ACCENTURE PLC
CONSOLIDATED CASH FLOWS STATEMENTS
For the Years Ended August 31,
2013, 2012 and 2011
(In thousands of U.S. dollars)
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|
|
|
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|
|
|
|
|
|
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|
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2013
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|
2012
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|
2011
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CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
Net income
|
$
|
3,554,519
|
|
|
$
|
2,824,933
|
|
|
$
|
2,553,240
|
|
|
Adjustments to reconcile Net income to Net cash provided by operating activities—
|
|
|
|
|
|
|
Depreciation, amortization and asset impairments
|
593,028
|
|
|
593,545
|
|
|
513,256
|
|
|
Reorganization (benefits) costs, net
|
(272,042
|
)
|
|
1,691
|
|
|
1,520
|
|
|
Share-based compensation expense
|
615,878
|
|
|
538,086
|
|
|
450,137
|
|
|
Deferred income taxes, net
|
(209,674
|
)
|
|
56,981
|
|
|
(196,395
|
)
|
|
Other, net
|
(90,043
|
)
|
|
(94,332
|
)
|
|
81,127
|
|
|
Change in assets and liabilities, net of acquisitions—
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|
|
|
|
|
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Receivables from clients, net
|
(213,634
|
)
|
|
15,822
|
|
|
(486,128
|
)
|
|
Unbilled services, current and non-current, net
|
(96,060
|
)
|
|
(144,281
|
)
|
|
(134,353
|
)
|
|
Other current and non-current assets
|
(21,152
|
)
|
|
(355,472
|
)
|
|
(466,913
|
)
|
|
Accounts payable
|
(5,073
|
)
|
|
(68,082
|
)
|
|
63,005
|
|
|
Deferred revenues, current and non-current
|
(81,878
|
)
|
|
229,724
|
|
|
294,512
|
|
|
Accrued payroll and related benefits
|
88,202
|
|
|
420,049
|
|
|
442,107
|
|
|
Income taxes payable, current and non-current
|
(260,902
|
)
|
|
69,146
|
|
|
186,937
|
|
|
Other current and non-current liabilities
|
(298,041
|
)
|
|
169,042
|
|
|
139,687
|
|
|
Net cash provided by operating activities
|
3,303,128
|
|
|
4,256,852
|
|
|
3,441,739
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
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|
|
|
|
|
|
Proceeds from maturities and sales of available-for-sale investments
|
—
|
|
|
12,549
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|
|
10,932
|
|
|
Purchases of available-for-sale investments
|
—
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|
|
(7,554
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)
|
|
(11,173
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)
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Proceeds from sales of property and equipment
|
17,366
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|
|
5,977
|
|
|
6,755
|
|
|
Purchases of property and equipment
|
(369,593
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)
|
|
(371,974
|
)
|
|
(403,714
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)
|
|
Purchases of businesses and investments, net of cash acquired
|
(803,988
|
)
|
|
(174,383
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)
|
|
(306,187
|
)
|
|
Net cash used in investing activities
|
(1,156,215
|
)
|
|
(535,385
|
)
|
|
(703,387
|
)
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
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Proceeds from issuance of ordinary shares
|
515,812
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|
|
454,387
|
|
|
557,366
|
|
|
Purchases of shares
|
(2,544,352
|
)
|
|
(2,098,841
|
)
|
|
(2,171,877
|
)
|
|
Repayments of long-term debt, net
|
(34
|
)
|
|
(6,399
|
)
|
|
(1,539
|
)
|
|
Proceeds from (repayments of) short-term borrowings, net
|
88
|
|
|
131
|
|
|
(69
|
)
|
|
Cash dividends paid
|
(1,121,738
|
)
|
|
(950,857
|
)
|
|
(643,642
|
)
|
|
Excess tax benefits from share-based payment arrangements
|
114,073
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|
|
78,357
|
|
|
171,314
|
|
|
Other, net
|
(29,478
|
)
|
|
(35,633
|
)
|
|
(33,057
|
)
|
|
Net cash used in financing activities
|
(3,065,629
|
)
|
|
(2,558,855
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)
|
|
(2,121,504
|
)
|
|
Effect of exchange rate changes on cash and cash equivalents
|
(89,925
|
)
|
|
(223,164
|
)
|
|
245,938
|
|
|
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
|
(1,008,641
|
)
|
|
939,448
|
|
|
862,786
|
|
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CASH AND CASH EQUIVALENTS,
beginning of period
|
6,640,526
|
|
|
5,701,078
|
|
|
4,838,292
|
|
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CASH AND CASH EQUIVALENTS,
end of period
|
$
|
5,631,885
|
|
|
$
|
6,640,526
|
|
|
$
|
5,701,078
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|
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SUPPLEMENTAL CASH FLOW INFORMATION
|
|
|
|
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Interest paid
|
$
|
13,984
|
|
|
$
|
15,133
|
|
|
$
|
14,884
|
|
|
Income taxes paid
|
$
|
963,039
|
|
|
$
|
1,033,704
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|
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$
|
824,434
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|
The accompanying Notes are an integral part of these Consolidated Financial Statements.
ACCENTURE PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business
Accenture plc is one of the world’s leading organizations providing management consulting, technology and outsourcing services and operates globally with one common brand and business model designed to enable it to provide clients around the world with the same high level of service. Drawing on a combination of industry expertise, functional capabilities, alliances, global resources and technology, Accenture plc seeks to deliver competitively priced, high-value services that help clients measurably improve business performance. Accenture plc’s global delivery model enables it to provide an end-to-end delivery capability by drawing on its global resources to deliver high-quality, cost-effective solutions to clients.
Basis of Presentation
The Consolidated Financial Statements include the accounts of Accenture plc, an Irish company, and its controlled subsidiary companies (collectively, the “Company”). Accenture plc’s only business is to hold Class I common shares in, and to act as the sole general partner of, its subsidiary, Accenture SCA, a Luxembourg partnership limited by shares. The Company operates its business through Accenture SCA and subsidiaries of Accenture SCA. Accenture plc controls Accenture SCA’s management and operations and consolidates Accenture SCA’s results in its Consolidated Financial Statements.
