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Income Taxes (Tables)
 12 Months Ended
Jun. 30, 2017
Income Tax Disclosure [Abstract]  
Schedule of (Loss) Income from Continuing Operations Before Income Tax Expense (Benefit) Attributable to Jurisdictions

(Loss) income from continuing operations before income tax expense (benefit) was attributable to the following jurisdictions:

 

     For the fiscal years ended
June 30,		  
     2017     2016     2015  
     (in millions)  

U.S.

    $ 84     $ (125 )    $ 148  

Foreign

      (699 )      306       404  
  

 

 

    

 

 

    

 

 

  

(Loss) income from continuing operations before income tax expense (benefit)

    $ (615 )    $ 181     $ 552  
  

 

 

    

 

 

    

 

 

  
Schedule of Components of Income Tax Expense (Benefit)

The significant components of the Company’s income tax expense (benefit) were as follows:

 

     For the fiscal years ended
June 30,		  
     2017     2016     2015  
     (in millions)  

Current:

       

U.S.

       

Federal

    $ 1     $ 15     $ 35  

State & local

      4       5       11  

Foreign

      118       102       135  
  

 

 

    

 

 

    

 

 

  

Total current tax

      123       122       181  
  

 

 

    

 

 

    

 

 

  

Deferred:

       

U.S.

       

Federal

      57       (71 )      16  

State & local

      (1 )      (106 )      1  

Foreign

      (151 )      1       (13 ) 
  

 

 

    

 

 

    

 

 

  

Total deferred tax

      (95 )      (176 )      4  
  

 

 

    

 

 

    

 

 

  

Total income tax expense (benefit)(a)

    $ 28     $ (54 )    $ 185  
  

 

 

    

 

 

    

 

 

  

 

a) 

The Company recognized a tax benefit of approximately $144 million upon reclassification of the Digital Education segment to discontinued operations in (Loss) income from discontinued operations, net of tax, in the Statement of Operations in fiscal year 2016. In addition, a tax benefit of $30 million related to the operations of the Digital Education segment for the period was recorded to discontinued operations in (Loss) income from discontinued operations, net of tax, in the Statement of Operations in fiscal 2016. The tax expense (benefit) shown above excludes the tax benefit of the Company’s digital education business. The Company will not have a current federal tax expense after accounting for the federal current tax benefits attributed to discontinued operations.

 
Effective Income Tax Rate Reconciliation

The reconciliation between the Company’s actual effective tax rate and the statutory U.S. Federal income tax rate of 35% was:

 

     For the fiscal years ended
June 30,		  
       2017         2016         2015    

U.S. federal income tax rate

      35 %      35 %      35 % 

State and local taxes, net

      —         (8 )      1  

Effect of foreign operations(a)

      (17 )      (1 )      (2 ) 

Change in valuation allowance(b)

      (7 )      (62 )      —    

Income tax audit settlements(c)

      (10 )      —         —    

Non-deductible goodwill and asset impairment(d)

      (7 )      —         —    

Non-deductible compensation and benefits

      (1 )      3       1  

R&D credits

      1       (2 )      (1 ) 

Other, net

      1       5       —    
  

 

 

    

 

 

    

 

 

  

Effective tax rate(e)

      (5 )%      (30 )%      34 % 
  

 

 

    

 

 

    

 

 

  
(a) 

The Company’s effective tax rate is impacted by the geographic mix of its pre-tax income. The Company’s foreign operations are located primarily in Australia and the United Kingdom (“U.K.”) which have lower income tax rates than the U.S. As indicated in the pre-tax income table above, for the fiscal year ended June 30, 2017, the Company recorded a pre-tax loss on a consolidated basis comprised of pre-tax income in the U.S. and pre-tax losses in foreign jurisdictions which includes impairments and write-downs of approximately $1 billion. The losses in our foreign operations had the effect of reducing the tax benefit of consolidated pre-tax losses measured at the U.S. statutory rate by $98 million resulting in a lower effective tax rate. For the fiscal years ended June 30, 2016 and June 30, 2015, the Company recorded pre-tax book income on a consolidated basis with pre-tax income in foreign jurisdictions. Accordingly, the effect of foreign operations at lower tax rates decreased the Company’s effective tax rate.
(b) 

For the fiscal year ended June 30, 2017, valuation allowance increased by $40 million related to foreign net operating losses, which more likely than not will not be utilized. For the fiscal year ended June 30, 2016, included in the change in valuation allowance is a tax benefit of $106 million related to the release of previously established valuation allowances related to certain U.S. Federal net operating losses and state deferred tax assets. This benefit was recognized in conjunction with management’s plan to dispose of the Company’s digital education business during fiscal 2016, as the Company now expects to generate sufficient U.S. taxable income to utilize these deferred tax assets prior to expiration.
(c) 

