.Analysis of Income Taxes
Difficulty: Advanced
Income Tax Accounting Policy
Accenture calculates and provides for income taxes in each of the tax jurisdictions in which it operates. Deferred tax assets and liabilities, measured using enacted tax rates, are recognized for the future tax consequences of temporary differences between the tax and financial statement bases of assets and liabilities. A valuation allowance reduces the deferred tax assets to the amount that is more likely than not to be realized. Accenture establishes liabilities or reduces assets for uncertain tax positions when Accenture believes those tax positions are not more likely than not of being sustained if challenged. Each fiscal quarter, Accenture evaluates these uncertain tax positions and adjusts the related tax assets and liabilities in light of changing facts and circumstances.
Source: Accenture PLC, Annual Report
Income Tax Expense (Benefit)
Accenture PLC, income tax expense (benefit), continuing operations
USD $ in thousands
| 12 months ended | Aug 31, 2017 | Aug 31, 2016 | Aug 31, 2015 | Aug 31, 2014 | Aug 31, 2013 | Aug 31, 2012 | |
|---|---|---|---|---|---|---|---|
| | U.S. federal | ||||||
| | U.S. state and local | ||||||
| | Non-U.S. | ||||||
| | Current tax expense | ||||||
| | U.S. federal | ||||||
| | U.S. state and local | ||||||
| | Non-U.S. | ||||||
| | Deferred tax expense (benefit) | ||||||
| | Provision for income taxes |
Source: Based on data from Accenture PLC Annual Reports
| Item | Description | The company |
|---|---|---|
| Current tax expense | The component of income tax expense for the period representing amounts of income taxes paid or payable (or refundable) for the period for all income tax obligations as determined by applying the provisions of relevant enacted tax laws to relevant amounts of taxable income (loss) from continuing operations. | Accenture PLC's current tax expense declined from 2015 to 2016 but then slightly increased from 2016 to 2017. |
| Deferred tax expense (benefit) | The component of income tax expense for the period representing the net change in the entity's deferred tax assets and liabilities pertaining to continuing operations. | Accenture PLC's deferred tax expense (benefit) increased from 2015 to 2016 but then slightly declined from 2016 to 2017 not reaching 2015 level. |
| Provision for income taxes | The sum of the current income tax expense (benefit) and the deferred income tax expense (benefit) pertaining to pretax income (loss) from continuing operations; income tax expense (benefit) may include interest and penalties on tax uncertainties based on the entity's accounting policy. | Accenture PLC's provision for income taxes increased from 2015 to 2016 but then declined significantly from 2016 to 2017. |
Effective Income Tax Rate (EITR)
Accenture PLC, effective income tax rate (EITR) reconciliation
| Aug 31, 2017 | Aug 31, 2016 | Aug 31, 2015 | Aug 31, 2014 | Aug 31, 2013 | Aug 31, 2012 | ||
|---|---|---|---|---|---|---|---|
| | U.S. federal statutory income tax rate | % | % | % | % | % | % |
| | U.S. state and local taxes, net | % | % | % | % | % | % |
| | Non-U.S. operations taxed at lower rates | % | % | % | % | % | % |
| | Final determinations | % | % | % | % | % | % |
| | Other net activity in unrecognized tax benefits | % | % | % | % | % | % |
| | Change in indefinite reinvestment assertion | % | % | % | % | % | % |
| | Divestitures | % | % | % | % | % | % |
| | Excess tax benefits from share based payments | % | % | % | % | % | % |
| | Other, net | % | % | % | % | % | % |
| | Effective income tax rate | % | % | % | % | % | % |
Source: Based on data from Accenture PLC Annual Reports
| Item | Description | The company |
|---|---|---|
| Effective income tax rate | A ratio calculated by dividing the reported amount of income tax expense attributable to continuing operations for the period by GAAP-basis pretax income from continuing operations. | Accenture PLC's effective income tax rate declined from 2015 to 2016 and from 2016 to 2017. |
Components of Deferred Tax Assets and Liabilities
Accenture PLC, components of deferred tax assets and liabilities
USD $ in thousands
| Aug 31, 2017 | Aug 31, 2016 | Aug 31, 2015 | Aug 31, 2014 | Aug 31, 2013 | Aug 31, 2012 | ||
|---|---|---|---|---|---|---|---|
| | Pensions | ||||||
| | Revenue recognition | ||||||
| | Compensation and benefits | ||||||
| | Share-based compensation | ||||||
| | Tax credit carryforwards | ||||||
| | Net operating loss carryforwards | ||||||