The shares of Accenture SCA and Accenture Canada Holdings Inc. held by persons other than the Company are treated as a noncontrolling interest in the Consolidated Financial Statements. The noncontrolling interest percentages were
6%
and
8%
as of
August 31, 2013 and 2012
, respectively. Purchases and/or redemptions of Accenture SCA Class I common shares or Accenture Canada Holdings Inc. exchangeable shares are accounted for at carryover basis.
All references to years, unless otherwise noted, refer to the Company’s fiscal year, which ends on August 31. For example, a reference to “fiscal
2013
” means the 12-month period that ended on
August 31, 2013
. All references to quarters, unless otherwise noted, refer to the quarters of the Company’s fiscal year.
The preparation of the Consolidated Financial Statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect amounts reported in the Consolidated Financial Statements and accompanying disclosures. Although these estimates are based on management’s best knowledge of current events and actions that the Company may undertake in the future, actual results may be different from those estimates.
Fiscal 2012 income tax amounts in certain line items within cash flows from operating activities in the Company’s Consolidated Cash Flows Statement have been revised. These revisions were not material and had no impact on reported Net cash provided by operating activities. In addition, certain other amounts reported in previous years have been reclassified to conform to the fiscal 2013 presentation.
Revenue Recognition
Revenues from contracts for technology integration consulting services where the Company designs/redesigns, builds and implements new or enhanced systems applications and related processes for its clients are recognized on the percentage-of-completion method, which involves calculating the percentage of services provided during the reporting period compared to the total estimated services to be provided over the duration of the contract. Contracts for technology integration consulting services generally span six months to two years. Estimated revenues used in applying the percentage-of-completion method include estimated incentives for which achievement of defined goals is deemed probable. This method is followed where reasonably dependable estimates of revenues and costs can be made. Estimates of total contract revenues and costs are continuously monitored during the term of the contract, and recorded revenues and estimated costs are subject to revision as the contract progresses. Such revisions may result in increases or decreases to revenues and income and are reflected in the Consolidated Financial Statements in the periods in which they are first identified. If the Company’s estimates indicate that a contract loss will occur, a loss provision is recorded in the period in which the loss first becomes probable and reasonably estimable. Contract losses are determined to be the amount by which the estimated total direct and indirect costs of the contract exceed the estimated total revenues that will be generated by the contract and are included in Cost of services and classified in Other accrued liabilities.
Revenues from contracts for non-technology integration consulting services with fees based on time and materials or cost-plus are recognized as the services are performed and amounts are earned. The Company considers amounts to be earned once evidence of an arrangement has been obtained, services are delivered, fees are fixed or determinable, and collectibility is reasonably assured. In such contracts, the Company’s efforts, measured by time incurred, typically are provided in less than a year and represent the contractual milestones or output measure, which is the contractual earnings pattern. For non-technology integration consulting
ACCENTURE PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)
contracts with fixed fees, the Company recognizes revenues as amounts become billable in accordance with contract terms, provided the billable amounts are not contingent, are consistent with the services delivered, and are earned. Contingent or incentive revenues relating to non-technology integration consulting contracts are recognized when the contingency is satisfied and the Company concludes the amounts are earned.
Outsourcing contracts typically span several years and involve complex delivery, often through multiple workforces in different countries. In a number of these arrangements, the Company hires client employees and becomes responsible for certain client obligations. Revenues are recognized on outsourcing contracts as amounts become billable in accordance with contract terms, unless the amounts are billed in advance of performance of services, in which case revenues are recognized when the services are performed and amounts are earned. Revenues from time-and-materials or cost-plus contracts are recognized as the services are performed. In such contracts, the Company’s effort, measured by time incurred, represents the contractual milestones or output measure, which is the contractual earnings pattern. Revenues from unit-priced contracts are recognized as transactions are processed based on objective measures of output. Revenues from fixed-price contracts are recognized on a straight-line basis, unless revenues are earned and obligations are fulfilled in a different pattern. Outsourcing contracts can also include incentive payments for benefits delivered to clients. Revenues relating to such incentive payments are recorded when the contingency is satisfied and the Company concludes the amounts are earned.
Costs related to delivering outsourcing services are expensed as incurred with the exception of certain transition costs related to the set-up of processes, personnel and systems, which are deferred during the transition period and expensed evenly over the period outsourcing services are provided. The deferred costs are specific internal costs or incremental external costs directly related to transition or set-up activities necessary to enable the outsourced services. Generally, deferred amounts are protected in the event of early termination of the contract and are monitored regularly for impairment. Impairment losses are recorded when projected remaining undiscounted operating cash flows of the related contract are not sufficient to recover the carrying amount of contract assets. Deferred transition costs were
$539,048
and
$538,638
as of
August 31, 2013 and 2012
, respectively, and are included in Deferred contract costs. Amounts billable to the client for transition or set-up activities are deferred and recognized as revenue evenly over the period outsourcing services are provided. Deferred transition revenues were
$515,578
and
$551,364
as of
August 31, 2013 and 2012
, respectively, and are included in non-current Deferred revenues relating to contract costs. Contract acquisition and origination costs are expensed as incurred.
The Company enters into contracts that may consist of multiple elements. These contracts may include any combination of technology integration consulting services, non-technology integration consulting services or outsourcing services described above. Revenues for contracts with multiple elements are allocated based on the lesser of the element’s relative selling price or the amount that is not contingent on future delivery of another element. The selling price of each element is determined by obtaining the vendor-specific objective evidence (“VSOE”) of fair value of each element. VSOE of fair value is based on the price charged when the element is sold separately by the Company on a regular basis and not as part of a contract with multiple elements. If the amount of non-contingent revenues allocated to a delivered element accounted for under the percentage-of-completion method of accounting is less than the costs to deliver such services, then such costs are deferred and recognized in future periods when the revenues become non-contingent. Revenues are recognized in accordance with the Company’s accounting policies for the separate elements, as described above. Elements qualify for separation when the services have value on a stand-alone basis, selling price of the separate elements exists and, in arrangements that include a general right of refund relative to the delivered element, performance of the undelivered element is considered probable and substantially in the Company’s control. While determining fair value and identifying separate elements require judgment, generally fair value and the separate elements are readily identifiable as the Company also sells those elements unaccompanied by other elements.
