2015, we recorded discrete charges totaling $13 million attributable to the transfer pricing audit adjustment and related re-measurement of uncertain tax positions for tax years subject to future audits.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in millions):

	Three Months Ended
	July 29, 2016		July 31, 2015
Balance at beginning of period	$	216	$	272
Additions based on tax positions related to the current year		2		4
Additions for tax positions of prior years		—		19
Decreases for tax positions of prior years		—		(5	)
Settlements		—		(47	)
Balance at end of period	$	218	$	243

As of July 29, 2016, we had $218 million of gross unrecognized tax benefits, of which $149 million has been recorded in other long-term liabilities. Unrecognized tax benefits of $154 million, including penalties, interest and indirect benefits, would affect our provision for income taxes if recognized.

We are currently undergoing income tax audits in the United States (U.S.) and several foreign tax jurisdictions. Transfer pricing calculations are key issues under audits in various jurisdictions, and are often subject to dispute and appeals. The IRS has concluded the examination of our federal income tax returns for our fiscal years through 2010. The IRS commenced the examination of our federal income tax returns for our fiscal years 2012 and 2013 in August 2016.

On September 17, 2010, the Danish Tax Authorities issued a decision concluding that distributions declared in 2005 and 2006 from our Danish subsidiary were subject to Danish at-source dividend withholding tax. We do not believe that our Danish subsidiary is liable for withholding tax and filed an appeal with the Danish Tax Tribunal to that effect. On December 19, 2011, the Danish Tax Tribunal issued a ruling that our Danish subsidiary was not liable for Danish withholding tax. The Danish tax examination agency appealed to the Danish High Court in March 2012. In February 2016, the Danish High Court referred the case to the European Court of Justice.

We continue to monitor the progress of ongoing discussions with tax authorities and the impact, if any, of the expected expiration of the statute of limitations in various taxing jurisdictions.