| | Depreciation and amortization | ||||||
| | Deferred amortization deductions | ||||||
| | Indirect effects of unrecognized tax benefits | ||||||
| | Other | ||||||
| | Deferred tax assets, gross | ||||||
| | Valuation allowance | ||||||
| | Deferred tax assets | ||||||
| | Revenue recognition | ||||||
| | Depreciation and amortization | ||||||
| | Investments in subsidiaries | ||||||
| | Other | ||||||
| | Deferred tax liabilities | ||||||
| | Net deferred tax assets (liabilities) |
Source: Based on data from Accenture PLC Annual Reports
| Item | Description | The company |
|---|---|---|
| Deferred tax assets, gross | The sum of the tax effects as of the balance sheet date of the amounts of all future tax deductions arising from temporary differences between tax basis and generally accepted accounting principles basis recognition of assets, liabilities, revenues and expenses, which can only be deducted for tax purposes when permitted under enacted tax laws (before the valuation allowance, if any, to reduce such sum amount to net realizable value). Includes any tax benefit realized in deferred tax assets for significant impacts of tax planning strategies. | Accenture PLC's deferred tax assets, gross increased from 2015 to 2016 and from 2016 to 2017. |
| Deferred tax assets | The aggregate tax effects as of the balance sheet date of all future tax deductions arising from temporary differences between tax basis and generally accepted accounting principles basis recognition of assets, liabilities, revenues and expenses, which can only be deducted for tax purposes when permitted under enacted tax laws; net of deducting the allocated valuation allowance, if any, to reduce such amount to net realizable value. | Accenture PLC's deferred tax assets increased from 2015 to 2016 and from 2016 to 2017. |
| Net deferred tax assets (liabilities) | For entities that net deferred tax assets and tax liabilities, represents the unclassified net amount of deferred tax assets and liabilities as of the balance sheet date, which result from applying the applicable enacted tax rate to net temporary differences and carryforwards pertaining to assets or liabilities. A temporary difference is a difference between the tax basis of an asset or liability and its carrying amount in the financial statements prepared in accordance with generally accepted accounting principles that will reverse in ensuing periods. | Accenture PLC's net deferred tax assets (liabilities) declined from 2015 to 2016 but then increased from 2016 to 2017 exceeding 2015 level. |
Deferred Tax Assets and Liabilities, Classification
Accenture PLC, deferred tax assets and liabilities, classification
USD $ in thousands
| Aug 31, 2017 | Aug 31, 2016 | Aug 31, 2015 | Aug 31, 2014 | Aug 31, 2013 | Aug 31, 2012 | ||
|---|---|---|---|---|---|---|---|
| | Current deferred tax assets | ||||||
| | Non-current deferred tax assets | ||||||
| | Current deferred tax liabilities | ||||||
| | Non-current deferred tax liabilities |
Source: Based on data from Accenture PLC Annual Reports
| Item | Description | The company |
|---|---|---|
| Current deferred tax assets | The current portion of the aggregate tax effects as of the balance sheet date of all future tax deductions arising from temporary differences between tax basis and generally accepted accounting principles basis recognition of assets, liabilities, revenues and expenses, which can only be deducted for tax purposes when permitted under enacted tax laws; after deducting the allocated valuation allowance, if any, to reduce such amount to net realizable value. Deferred tax liabilities and assets shall be classified as current or noncurrent based on the classification of the related asset or liability for financial reporting. A deferred tax liability or asset that is not related to an asset or liability for financial reporting, including deferred tax assets related to carryforwards, shall be classified according to the expected reversal date of the temporary difference. An unrecognized tax benefit that is directly related to a position taken in a tax year that results in a net operating loss carryforward should be presented as a reduction of the related deferred tax asset. | |