Revenues recognized in excess of billings are recorded as Unbilled services. Billings in excess of revenues recognized are recorded as Deferred revenues until revenue recognition criteria are met.
Revenues before reimbursements (“net revenues”) include the margin earned on computer hardware and software, as well as revenues from alliance agreements. Reimbursements include billings for travel and other out-of-pocket expenses and third-party costs, such as the cost of hardware and software resales. In addition, Reimbursements include allocations from gross billings to record an amount equivalent to reimbursable costs, where billings do not specifically identify reimbursable expenses. The Company reports revenues net of any revenue-based taxes assessed by governmental authorities that are imposed on and concurrent with specific revenue-producing transactions.
Employee Share-Based Compensation Arrangements
Share-based compensation expense is recognized over the requisite service period for awards of equity instruments to employees based on the grant date fair value of those awards expected to ultimately vest. Forfeitures are estimated on the date of grant and revised if actual or expected forfeiture activity differs materially from original estimates.
ACCENTURE PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)
Income Taxes
The Company 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. The Company establishes liabilities or reduces assets for uncertain tax positions when the Company believes those tax positions are not more likely than not of being sustained if challenged. Each fiscal quarter, the Company evaluates these uncertain tax positions and adjusts the related tax assets and liabilities in light of changing facts and circumstances.
Translation of Non-U.S. Currency Amounts
Assets and liabilities of non-U.S. subsidiaries whose functional currency is not the U.S. dollar are translated into U.S. dollars at fiscal year-end exchange rates. Revenue and expense items are translated at average foreign currency exchange rates prevailing during the fiscal year. Translation adjustments are included in Accumulated other comprehensive loss. Gains and losses arising from intercompany foreign currency transactions that are of a long-term investment nature are reported in the same manner as translation adjustments.
Cash and Cash Equivalents
Cash and cash equivalents consist of all cash balances and liquid investments with original maturities of three months or less, including money market funds of
$650,000
and
$1,265,000
as of
August 31, 2013 and 2012
, respectively. Cash and cash equivalents also includes restricted cash of
$45,132
and
$27,982
as of August 31, 2013 and 2012, respectively, which primarily relates to cash held to meet certain insurance requirements. As a result of certain subsidiaries’ cash management systems, checks issued but not presented to the banks for payment may create negative book cash payables. Such negative balances are classified as Current portion of long term debt and bank borrowings.
Client Receivables, Unbilled Services and Allowances
The Company records its client receivables and unbilled services at their face amounts less allowances. On a periodic basis, the Company evaluates its receivables and unbilled services and establishes allowances based on historical experience and other currently available information. As of
August 31, 2013 and 2012
, total allowances recorded for client receivables and unbilled services were
$91,716
and
$64,874
, respectively. The allowance reflects the Company’s best estimate of collectibility risks on outstanding receivables and unbilled services. In limited circumstances, the Company agrees to extend financing to certain clients. The terms vary by contract, but generally payment for services is contractually linked to the achievement of specified performance milestones.
Concentrations of Credit Risk
The Company’s financial instruments, consisting primarily of cash and cash equivalents, foreign currency exchange rate instruments, client receivables and unbilled services, are exposed to concentrations of credit risk. The Company places its cash and cash equivalents and foreign exchange instruments with highly-rated financial institutions, limits the amount of credit exposure with any one financial institution and conducts ongoing evaluation of the credit worthiness of the financial institutions with which it does business. Client receivables are dispersed across many different industries and countries; therefore, concentrations of credit risk are limited.
Investments
All liquid investments with an original maturity greater than 90 days but less than one year are considered to be short-term investments. Investments with an original maturity greater than one year are considered to be long-term investments. Marketable short-term and long-term investments are classified and accounted for as available-for-sale investments. Available-for-sale investments are reported at fair value with changes in unrealized gains and losses recorded as a separate component of Accumulated other comprehensive loss until realized. Quoted market prices are used to determine the fair values of common equity and debt securities that were issued by publicly traded entities. Interest and amortization of premiums and discounts for debt securities are included in Interest income. Realized gains and losses on securities are determined based on the First In, First Out method and are included in Other (expense) income, net. The Company does not hold these investments for speculative or trading purposes.
ACCENTURE PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)
Property and Equipment
Property and equipment is stated at cost, net of accumulated depreciation. Depreciation of property and equipment is computed on a straight-line basis over the following estimated useful lives:
|
|
|
|
|
|
Buildings
|
20 to 25 years
|
|
Computers, related equipment and software
|
2 to 7 years
|
|
Furniture and fixtures
|
5 to 10 years
|
|
Leasehold improvements
|
Lesser of lease term or 15 years
|
Long-Lived Assets
Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or group of assets may not be recoverable. Recoverability of long-lived assets or groups of assets is assessed based on a comparison of the carrying amount to the estimated future net cash flows. If estimated future undiscounted net cash flows are less than the carrying amount, the asset is considered impaired and expense is recorded at an amount required to reduce the carrying amount to fair value.
Operating Expenses
Selected components of operating expenses were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
|
|
|
2013
|
|
2012
|
|
2011
|
|
Training costs
|
$
|
878,108
|
|
|
$
|
857,574
|
|
|
$
|
810,387
|
|
|
Research and development costs
|
715,094
|
|
|
559,611
|
|
|
481,970
|
|
|
Advertising costs
|
90,310
|
|
|
81,640
|
|
|
81,420
|
|
|
Provision for (release of) doubtful accounts (1)
|
32,238
|
|
|
(204
|
)
|
|
(24,361
|
)
|
_______________
|
|
|
|
(1)
|
For additional information, see “—Client Receivables, Unbilled Services and Allowances.”
|
Recently Adopted Accounting Pronouncements
In August 2013, the Company early adopted guidance issued by the Financial Accounting Standards Board (“FASB”) which requires enhanced disclosures in the notes to the consolidated financial statements to present separately, by item, reclassifications out of accumulated other comprehensive income (loss). The early adoption of this guidance did not have a material impact on the Consolidated Financial Statements. For additional information related to the reclassifications out of accumulated other comprehensive income (loss), see Note 4 (Accumulated Other Comprehensive Loss) to these Consolidated Financial Statements.
