Income Taxes (Tables)

12 Months Ended

Dec. 31, 2017

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,
	2017			2016			2015
Income before income tax expense:
Domestic	$	185		$	228		$	355
Foreign	966			878			766
	$	1,151		$	1,106		$	1,121
Income tax expense (benefit):
Current:
Federal	$	696		$	(15	)	$	169
State	26			16			31
Foreign	335			150			40
Total current	1,057			151			240
Deferred:
Federal	(111		)	40			1
State	(32		)	(13		)	(21		)
Foreign	(36		)	(38		)	9
Total deferred	(179		)	(11		)	(11		)

Income tax expense	$	878		$	140		$	229

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,
	2017					2016					2015
Federal income tax provision at statutory rate	$	403		35	%	$	387		35	%	$	392		35	%
State taxes, net of federal benefit	4			—		9			1		5			—
Research and development credits	(26		)	(2	)	(36		)	(3	)	(26		)	(2	)
Foreign rate differential	(271		)	(24	)	(239		)	(22	)	(228		)	(20	)
Change in tax reserves	291			25		210			19		136			12
Net operating loss tax attribute assumed from the Purchase Transaction	(36		)	(3	)	(114		)	(10	)	(63		)	(6	)
Excess tax benefits related to share-based payments	(113		)	(10	)	(81		)	(7	)	—			—
U.S. Tax Reform Act	636			55		—			—		—			—
Other	(10		)	—		4			—		13			1
Income tax expense	$	878		76	%	$	140		13	%	$	229		20	%

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

The components of the net deferred tax assets (liabilities) are as follows (amounts in millions):



	As of December 31,
	2017			2016
Deferred tax assets:
Allowance for sales returns and price protection	$	47		$	64
Inventory reserve	5			9
Accrued expenses	26			25
Deferred revenue	245			233
Tax credit carryforwards	60			48
Net operating loss carryforwards	11			10
Share-based compensation	59			61
Acquired intangibles	149			111
State taxes	22			24
Other	39			28
Deferred tax assets	663			613
Valuation allowance	—			—
Deferred tax assets, net of valuation allowance	663			613
Deferred tax liabilities:
Acquired intangibles	(146		)	(219		)
Prepaid royalties	(19		)	(60		)
Capitalized software development expenses	(55		)	(91		)
Other	(5		)	(4		)
Deferred tax liabilities	(225		)	(374		)
Net deferred tax assets	$	438		$	239

Reconciliation of unrecognized tax benefits for the period

A reconciliation of total gross unrecognized tax benefits is as follows (amounts in millions):



	For the Years Ended December 31,
	2017			2016			2015
Unrecognized tax benefits balance at January 1	$	846		$	552		$	419
Gross increase for tax positions of prior-years	66			89			8
Gross decrease for tax positions of prior-years	—			(17		)	(11		)
Gross increase for tax positions of current year	229			240			136
Settlement with taxing authorities	(1		)	(18		)	—
Lapse of statute of limitations	(2		)	—			—
Unrecognized tax benefits balance at December 31	$	1,138		$	846		$	552