| Non-current deferred tax assets | The noncurrent portion as of the balance sheet date of the aggregate carrying amount of all future tax deductions arising from temporary differences between tax basis and generally accepted accounting principles basis recognition of assets, liabilities, revenues and expenses, which can only be deducted for tax purposes when permitted under enacted tax laws; after the valuation allowance, if any, to reduce such amount to net realizable value. Deferred tax liabilities and assets shall be classified as current or noncurrent based on the classification of the related asset or liability for financial reporting. A deferred tax liability or asset that is not related to an asset or liability for financial reporting, including deferred tax assets related to carryforwards, shall be classified according to the expected reversal date of the temporary difference. | Accenture PLC's non-current deferred tax assets increased from 2015 to 2016 and from 2016 to 2017. |
| Current deferred tax liabilities | Represents the current portion of deferred tax liabilities, which result from applying the applicable tax rate to net taxable temporary differences pertaining to each jurisdiction to which the entity is obligated to pay income tax. A current taxable temporary difference is a difference between the tax basis and the carrying amount of a current asset or liability in the financial statements prepared in accordance with generally accepted accounting principles. In a classified statement of financial position, an enterprise shall separate deferred tax liabilities and assets into a current amount and a noncurrent amount. Deferred tax liabilities and assets shall be classified as current or noncurrent based on the classification of the related asset or liability for financial reporting. A deferred tax liability or asset that is not related to an asset or liability for financial reporting, including deferred tax assets related to carryforwards, shall be classified according to the expected reversal date of the temporary difference. | |
| Non-current deferred tax liabilities | Represents the noncurrent portion of deferred tax liabilities, which result from applying the applicable tax rate to net taxable temporary differences pertaining to each jurisdiction to which the entity is obligated to pay income tax. A noncurrent taxable temporary difference is a difference between the tax basis and the carrying amount of a noncurrent asset or liability in the financial statements prepared in accordance with generally accepted accounting principles. In a classified statement of financial position, an enterprise shall separate deferred tax liabilities and assets into a current amount and a noncurrent amount. Deferred tax liabilities and assets shall be classified as current or noncurrent based on the classification of the related asset or liability for financial reporting. A deferred tax liability or asset that is not related to an asset or liability for financial reporting, including deferred tax assets related to carryforwards, shall be classified according to the expected reversal date of the temporary difference. | Accenture PLC's non-current deferred tax liabilities declined from 2015 to 2016 but then increased from 2016 to 2017 exceeding 2015 level. |
Analyst Adjustments: Removal of Deferred Taxes
Accenture PLC, adjustments to financial data
USD $ in thousands
| Aug 31, 2017 | Aug 31, 2016 | Aug 31, 2015 | Aug 31, 2014 | Aug 31, 2013 | Aug 31, 2012 | ||
|---|---|---|---|---|---|---|---|
| Adjustment to Current Assets | |||||||
| | Current assets (as reported) | ||||||
| | Less: Current deferred tax assets, net | ||||||
| | Current assets (adjusted) | ||||||
| Adjustment to Total Assets | |||||||
| | Total assets (as reported) | ||||||
| | Less: Current deferred tax assets, net | ||||||
| | Less: Noncurrent deferred tax assets, net | ||||||
| | Total assets (adjusted) | ||||||
| Adjustment to Current Liabilities | |||||||
| | Current liabilities (as reported) | ||||||
| | Less: Current deferred tax liabilities, net | ||||||
| | Current liabilities (adjusted) | ||||||
| Adjustment to Total Liabilities | |||||||
| | Total liabilities (as reported) | ||||||
| | Less: Current deferred tax liabilities, net | ||||||
| | Less: Noncurrent deferred tax liabilities, net | ||||||
| | Total liabilities (adjusted) | ||||||
| Adjustment to Total Accenture Plc Shareholders' Equity | |||||||
| | Total Accenture plc shareholders' equity (as reported) | ||||||
| | Less: Net deferred tax assets (liabilities) | ||||||
| | Total Accenture plc shareholders' equity (adjusted) | ||||||
| Adjustment to Net Income Attributable To Accenture Plc | |||||||