In September 2012, the Company adopted guidance issued by the FASB, which requires companies to present net income and other comprehensive income in either one continuous statement or in two separate but consecutive statements. The adoption of this guidance resulted in a change in the presentation of the components of comprehensive income, which are now presented in the Consolidated Statements of Comprehensive Income rather than in the Consolidated Shareholders’ Equity Statements.
In September 2011, the FASB issued guidance on testing goodwill for impairment. The new guidance provides an entity the option to first perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If an entity determines that this is the case, it is required to perform the prescribed two-step goodwill impairment test to identify potential goodwill impairment and measure the amount of goodwill impairment to be recognized for that reporting unit (if any). If an entity determines that the fair value of a reporting unit is greater than its carrying amount, the two-step goodwill impairment test is not required. The Company adopted this new guidance for its fiscal 2013 annual goodwill impairment test. The adoption of this guidance did not have a material impact on the Consolidated Financial Statements.
ACCENTURE PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)
2. EARNINGS PER SHARE
Basic and diluted earnings per share were calculated as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
|
|
|
2013
|
|
2012
|
|
2011
|
|
Basic Earnings per share
|
|
|
|
|
|
|
Net income attributable to Accenture plc
|
$
|
3,281,878
|
|
|
$
|
2,553,510
|
|
|
$
|
2,277,677
|
|
|
Basic weighted average Class A ordinary shares
|
645,536,995
|
|
|
643,132,601
|
|
|
645,631,170
|
|
|
Basic earnings per share
|
$
|
5.08
|
|
|
$
|
3.97
|
|
|
$
|
3.53
|
|
|
Diluted Earnings per share
|
|
|
|
|
|
|
Net income attributable to Accenture plc
|
$
|
3,281,878
|
|
|
$
|
2,553,510
|
|
|
$
|
2,277,677
|
|
|
Net income attributable to noncontrolling interests in Accenture SCA and
Accenture Canada Holdings Inc. (1)
|
234,398
|
|
|
237,520
|
|
|
243,575
|
|
|
Net income for diluted earnings per share calculation
|
$
|
3,516,276
|
|
|
$
|
2,791,030
|
|
|
$
|
2,521,252
|
|
|
Basic weighted average Class A ordinary shares
|
645,536,995
|
|
|
643,132,601
|
|
|
645,631,170
|
|
|
Class A ordinary shares issuable upon redemption/exchange of noncontrolling
interests (1)
|
46,212,252
|
|
|
59,833,742
|
|
|
69,326,725
|
|
|
Diluted effect of employee compensation related to Class A ordinary shares (2)
|
20,843,994
|
|
|
23,917,121
|
|
|
28,122,887
|
|
|
Diluted effect of share purchase plans related to Class A ordinary shares
|
170,375
|
|
|
127,595
|
|
|
130,530
|
|
|
Diluted weighted average Class A ordinary shares (2)
|
712,763,616
|
|
|
727,011,059
|
|
|
743,211,312
|
|
|
Diluted earnings per share (2)
|
$
|
4.93
|
|
|
$
|
3.84
|
|
|
$
|
3.39
|
|
_______________
|
|
|
|
(1)
|
Diluted earnings per share assumes the redemption of all Accenture SCA Class I common shares owned by holders of noncontrolling interests and the exchange of all Accenture Canada Holdings Inc. exchangeable shares for Accenture plc Class A ordinary shares, on a one-for-one basis. The income effect does not take into account “Net income attributable to noncontrolling interests—other,” since those shares are not redeemable or exchangeable for Accenture plc Class A ordinary shares.
|
|
|
|
|
(2)
|
Fiscal
2012
and
2011
diluted weighted average Accenture plc Class A ordinary shares and earnings per share amounts have been restated to reflect the impact of the issuance of additional restricted share units to holders of restricted share units in connection with the
fiscal 2013
payment of cash dividends. This did not result in a change to previously reported Diluted earnings per share.
|
ACCENTURE PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)
3. REORGANIZATION (BENEFITS) COSTS, NET
In fiscal 2001, the Company accrued reorganization liabilities in connection with its transition to a corporate structure. These included liabilities for certain individual income tax exposures related to the transfer of interests in certain entities to the Company as part of the reorganization. The Company has recorded reorganization expense and the related liability where such liabilities are probable. Interest accruals are made to cover reimbursement of interest on such tax assessments.
The Company’s reorganization activity was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
|
|
|
2013
|
|
2012
|
|
2011
|
|
Reorganization liability, beginning of period
|
$
|
268,806
|
|
|
$
|
307,286
|
|
|
$
|
271,907
|
|
|
Final determinations
|
(273,945
|
)
|
|
—
|
|
|
—
|
|
|
Interest expense accrued
|
1,903
|
|
|
1,691
|
|
|
1,520
|
|
|
Other adjustments
|
3,532
|
|
|
—
|
|
|
(3,873
|
)
|
|
Foreign currency translation
|
18,165
|
|
|
(40,171
|
)
|
|
37,732
|
|
|
Reorganization liability, end of period
|
$
|
18,461
|
|
|
$
|
268,806
|
|
|
$
|
307,286
|
|
As a result of final determinations, certain reorganization liabilities established in connection with the Company's transition to a corporate structure in 2001 are no longer probable. Accordingly, the Company recorded reorganization benefits of
$273,945
during fiscal
2013
. These benefits were partially offset by interest expense associated with carrying these liabilities of
$1,903
. As of
August 31, 2013
, reorganization liabilities of
$5,080
were included in Other accrued liabilities because expirations of statutes of limitations or other final determinations could occur within 12 months, and reorganization liabilities of
$13,381
were included in Other non-current liabilities. Final resolution, through settlement, conclusion of legal proceedings or a tax authority’s decision not to pursue a claim, will result in payment by the Company of amounts in settlement or judgment of these matters and/or recording of a reorganization benefit or cost in the Company’s Consolidated Income Statement. As of
August 31, 2013
, only a small number of countries remain that have active audits/investigations or open statutes of limitations.