In the fiscal year ended June 30, 2017, the Company reached an agreement with a foreign tax authority to settle certain tax issues related to fiscal years 2010 through 2015. As a result of the settlement, the Company recorded net income tax expense of $63 million. See Uncertain Tax Positions below.
(d) 

The Company recorded non-cash charges of $48 million related to the impairment of Goodwill, which was non-deductible, and a write-down of $360 million on U.K. fixed assets, a portion of which were non-deductible, which reduced the Company’s tax benefit by $12 million and $29 million, respectively. These impairments and write-downs have an impact on our effective tax rate to the extent a tax benefit is not recorded.
(e) 

For the fiscal year ended June 30, 2017, the effective tax rate of (5)% represents income tax expense when compared to consolidated pre-tax book loss. For the fiscal year ended June 30, 2016, the effective tax rate of (30)% represents income tax benefit when compared to consolidated pre-tax book income. For the fiscal year ended June 30, 2015, the effective tax rate of 34% represents an income tax expense when compared to consolidated pre-tax book income. As a result, certain reconciling items between the U.S. federal income tax rate and the Company’s effective tax rate may have the opposite impact.

 
Summary of Recognized Current and Deferred Income Taxes in Balance Sheets

The Company recognized current and deferred income taxes in the Balance Sheets at June 30, 2017 and 2016, respectively, as follows:

 

     As of June 30,  
     2017     2016  
     (in millions)  

Deferred income tax assets

    $ 525     $ 602  

Deferred income tax liabilities

      (61 )      (171 ) 
  

 

 

    

 

 

  

Net deferred tax assets

    $ 464     $ 431  
  

 

 

    

 

 

  

 
Schedule of Components of Deferred Tax Assets and Liabilities

The significant components of the Company’s deferred tax assets and liabilities were as follows:

 

     As of June 30,  
     2017     2016  
     (in millions)  

Deferred tax assets:

     

Accrued liabilities

    $ 80     $ 185  

Capital loss carryforwards

      904       803  

Retirement benefit obligations

      101       112  

Net operating loss carryforwards

      473       580  

Business credits

      69       38  

Other

      284       213  
  

 

 

    

 

 

  

Total deferred tax assets

      1,911       1,931  
  

 

 

    

 

 

  

Deferred tax liabilities:

     

Asset basis difference and amortization

      (204 )      (421 ) 

Other

      (56 )      (65 ) 
  

 

 

    

 

 

  

Total deferred tax liabilities

      (260 )      (486 ) 
  

 

 

    

 

 

  

Net deferred tax asset before valuation allowance

      1,651       1,445  

Less: valuation allowance (See Note 21—Valuation and Qualifying Accounts)

      (1,187 )      (1,014 ) 
  

 

 

    

 

 

  

Net deferred tax assets

    $ 464     $ 431  
  

 

 

    

 

 

  
Schedule of Income Tax Net Operating Loss Carryforwards (NOLs) (Gross, Net Uncertain Tax Benefits)

As of June 30, 2017, the Company had income tax Net Operating Loss Carryforwards (NOLs) (gross, net of uncertain tax benefits), in various jurisdictions as follows:

 

Jurisdiction

    Expiration    Amount
(in  millions)		  

U.S. Federal

    2021 to 2037    $ 783  

U.S. States

    Various      530  

Australia

    Indefinite      239  

U.K.

    Indefinite      10  

Other Foreign

    Various      388  
Change in Unrecognized Tax Benefits, Excluding Interest and Penalties

The following table sets forth the change in the Company’s unrecognized tax benefits, excluding interest and penalties:

 

     For the fiscal years
ended June 30,		  
     2017     2016     2015  
     (in millions)  

Balance, beginning of period

    $ 86     $ 129     $ 58  

Additions for prior year tax positions

      107       6       79  

Additions for current year tax positions

      5       4       4  

Reduction for prior year tax positions

      (9 )      (40 )      (7 ) 

Lapse of the statute of limitations

      (8 )      (2 )      —    

Settlement—cash

      (21 )      (2 )      —    

Settlement—tax attributes

      (94 )      —         —    

Impact of currency translations

      (2 )      (9 )      (5 ) 
  

 

 

    

 

 

    

 

 

  

Balance, end of period

    $ 64     $ 86     $ 129  
  

 

 

    

 

 

    

 

 

  
Summary of Major Tax Jurisdictions and Fiscal Years Open to Examination

The following is a summary of major tax jurisdictions for which tax authorities may assert additional taxes based upon tax years currently under audit and subsequent years that could be audited by the respective taxing authorities.

 

Jurisdiction

    Fiscal Years Open to Examination

U.S. Federal

    2009-2016

U.S. States

    Various

Australia

    2012-2016

U.K.

    2011-2016