Income Taxes (Tables)

12 Months Ended

Oct. 31, 2012

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

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

	Year Ended October 31,
	2012		2011		2010
	(in thousands)
United States	$	39,855	$	40,434	$	57,795
Foreign		161,280		178,679		140,863
	$	201,135	$	219,113	$	198,658

Components of (Benefit) Provision for Income Taxes

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

	Year Ended October 31,
	2012			2011			2010
	(in thousands)
Current:
Federal	$	(12,443	)	$	(6,436	)	$	(17,097	)
State		(547	)		(2,197	)		8
Foreign		6,826			474			25,421
		(6,164	)		(8,159	)		8,332
Deferred:
Federal		22,506			(7,160	)		(25,156	)
State		14			(2,456	)		(9,309	)
Foreign		2,377			15,524			(12,272	)
		24,897			5,908			(46,737	)
Provision (Benefit) for income taxes	$	18,733		$	(2,251	)	$	(38,405	)

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,
	2012			2011			2010
	(in thousands)
Statutory federal tax	$	70,397		$	76,689		$	69,530
State tax (benefit), net of federal effect		1,078			(4,988	)		(2,491	)
Tax credits		(4,289	)		(19,042	)		(7,451	)
Tax exempt income		(41	)		(354	)		(1,479	)
Tax on foreign earnings less than U.S. statutory tax		(21,288	)		(28,968	)		(11,615	)
Tax settlements		(36,882	)		(32,782	)		(73,045	)
Stock based compensation		9,016			7,817			5,336
Changes in valuation allowance		10			49			(21,612	)
Other		732			(672	)		4,422
	$	18,733		$	(2,251	)	$	(38,405	)

Components of Deferred Tax Assets and Liabilities

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

	October 31,
	2012			2011
	(in thousands)
Net deferred tax assets:
Deferred tax assets:
Accruals and reserves	$	30,317		$	16,274
Deferred revenue		46,247			47,603
Deferred compensation		39,186			36,975
Capitalized costs		94,031			98,420
Capitalized research and development costs		48,059			45,710
Stock compensation		21,229			32,186
Tax loss carryovers		73,492			36,515
Foreign tax credit carryovers		10,766			23,759
Research and other tax credit carryovers		88,973			74,110
Capital loss carryovers		—			1,896
Other		2,449			1,349
Gross deferred tax assets		454,749			414,797
Valuation allowance		(26,259	)		(13,395	)
Total deferred tax assets		428,490			401,402
Deferred tax liabilities:
Intangible assets		116,639			49,948
Undistributed earnings of foreign subsidiaries		831			12,631
Total deferred tax liabilities		117,470			62,579
Net deferred tax assets	$	311,020		$	338,823

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	$	177,517		2018-2031
Federal research credit carryforward		93,932		2017-2032
Foreign tax credit carryforward		15,598		2015-2021
California research credit carryforward		95,126		Indefinite
Other state research credit carryforward		8,021		2013-2032
State net operating loss carryforward		206,203		2013-2031

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, 2012			As of October 31, 2011
	(in thousands)
Beginning balance	$	177,893		$	213,923
Increases in unrecognized tax benefits related to prior year tax positions		6,053			4,188
Decreases in unrecognized tax benefits related to prior year tax positions		(35,010	)		(44,061	)
Increases in unrecognized tax benefits related to current year tax positions		9,431			19,922
Decreases in unrecognized tax benefits related to settlements with taxing authorities		(80,137	)		(1,258	)
Reductions in unrecognized tax benefits due to lapse of applicable statute of limitations		(3,499	)		(15,200	)
Increases in unrecognized tax benefits acquired		35,171			350
Changes in unrecognized tax benefits due to foreign currency translation		(222	)		29
	$	109,680		$	177,893

Subsidiaries Remain Subject to Tax Examination

The Company’s subsidiaries remain subject to tax examination in the following jurisdictions:

Jurisdiction	Year(s) Subject to Examination
United States—Synopsys	Fiscal 2012
United States—Magma Design Automation	Fiscal years after 2008
California—Synopsys	Fiscal years after 2007
California—Magma Design Automation	Fiscal years after 2007
Hungary	Fiscal years after 2005
Taiwan and Japan	Fiscal years after 2006
Ireland	Fiscal years after 2007