ACCENTURE PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)
4. ACCUMULATED OTHER COMPREHENSIVE LOSS
The following table summarizes the changes in the accumulated balances for each component of accumulated other comprehensive loss attributable to Accenture plc:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
|
|
|
2013
|
|
2012
|
|
2011
|
|
Foreign currency translation
|
|
|
|
|
|
|
Beginning balance
|
$
|
(156,010
|
)
|
|
$
|
147,770
|
|
|
$
|
(44,638
|
)
|
|
Foreign currency translation
|
(280,128
|
)
|
|
(334,750
|
)
|
|
224,805
|
|
|
Income tax benefit (expense)
|
4,603
|
|
|
3,491
|
|
|
(6,432
|
)
|
|
Portion attributable to noncontrolling interests
|
17,134
|
|
|
27,479
|
|
|
(25,965
|
)
|
|
Foreign currency translation, net of tax
|
(258,391
|
)
|
|
(303,780
|
)
|
|
192,408
|
|
|
Ending balance
|
(414,401
|
)
|
|
(156,010
|
)
|
|
147,770
|
|
|
|
|
|
|
|
|
|
Defined benefit plans
|
|
|
|
|
|
|
Beginning balance
|
(502,742
|
)
|
|
(313,520
|
)
|
|
(345,225
|
)
|
|
Actuarial gains (losses)
|
162,975
|
|
|
(366,711
|
)
|
|
17,859
|
|
|
Prior service costs arising during the period
|
(45,653
|
)
|
|
—
|
|
|
—
|
|
|
Reclassifications into net periodic pension and post-retirement expense (1)
|
33,393
|
|
|
28,070
|
|
|
38,114
|
|
|
Income tax (expense) benefit
|
(68,300
|
)
|
|
132,764
|
|
|
(21,171
|
)
|
|
Portion attributable to noncontrolling interests
|
(5,077
|
)
|
|
16,655
|
|
|
(3,097
|
)
|
|
Defined benefit plans, net of tax
|
77,338
|
|
|
(189,222
|
)
|
|
31,705
|
|
|
Ending balance
|
(425,404
|
)
|
|
(502,742
|
)
|
|
(313,520
|
)
|
|
|
|
|
|
|
|
|
Cash flow hedges
|
|
|
|
|
|
|
Beginning balance
|
(19,402
|
)
|
|
32,354
|
|
|
4,340
|
|
|
Unrealized (losses) gains
|
(365,203
|
)
|
|
(146,532
|
)
|
|
72,066
|
|
|
Reclassification adjustments into Cost of services
|
49,954
|
|
|
55,068
|
|
|
(21,753
|
)
|
|
Income tax benefit (expense)
|
109,005
|
|
|
35,152
|
|
|
(19,562
|
)
|
|
Portion attributable to noncontrolling interests
|
12,705
|
|
|
4,556
|
|
|
(2,737
|
)
|
|
Cash flow hedges, net of tax
|
(193,539
|
)
|
|
(51,756
|
)
|
|
28,014
|
|
|
Ending balance
|
(212,941
|
)
|
|
(19,402
|
)
|
|
32,354
|
|
|
|
|
|
|
|
|
|
Marketable securities
|
|
|
|
|
|
|
Beginning balance
|
6
|
|
|
(984
|
)
|
|
(769
|
)
|
|
Unrealized gains (losses)
|
—
|
|
|
142
|
|
|
(236
|
)
|
|
Reclassification adjustments into Other (expense) income, net
|
(5
|
)
|
|
935
|
|
|
—
|
|
|
Portion attributable to noncontrolling interests
|
(1
|
)
|
|
(87
|
)
|
|
21
|
|
|
Marketable securities, net of tax
|
(6
|
)
|
|
990
|
|
|
(215
|
)
|
|
Ending balance
|
—
|
|
|
6
|
|
|
(984
|
)
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive loss
|
$
|
(1,052,746
|
)
|
|
$
|
(678,148
|
)
|
|
$
|
(134,380
|
)
|
_______________
|
|
|
|
(1)
|
Reclassifications into net periodic pension and post-retirement expense are recognized in Cost of services, Sales & marketing and General & administrative costs.
|
ACCENTURE PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)
5. PROPERTY AND EQUIPMENT
The components of Property and equipment, net were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
August 31,
|
|
|
2013
|
|
2012
|
|
Buildings and land
|
$
|
3,502
|
|
|
$
|
3,296
|
|
|
Computers, related equipment and software
|
1,379,731
|
|
|
1,356,950
|
|
|
Furniture and fixtures
|
307,199
|
|
|
313,370
|
|
|
Leasehold improvements
|
697,454
|
|
|
654,134
|
|
|
Property and equipment, gross
|
2,387,886
|
|
|
2,327,750
|
|
|
Total accumulated depreciation
|
(1,608,211
|
)
|
|
(1,548,256
|
)
|
|
Property and equipment, net
|
$
|
779,675
|
|
|
$
|
779,494
|
|
ACCENTURE PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)
6. BUSINESS COMBINATIONS AND GOODWILL
On July 8, 2013, the Company acquired Acquity Group Ltd. (“Acquity”), a provider of strategy, digital marketing and technical services, for
$282,985
, net of cash acquired. This acquisition expanded Accenture’s range of digital marketing services and resulted in more than
600
Acquity employees joining Accenture. In connection with this acquisition, the Company recorded goodwill of
$215,979
, which was allocated to the Products, Communication, Media & Technology and Financial Services reportable segments, and intangible assets of
$55,972
, primarily related to customer relationships and technology-related assets. The goodwill is not deductible for U.S. federal income tax purposes. The intangible assets are being amortized over
one
to
ten
years. The pro forma effects on the Company’s operations were not material.
