cisco-annual-report-2021

Significant judgment is required in evaluating our uncertain tax positions and determining our provision for income taxes.
Although we believe our reserves are reasonable, no assurance can be given that the final tax outcome of these matters will not
be different from that which is reflected in our historical income tax provisions and accruals. We adjust these reserves in light of
changing facts and circumstances, such as the closing of a tax audit or the refinement of an estimate. To the extent that the final
tax outcome of these matters is different than the amounts recorded, such differences will impact the provision for income taxes
in the period in which such determination is made. The provision for income taxes includes the impact of reserve provisions and
changes to reserves that are considered appropriate, as well as the related net interest and penalties.
Significant judgment is also required in determining any valuation allowance recorded against deferred tax assets. In assessing
the need for a valuation allowance, we consider all available evidence, including past operating results, estimates of future
taxable income, and the feasibility of tax planning strategies. In the event that we change our determination as to the amount of
deferred tax assets that can be realized, we will adjust our valuation allowance with a corresponding impact to the provision for
income taxes in the period in which such determination is made.
Our provision for income taxes is subject to volatility and could be adversely impacted by earnings being lower than anticipated
in countries that have lower tax rates and higher than anticipated in countries that have higher tax rates; by changes in the
valuation of our deferred tax assets and liabilities; by changes to foreign-derived intangible income deduction, global intangible
low-tax income and base erosion and anti-abuse tax laws, regulations, or interpretations thereof; by expiration of or lapses
in tax incentives; by transfer pricing adjustments, including the effect of acquisitions on our legal structure; by tax effects of
nondeductible compensation; by tax costs related to intercompany realignments; by changes in accounting principles; or by
changes in tax laws and regulations, treaties, or interpretations thereof, including changes to the taxation of earnings of our foreign
subsidiaries, the deductibility of expenses attributable to foreign income, and the foreign tax credit rules. Significant judgment
is required to determine the recognition and measurement attributes prescribed in the accounting guidance for uncertainty in
income taxes. The Organisation for Economic Co-operation and Development (OECD), an international association comprised
of 38 countries, including the United States, has made changes and is contemplating additional changes to numerous longstanding
tax principles. There can be no assurance that these changes and any contemplated changes if finalized, once adopted
by countries, will not have an adverse impact on our provision for income taxes. As a result of certain of our ongoing employment
and capital investment actions and commitments, our income in certain countries was subject to reduced tax rates. Our failure
to meet these commitments could adversely impact our provision for income taxes. In addition, we are subject to the continuous
examination of our income tax returns by the Internal Revenue Service (IRS) and other tax authorities. We regularly assess
the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income
taxes. There can be no assurance that the outcomes from these continuous examinations will not have an adverse impact on our
operating results and financial condition.
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