Tax indemnification receivable related to net uncertain tax positions

  
  
Fiscal 2020   
The Company performed its annual goodwill impairment assessment as of July 1, 2019. Subsequent to the measurement date, the Company experienced a decline in its stock price and market capitalization that represented an indicator of impairment as the observed declines were substantial and sustained. As a result, the Company performed quantitative goodwill impairment tests during the second and fourth quarters of fiscal 2020. Both quantitative goodwill impairment tests were performed for all of DXC's reporting units, consistent with its policy described in Note 1 - "Summary of Significant Accounting Policies.” As part of the reconciliation to the Company’s market capitalization, the Company concluded on both instances that the carrying values of its reporting units exceeded their estimated fair values and recognized total non-cash impairment charges of $6,794 million, consisting of $3,789 million and $3,005 million in its GBS and GIS segments, respectively. The goodwill impairment charges do not have an impact on the calculation of the Company's financial covenants under the Company's debt arrangements.  
  
Note 13 - Income TaxesThe sources of income (loss) from continuing operations, before income taxes, classified between domestic entities and those entities domiciled outside of the United States, are as follows:

|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  | Fiscal Years Ended |
| (in millions) |  | March 31, 2022 |  | March 31, 2021 |  | March 31, 2020 |
| Domestic entities |  | $ | (566) |  |  | $ | 975  |  |  | $ | (2,928) |  |
| Entities outside the United States |  | 1,707  |  |  | (321) |  |  | (2,300) |  |
| Total |  | $ | 1,141  |  |  | $ | 654  |  |  | $ | (5,228) |  |

  
The income tax expense (benefit) on income (loss) from continuing operations is comprised of:

|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  | Fiscal Years Ended |
| (in millions) |  | March 31, 2022 |  | March 31, 2021 |  | March 31, 2020 |
| Current: |  |  |  |  |  |  |
| Federal |  | $ | (118) |  |  | $ | 730  |  |  | $ | 3  |  |
| State |  | (17) |  |  | 257  |  |  | 16  |  |
| Foreign |  | 285  |  |  | 216  |  |  | 167  |  |
|  |  | 150  |  |  | 1,203  |  |  | 186  |  |
| Deferred: |  |  |  |  |  |  |
| Federal |  | 9  |  |  | (221) |  |  | (125) |  |
| State |  | (9) |  |  | (51) |  |  | 17  |  |
| Foreign |  | 255  |  |  | (131) |  |  | 52  |  |
|  |  | 255  |  |  | (403) |  |  | (56) |  |
| Total income tax expense |  | $ | 405  |  |  | $ | 800  |  |  | $ | 130  |  |

  
The current federal (benefit) and tax expense for fiscal years 2022, 2021, and 2020 includes a $(7) million, $(4) million and $(31) million transition tax benefit, respectively. The current expense (benefit) for fiscal years 2022, 2021 and 2020, includes interest and penalties of $(3) million, $2 million and $2 million, respectively, for uncertain tax positions.  
In connection with the HPES Merger, the Company entered into a tax matters agreement with HPE. HPE generally will be responsible for tax liabilities arising prior to the HPES Merger, and DXC is liable to HPE for income tax receivables it receives related to pre-HPES Merger periods. Pursuant to the tax matters agreement, the Company recorded a $27 million tax indemnification receivable related to uncertain tax positions, $72 million of tax indemnification receivable related to other tax payables and $129 million of tax indemnification payable related to other tax receivables.  
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