During fiscal
2013
, the Company also completed other individually immaterial acquisitions, including a provider of clinical and regulatory information management solutions and software for the pharmaceutical industry and a provider of loan origination software and electronic document management services, for total consideration of
$521,003
. These acquisitions were completed primarily to expand the Company’s products and services offerings. In connection with these acquisitions, the Company recorded goodwill of
$405,151
, which was allocated among the reportable operating segments, and intangible assets of
$122,012
, primarily related to customer relationships and technology-related assets. Goodwill also included immaterial adjustments related to prior period acquisitions and is not deductible for U.S. federal income tax purposes. The intangible assets are being amortized over
one
to
fifteen
years. The pro forma effects on the Company’s operations were not material.
During fiscal 2012, the Company completed several individually immaterial acquisitions, including a provider of residential and commercial mortgage processing services, for total consideration of
$174,383
. In connection with these acquisitions, the Company recorded goodwill of
$123,817
, which was allocated among the reportable operating segments, and intangible assets of
$57,732
, primarily related to customer relationships. Goodwill also included immaterial adjustments related to prior period acquisitions. The intangible assets are being amortized over
three
to
seven
years. The pro forma effects on the Company’s operations were not material.
During fiscal 2011, the Company completed several individually immaterial acquisitions, including a provider of software solutions for the property and casualty insurance industry, for total consideration of
$306,187
. In connection with these acquisitions, the Company recorded goodwill of
$254,975
, which was allocated among the reportable operating segments, and intangible assets of
$81,735
, primarily related to customer relationships and intellectual property. The intangible assets are being amortized over a period of less than
one
to
fifteen
years. The pro forma effects on the Company’s operations were not material.
Goodwill is reviewed for impairment annually or more frequently if indicators of impairment exist. Based on the results of its annual impairment analysis, the Company determined that no impairment existed as of
August 31, 2013 and 2012
.
The changes in the carrying amount of goodwill by reportable operating segment were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
August 31,
2011
|
|
Additions/
Adjustments
|
|
Foreign
Currency
Translation
|
|
August 31,
2012
|
|
Additions/
Adjustments
|
|
Foreign
Currency
Translation
|
|
August 31,
2013
|
|
Communications, Media &
Technology
|
$
|
173,867
|
|
|
$
|
2,298
|
|
|
$
|
(7,752
|
)
|
|
$
|
168,413
|
|
|
$
|
69,879
|
|
|
$
|
(3,848
|
)
|
|
$
|
234,444
|
|
|
Financial Services
|
304,720
|
|
|
112,733
|
|
|
(9,497
|
)
|
|
407,956
|
|
|
182,800
|
|
|
(8,107
|
)
|
|
582,649
|
|
|
Health & Public Service
|
286,158
|
|
|
1,322
|
|
|
(2,147
|
)
|
|
285,333
|
|
|
10,287
|
|
|
(576
|
)
|
|
295,044
|
|
|
Products
|
278,929
|
|
|
5,241
|
|
|
(13,992
|
)
|
|
270,178
|
|
|
347,847
|
|
|
(1,017
|
)
|
|
617,008
|
|
|
Resources
|
88,317
|
|
|
3,147
|
|
|
(7,961
|
)
|
|
83,503
|
|
|
9,988
|
|
|
(4,050
|
)
|
|
89,441
|
|
|
Total
|
$
|
1,131,991
|
|
|
$
|
124,741
|
|
|
$
|
(41,349
|
)
|
|
$
|
1,215,383
|
|
|
$
|
620,801
|
|
|
$
|
(17,598
|
)
|
|
$
|
1,818,586
|
|
ACCENTURE PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)
7. DERIVATIVE FINANCIAL INSTRUMENTS
In the normal course of business, the Company uses derivative financial instruments to manage foreign currency exchange rate risk. Derivative transactions are governed by a uniform set of policies and procedures covering areas such as authorization, counterparty exposure and hedging practices. Positions are monitored using techniques such as market value and sensitivity analyses. The Company does not enter into derivative transactions for trading purposes. The Company classifies cash flows from its derivative programs as cash flows from operating activities in the Consolidated Cash Flows Statement.
Certain derivatives also give rise to credit risks from the possible non-performance by counterparties. Credit risk is generally limited to the fair value of those contracts that are favorable to the Company, and the maximum amount of loss due to credit risk, based on the gross fair value of all of the Company’s derivative financial instruments, was approximately
$4,805
as of
August 31, 2013
.
The Company also utilizes standard counterparty master agreements containing provisions for the netting of certain foreign currency transaction obligations and for set-off of certain obligations in the event of an insolvency of one of the parties to the transaction. These provisions may reduce the Company’s potential overall loss resulting from the insolvency of a counterparty and reduce a counterparty’s potential overall loss resulting from the insolvency of the Company. Additionally, these agreements contain early termination provisions triggered by adverse changes in a counterparty’s credit rating, thereby enabling the Company to accelerate settlement of a transaction prior to its contractual maturity and potentially decrease the Company’s realized loss on an open transaction. Similarly, a decrement in the Company’s credit rating could trigger a counterparty’s early termination rights, thereby enabling a counterparty to accelerate settlement of a transaction prior to its contractual maturity and potentially increase the Company’s realized loss on an open transaction. The aggregate fair value of the Company’s derivative instruments with credit-risk-related contingent features that are in a liability position as of
August 31, 2013
was
$418,697
.
The Company’s derivative financial instruments consist of deliverable and non-deliverable foreign currency forward contracts. Fair values for derivative financial instruments are based on prices computed using third-party valuation models and are classified as Level 2 in accordance with the three-level hierarchy of fair value measurements. All of the significant inputs to the third-party valuation models are observable in active markets. Inputs include current market-based parameters such as forward rates, yield curves and credit default swap pricing. For additional information related to the three-level hierarchy of fair value measurements, see Note 10 (Retirement and Profit Sharing Plans) to these Consolidated Financial Statements.