| | Net income attributable to Accenture plc (as reported) | ||||||
| | Add: Deferred income tax expense (benefit) | ||||||
| | Net income attributable to Accenture plc (adjusted) | ||||||
Adjusted Ratios: Removal of Deferred Taxes (Summary)
Accenture PLC, adjusted ratios
| Aug 31, 2017 | Aug 31, 2016 | Aug 31, 2015 | Aug 31, 2014 | Aug 31, 2013 | Aug 31, 2012 | ||
|---|---|---|---|---|---|---|---|
| Current Ratio | |||||||
| | Reported current ratio | ||||||
| | Adjusted current ratio | ||||||
| Net Profit Margin | |||||||
| | Reported net profit margin | % | % | % | % | % | % |
| | Adjusted net profit margin | % | % | % | % | % | % |
| Total Asset Turnover | |||||||
| | Reported total asset turnover | ||||||
| | Adjusted total asset turnover | ||||||
| Financial Leverage | |||||||
| | Reported financial leverage | ||||||
| | Adjusted financial leverage | ||||||
| Return on Equity (ROE) | |||||||
| | Reported ROE | % | % | % | % | % | % |
| | Adjusted ROE | % | % | % | % | % | % |
| Return on Assets (ROA) | |||||||
| | Reported ROA | % | % | % | % | % | % |
| | Adjusted ROA | % | % | % | % | % | % |
| Ratio | Description | The company |
|---|---|---|
| Adjusted current ratio | A liquidity ratio calculated as adjusted current assets divided by adjusted current liabilities. | Accenture PLC's adjusted current ratio improved from 2015 to 2016 but then deteriorated significantly from 2016 to 2017. |
| Adjusted net profit margin | An indicator of profitability, calculated as adjusted net income divided by total revenue. | Accenture PLC's adjusted net profit margin improved from 2015 to 2016 but then slightly deteriorated from 2016 to 2017 not reaching 2015 level. |
| Adjusted total asset turnover | An activity ratio calculated as total revenue divided by adjusted total assets. | Accenture PLC's adjusted total asset turnover deteriorated from 2015 to 2016 and from 2016 to 2017. |
| Adjusted financial leverage | A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity. Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income. |
Accenture PLC's adjusted financial leverage declined from 2015 to 2016 and from 2016 to 2017. |
| Adjusted ROE | A profitability ratio calculated as adjusted net income divided by adjusted shareholders' equity. | Accenture PLC's adjusted ROE improved from 2015 to 2016 but then deteriorated significantly from 2016 to 2017. |
| Adjusted ROA | A profitability ratio calculated as adjusted net income divided by adjusted total assets. | Accenture PLC's adjusted ROA improved from 2015 to 2016 but then deteriorated significantly from 2016 to 2017. |
Adjusted Current Ratio
| Aug 31, 2017 | Aug 31, 2016 | Aug 31, 2015 | Aug 31, 2014 | Aug 31, 2013 | Aug 31, 2012 | ||
|---|---|---|---|---|---|---|---|
| As Reported | |||||||
| | Current assets (USD $ in thousands) | ||||||
| | Current liabilities (USD $ in thousands) | ||||||
| | Current ratio1 | ||||||
| Adjusted for Deferred Taxes | |||||||
| | Adjusted current assets (USD $ in thousands) | ||||||
| | Adjusted current liabilities (USD $ in thousands) | ||||||
| | Adjusted current ratio2 | ||||||
2017 Calculations
1 Current ratio = Current assets ÷ Current liabilities
= ÷ =
2 Adjusted current ratio = Adjusted current assets ÷ Adjusted current liabilities
= ÷ =
| Ratio | Description | The company |
|---|---|---|
| Adjusted current ratio | A liquidity ratio calculated as adjusted current assets divided by adjusted current liabilities. | Accenture PLC's adjusted current ratio improved from 2015 to 2016 but then deteriorated significantly from 2016 to 2017. |
Adjusted Net Profit Margin
| Aug 31, 2017 | Aug 31, 2016 | Aug 31, 2015 | Aug 31, 2014 | Aug 31, 2013 | Aug 31, 2012 | ||
|---|---|---|---|---|---|---|---|
| As Reported | |||||||
| | Net income attributable to Accenture plc (USD $ in thousands) | ||||||
| | Revenues before reimbursements (Net revenues) (USD $ in thousands) | ||||||
| | Net profit margin1 | % | % | % | % | % | % |
| Adjusted for Deferred Taxes | |||||||
| | Adjusted net income attributable to Accenture plc (USD $ in thousands) | ||||||
| | Adjusted net profit margin2 | % | % | % | % | % | % |
2017 Calculations
1 Net profit margin = 100 × Net income attributable to Accenture plc ÷ Revenues before reimbursements (Net revenues)
= 100 × ÷ = %
2 Adjusted net profit margin = 100 × Adjusted net income attributable to Accenture plc ÷ Revenues before reimbursements (Net revenues)
= 100 × ÷ = %
| Ratio | Description | The company |
|---|---|---|
