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Income Taxes (Tables)

12 Months Ended

Oct. 31, 2014

Domestic and Foreign Components of Total Income Before Provision for Income Tax

The domestic and foreign components of the Company’s total income (loss) before provision for income taxes are as follows:



	Year Ended October 31,
	2014			2013		2012
	(in thousands)
United States	$	(7,638	)	$	61,818	$	39,855
Foreign	279,780			213,848		161,280
	$	272,142		$	275,666	$	201,135

Components of (Benefit) Provision for Income Taxes

The components of the (benefit) provision for income taxes were as follows:



	Year Ended October 31,
	2014			2013			2012
	(in thousands)
Current:
Federal	$	(14,951	)	$	11,692		$	(12,443	)
State	279			(5,949		)	(547		)
Foreign	42,085			29,428			6,826
	27,413			35,171			(6,164		)
Deferred:
Federal	(4,612		)	4,969			22,506
State	(4,141		)	933			14
Foreign	(5,642		)	(13,207		)	2,377
	(14,395		)	(7,305		)	24,897
Provision (Benefit) for income taxes	$	13,018		$	27,866		$	18,733

Rate Reconciliation Between Provision for Income Taxes and Taxes Computed at Statutory Federal Rate

The provision (benefit) for income taxes differs from the taxes computed with the statutory federal income tax rate as follows:



	Year Ended October 31,
	2014			2013			2012
	(in thousands)
Statutory federal tax	$	95,251		$	96,483		$	70,397
State tax (benefit), net of federal effect	(4,306		)	(2,697		)	1,078
Tax credits(1)	(5,153		)	(24,972		)	(4,289		)
Tax on foreign earnings less than U.S. statutory tax	(56,661		)	(36,670		)	(21,288		)
Deferred tax reversal resulting from merger of foreign affiliate	—			(6,808		)	—
Tax settlements	(19,645		)	(1,130		)	(36,882		)
Stock based compensation	5,675			4,671			9,016
Changes in valuation allowance	(235		)	(776		)	10
Federal statute lapses	(6,746		)	—			—
Other	4,838			(235		)	691
	$	13,018		$	27,866		$	18,733


(1)	As a result of the reinstatement of the federal research and development tax credit in fiscal 2013, the Company reflected a benefit of approximately $19 million in the above amount for the period January 1, 2012 through October 31, 2013. The federal research tax credit expired on December 31, 2013 resulting in only two months of credit for fiscal 2014.

Components of Deferred Tax Assets and Liabilities

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



	October 31,
	2014			2013
	(in thousands)
Net deferred tax assets:
Deferred tax assets:
Accruals and reserves	$	28,608		$	35,548
Deferred revenue	42,766			36,551
Deferred compensation	56,920			45,662
Capitalized costs	66,616			84,390
Capitalized research and development costs	32,710			36,650
Stock compensation	18,508			16,790
Tax loss carryovers	64,273			63,869
Foreign tax credit carryovers	18,846			13,961
Research and other tax credit carryovers	110,247			108,044
Other	4,689			3,736
Gross deferred tax assets	444,183			445,201
Valuation allowance	(45,996		)	(43,374		)
Total deferred tax assets	398,187			401,827
Deferred tax liabilities:
Intangible assets	81,218			82,662
Undistributed earnings of foreign subsidiaries	726			11,982
Total deferred tax liabilities	81,944			94,644
Net deferred tax assets	$	316,243		$	307,183

Tax Loss and Credit Carryforwards Available to Offset Future Income Tax Liabilities

The Company has the following tax loss and credit carryforwards available to offset future income tax liabilities:



Carryforward	Amount		Expiration Date
	(in thousands)
Federal net operating loss carryforward	$	162,289	2018-2033
Federal research credit carryforward	126,649		2018-2034
Federal foreign tax credit carryforward	13,557		2018-2024
International foreign tax credit carryforward	10,429		Indefinite
California research credit carryforward	131,069		Indefinite
Other state research credit carryforward	8,074		2015-2034
State net operating loss carryforward	159,496		2015-2033

Summary of Reconciliation of Beginning and Ending Balance of Gross Unrecognized Tax Benefit

A reconciliation of the beginning and ending balance of gross unrecognized tax benefits is summarized as follows:



	As of October 31, 2014			As of October 31, 2013
	(in thousands)
Beginning balance	$	117,760		$	109,680
Increases in unrecognized tax benefits related to prior year tax positions	2,037			4,189
Decreases in unrecognized tax benefits related to prior year tax positions	(23,271		)	(3,328		)
Increases in unrecognized tax benefits related to current year tax positions	35,277			14,128
Decreases in unrecognized tax benefits related to settlements with taxing authorities	(1,858		)	(4,967		)
Reductions in unrecognized tax benefits due to lapse of applicable statute of limitations	(8,816		)	(7,728		)
Increases in unrecognized tax benefits acquired	3,575			5,718
Changes in unrecognized tax benefits due to foreign currency translation	(602		)	68
	$	124,102		$	117,760

Subsidiaries Remain Subject to Tax Examination

The Company and/or its subsidiaries remain subject to tax examination in the following jurisdictions:




Jurisdiction	Year(s) Subject to Examination
United States—Synopsys	Fiscal 2014
United States—Magma Design Automation	Fiscal years after 2010
California—Synopsys	Fiscal years after 2009
California—Magma Design Automation	Fiscal years after 2010
Hungary	Fiscal years after 2007
Japan	Fiscal years after 2009
Ireland and Taiwan	Fiscal years after 2008

- Definition

Tabular disclosure of tax positions taken in the tax returns filed or to be filed for which it is more likely than not that the tax position will not be sustained upon examination by taxing authorities (i.e., uncertain tax positions) and other types of income tax contingencies, including: (1) the policy on classification of interest and penalties; (2) a tabular reconciliation of the total amounts of unrecognized tax benefits at the beginning and end of the period; the total amount(s) of: (3) unrecognized tax benefits that, if recognized, would affect the effective tax rate, and (4) interest and penalties recognized in each of the income statement and balance sheet; (5) for positions for which it is reasonably possible that the total amounts unrecognized will significantly change within 12 months of the reporting date the: (i) nature of the uncertainty, (ii) nature of the event that could occur that would cause the change, and (iii) an estimate of the range of the reasonably possible change or a statement that an estimate of the range cannot be made; and (6) a description of tax years that remain subject to examination by major tax jurisdictions.

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