Cash Flow Hedges
Certain of the Company’s subsidiaries are exposed to currency risk through their use of resources supplied by the Company’s Global Delivery Network. To mitigate this risk, the Company uses foreign currency forward contracts to hedge the foreign exchange risk of the forecasted intercompany expenses denominated in foreign currencies for up to three years in the future. The Company has designated these derivatives as cash flow hedges. As of
August 31, 2013 and 2012
, the Company held no derivatives that were designated as fair value or net investment hedges.
In order for a derivative to qualify for hedge accounting, the derivative must be formally designated as a fair value, cash flow or net investment hedge by documenting the relationship between the derivative and the hedged item. The documentation includes a description of the hedging instrument, the hedge item, the risk being hedged, the Company’s risk management objective and strategy for undertaking the hedge, the method for assessing the effectiveness of the hedge and the method for measuring hedge ineffectiveness. Additionally, the hedge relationship must be expected to be highly effective at offsetting changes in either the fair value or cash flows of the hedged item at both inception of the hedge and on an ongoing basis. The Company assesses the ongoing effectiveness of its hedges using the Hypothetical Derivative Method, which measures hedge ineffectiveness based on a comparison of the change in fair value of the actual derivative designated as the hedging instrument and the change in fair value of a hypothetical derivative. The hypothetical derivative would have terms that identically match the critical terms of the hedged item. The Company measures and records hedge ineffectiveness at the end of each fiscal quarter.
For a cash flow hedge, the effective portion of the change in estimated fair value of a hedging instrument is recorded in Accumulated other comprehensive loss as a separate component of Shareholders’ Equity and is reclassified into Cost of services in the Consolidated Income Statement during the period in which the hedged transaction is recognized. The amounts related to derivatives designated as cash flow hedges that were reclassified into Cost of services were a net loss of
$49,954
and
$55,068
during fiscal 2013 and 2012, respectively, and a net gain of
$21,753
during fiscal 2011. The ineffective portion of the change in fair value of a cash flow hedge is recognized immediately in Other (expense) income, net in the Consolidated Income Statement and for fiscal
2013, 2012 and 2011
, was not material. In addition, the Company did not discontinue any cash flow hedges during fiscal
2013, 2012 and 2011
. As of
August 31, 2013
,
$177,201
of net unrealized losses related to derivatives designated as cash flow hedges and recorded in Accumulated other comprehensive loss is expected to be reclassified into earnings in the next 12 months.
ACCENTURE PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)
Other Derivatives
The Company also uses foreign currency forward contracts, which have not been designated as hedges, to hedge balance sheet exposures, such as intercompany loans. These instruments are generally short-term in nature, with typical maturities of less than one year, and are subject to fluctuations in foreign exchange rates. Realized gains or losses and changes in the estimated fair value of these derivatives were a net loss of
$142,432
and
$153,913
for fiscal
2013
and
2012
, respectively. Gains and losses on these contracts are recorded in Other (expense) income, net in the Consolidated Income Statement and are offset by gains and losses on the related hedged items.
Fair Value of Derivative Instruments
The notional and fair values of all derivative instruments were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
August 31,
|
|
|
2013
|
|
2012
|
|
Assets
|
|
|
|
|
Cash Flow Hedges
|
|
|
|
|
Other current assets
|
$
|
—
|
|
|
$
|
15,392
|
|
|
Other non-current assets
|
—
|
|
|
36,106
|
|
|
Other Derivatives
|
|
|
|
|
Other current assets
|
4,805
|
|
|
9,988
|
|
|
Total assets
|
$
|
4,805
|
|
|
$
|
61,486
|
|
|
Liabilities
|
|
|
|
|
Cash Flow Hedges
|
|
|
|
|
Other accrued liabilities
|
$
|
187,525
|
|
|
$
|
59,458
|
|
|
Other non-current liabilities
|
159,155
|
|
|
23,471
|
|
|
Other Derivatives
|
|
|
|
|
Other accrued liabilities
|
72,017
|
|
|
11,147
|
|
|
Total liabilities
|
$
|
418,697
|
|
|
$
|
94,076
|
|
|
Total fair value
|
$
|
(413,892
|
)
|
|
$
|
(32,590
|
)
|
|
Total notional value
|
$
|
5,499,224
|
|
|
$
|
4,853,191
|
|
ACCENTURE PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)
8. BORROWINGS AND INDEBTEDNESS
As of
August 31, 2013
, the Company had the following borrowing facilities, including the issuance of letters of credit, to support general working capital purposes:
|
|
|
|
|
|
|
|
|
|
|
|
|
Facility
Amount
|
|
Borrowings
Under
Facilities
|
|
Syndicated loan facility (1)
|
$
|
1,000,000
|
|
|
$
|
—
|
|
|
Separate, uncommitted, unsecured multicurrency revolving credit facilities (2)
|
507,899
|
|
|
—
|
|
|
Local guaranteed and non-guaranteed lines of credit (3)
|
170,138
|
|
|
—
|
|
|
Total
|
$
|
1,678,037
|
|
|
$
|
—
|
|
_______________
|
|
|
|
(1)
|
This facility, which matures on
October 31, 2016
, provides unsecured, revolving borrowing capacity for general working capital purposes, including the issuance of letters of credit. Financing is provided under this facility at the prime rate or at the London Interbank Offered Rate plus a spread. The Company continues to be in compliance with relevant covenant terms. The facility is subject to annual commitment fees. As of
August 31, 2013 and 2012
, the Company had no borrowings under the facility.
|
|
|
|
|
(2)
|
The Company maintains separate, uncommitted and unsecured multicurrency revolving credit facilities. These facilities provide local currency financing for the majority of the Company’s operations. Interest rate terms on the revolving facilities are at market rates prevailing in the relevant local markets. As of
August 31, 2013 and 2012
, the Company had
no
borrowings under these facilities.
|
|
|
|
|
(3)
|
The Company also maintains local guaranteed and non-guaranteed lines of credit for those locations that cannot access the Company’s global facilities. As of
August 31, 2013 and 2012
, the Company had
no
borrowings under these various facilities.
|
Under the borrowing facilities described above, the Company had an aggregate of
$179,186
and
$164,121
of letters of credit outstanding as of
August 31, 2013 and 2012
, respectively. In addition, the Company also had total outstanding debt of
$25,600
and
$33
as of
August 31, 2013 and 2012
, respectively.