| Adjusted net profit margin | An indicator of profitability, calculated as adjusted net income divided by total revenue. | Accenture PLC's adjusted net profit margin improved from 2015 to 2016 but then slightly deteriorated from 2016 to 2017 not reaching 2015 level. |
Adjusted Total Asset Turnover
| Aug 31, 2017 | Aug 31, 2016 | Aug 31, 2015 | Aug 31, 2014 | Aug 31, 2013 | Aug 31, 2012 | ||
|---|---|---|---|---|---|---|---|
| As Reported | |||||||
| | Revenues before reimbursements (Net revenues) (USD $ in thousands) | ||||||
| | Total assets (USD $ in thousands) | ||||||
| | Total asset turnover1 | ||||||
| Adjusted for Deferred Taxes | |||||||
| | Adjusted total assets (USD $ in thousands) | ||||||
| | Adjusted total asset turnover2 | ||||||
2017 Calculations
1 Total asset turnover = Revenues before reimbursements (Net revenues) ÷ Total assets
= ÷ =
2 Adjusted total asset turnover = Revenues before reimbursements (Net revenues) ÷ Adjusted total assets
= ÷ =
| Ratio | Description | The company |
|---|---|---|
| Adjusted total asset turnover | An activity ratio calculated as total revenue divided by adjusted total assets. | Accenture PLC's adjusted total asset turnover deteriorated from 2015 to 2016 and from 2016 to 2017. |
Adjusted Financial Leverage
| Aug 31, 2017 | Aug 31, 2016 | Aug 31, 2015 | Aug 31, 2014 | Aug 31, 2013 | Aug 31, 2012 | ||
|---|---|---|---|---|---|---|---|
| As Reported | |||||||
| | Total assets (USD $ in thousands) | ||||||
| | Total Accenture plc shareholders' equity (USD $ in thousands) | ||||||
| | Financial leverage1 | ||||||
| Adjusted for Deferred Taxes | |||||||
| | Adjusted total assets (USD $ in thousands) | ||||||
| | Adjusted total Accenture plc shareholders' equity (USD $ in thousands) | ||||||
| | Adjusted financial leverage2 | ||||||
2017 Calculations
1 Financial leverage = Total assets ÷ Total Accenture plc shareholders' equity
= ÷ =
2 Adjusted financial leverage = Adjusted total assets ÷ Adjusted total Accenture plc shareholders' equity
= ÷ =
| Ratio | Description | The company |
|---|---|---|
| Adjusted financial leverage | A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity. Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income. |
Accenture PLC's adjusted financial leverage declined from 2015 to 2016 and from 2016 to 2017. |
Adjusted Return on Equity (ROE)
| Aug 31, 2017 | Aug 31, 2016 | Aug 31, 2015 | Aug 31, 2014 | Aug 31, 2013 | Aug 31, 2012 | ||
|---|---|---|---|---|---|---|---|
| As Reported | |||||||
| | Net income attributable to Accenture plc (USD $ in thousands) | ||||||
| | Total Accenture plc shareholders' equity (USD $ in thousands) | ||||||
| | ROE1 | % | % | % | % | % | % |
| Adjusted for Deferred Taxes | |||||||
| | Adjusted net income attributable to Accenture plc (USD $ in thousands) | ||||||
| | Adjusted total Accenture plc shareholders' equity (USD $ in thousands) | ||||||
| | Adjusted ROE2 | % | % | % | % | % | % |
2017 Calculations
1 ROE = 100 × Net income attributable to Accenture plc ÷ Total Accenture plc shareholders' equity
= 100 × ÷ = %
2 Adjusted ROE = 100 × Adjusted net income attributable to Accenture plc ÷ Adjusted total Accenture plc shareholders' equity
= 100 × ÷ = %
| Ratio | Description | The company |
|---|---|---|
| Adjusted ROE | A profitability ratio calculated as adjusted net income divided by adjusted shareholders' equity. | Accenture PLC's adjusted ROE improved from 2015 to 2016 but then deteriorated significantly from 2016 to 2017. |
Adjusted Return on Assets (ROA)
| Aug 31, 2017 | Aug 31, 2016 | Aug 31, 2015 | Aug 31, 2014 | Aug 31, 2013 | Aug 31, 2012 | ||
|---|---|---|---|---|---|---|---|
| As Reported | |||||||
| | Net income attributable to Accenture plc (USD $ in thousands) | ||||||
| | Total assets (USD $ in thousands) | ||||||
| | ROA1 | % | % | % | % | % | % |
| Adjusted for Deferred Taxes | |||||||
| | Adjusted net income attributable to Accenture plc (USD $ in thousands) | ||||||
| | Adjusted total assets (USD $ in thousands) | ||||||
| | Adjusted ROA2 | % | % | % | % | % | % |
2017 Calculations
1 ROA = 100 × Net income attributable to Accenture plc ÷ Total assets
= 100 × ÷ = %
2 Adjusted ROA = 100 × Adjusted net income attributable to Accenture plc ÷ Adjusted total assets
= 100 × ÷ = %
| Ratio | Description | The company |
|---|---|---|
| Adjusted ROA | A profitability ratio calculated as adjusted net income divided by adjusted total assets. | Accenture PLC's adjusted ROA improved from 2015 to 2016 but then deteriorated significantly from 2016 to 2017. |