ACCENTURE PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)
9. INCOME TAXES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
|
|
|
2013
|
|
2012
|
|
2011
|
|
Current taxes
|
|
|
|
|
|
|
U.S. federal(1)
|
$
|
155,090
|
|
|
$
|
118,498
|
|
|
$
|
334,400
|
|
|
U.S. state and local(1)
|
3,425
|
|
|
16,754
|
|
|
46,878
|
|
|
Non-U.S.
|
835,934
|
|
|
887,008
|
|
|
747,762
|
|
|
Total current tax expense
|
994,449
|
|
|
1,022,260
|
|
|
1,129,040
|
|
|
Deferred taxes
|
|
|
|
|
|
|
U.S. federal(1)
|
(12,912
|
)
|
|
161,093
|
|
|
(8,229
|
)
|
|
U.S. state and local(1)
|
795
|
|
|
27,362
|
|
|
(1,140
|
)
|
|
Non-U.S.
|
(197,557
|
)
|
|
(131,474
|
)
|
|
(160,889
|
)
|
|
Total deferred tax (benefit) expense
|
(209,674
|
)
|
|
56,981
|
|
|
(170,258
|
)
|
|
Total
|
$
|
784,775
|
|
|
$
|
1,079,241
|
|
|
$
|
958,782
|
|
_______________
|
|
|
|
(1)
|
The fiscal 2012 U.S. federal and U.S. state and local current and deferred tax expense reflects the impact of a discretionary cash contribution of
$500,000
made to the Company's U.S. defined benefit pension plan during fiscal 2013.
|
The components of Income before income taxes were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
|
|
|
2013
|
|
2012
|
|
2011
|
|
U.S. sources
|
$
|
1,043,810
|
|
|
$
|
748,177
|
|
|
$
|
719,315
|
|
|
Non-U.S. sources
|
3,295,484
|
|
|
3,155,997
|
|
|
2,792,707
|
|
|
Total
|
$
|
4,339,294
|
|
|
$
|
3,904,174
|
|
|
$
|
3,512,022
|
|
The reconciliation of the U.S. federal statutory income tax rate to the Company’s effective income tax rate was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
|
|
|
2013
|
|
2012
|
|
2011
|
|
U.S. federal statutory income tax rate
|
35.0
|
%
|
|
35.0
|
%
|
|
35.0
|
%
|
|
U.S. state and local taxes, net
|
1.1
|
|
|
1.0
|
|
|
0.9
|
|
|
Non-U.S. operations taxed at lower rates
|
(13.1
|
)
|
|
(13.7
|
)
|
|
(14.6
|
)
|
|
Reorganization final determinations (1)
|
(2.2
|
)
|
|
—
|
|
|
—
|
|
|
Other final determinations (1)
|
(8.2
|
)
|
|
(8.6
|
)
|
|
(0.6
|
)
|
|
Other net activity in unrecognized tax benefits
|
3.8
|
|
|
9.4
|
|
|
4.8
|
|
|
Other, net
|
1.7
|
|
|
4.5
|
|
|
1.8
|
|
|
Effective income tax rate
|
18.1
|
%
|
|
27.6
|
%
|
|
27.3
|
%
|
_______________
|
|
|
|
(1)
|
Final determinations include final agreements with tax authorities and expirations of statutes of limitations.
|
The effect on deferred tax assets and liabilities of enacted changes in tax laws and tax rates did not have a material impact on the Company’s effective tax rate.
ACCENTURE PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)
The components of the Company’s deferred tax assets and liabilities included the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
August 31,
|
|
|
2013
|
|
2012
|
|
Deferred tax assets
|
|
|
|
|
Pensions
|
$
|
127,515
|
|
|
$
|
165,216
|
|
|
Revenue recognition
|
97,361
|
|
|
89,420
|
|
|
Compensation and benefits
|
498,035
|
|
|
440,768
|
|
|
Share-based compensation
|
217,990
|
|
|
239,326
|
|
|
Tax credit carryforwards
|
94,417
|
|
|
137,904
|
|
|
Net operating loss carryforwards
|
197,691
|
|
|
176,649
|
|
|
Depreciation and amortization
|
46,185
|
|
|
55,182
|
|
|
Deferred amortization deductions
|
393,392
|
|
|
244,103
|
|
|
Indirect effects of unrecognized tax benefits
|
357,093
|
|
|
316,776
|
|
|
Derivatives
|
120,229
|
|
|
11,482
|
|
|
Other
|
99,182
|
|
|
94,308
|
|
|
|
2,249,090
|
|
|
1,971,134
|
|
|
Valuation allowance
|
(204,561
|
)
|
|
(221,015
|
)
|
|
Total deferred tax assets
|
2,044,529
|
|
|
1,750,119
|
|
|
Deferred tax liabilities
|
|
|
|
|
Revenue recognition
|
(71,907
|
)
|
|
(56,429
|
)
|
|
Depreciation and amortization
|
(128,106
|
)
|
|
(96,833
|
)
|
|
Investments in subsidiaries
|
(159,910
|
)
|
|
(174,943
|
)
|
|
Other
|
(69,971
|
)
|
|
(54,877
|
)
|
|
Total deferred tax liabilities
|
(429,894
|
)
|
|
(383,082
|
)
|
|
Net deferred tax assets
|
$
|
1,614,635
|
|
|
$
|
1,367,037
|
|
The Company recorded valuation allowances of
$204,561
and
$221,015
as of
August 31, 2013 and 2012
, respectively, against deferred tax assets principally associated with certain tax net operating loss and tax credit carryforwards, as the Company believes it is more likely than not that these assets will not be realized. For all other deferred tax assets, the Company believes it is more likely than not that the results of future operations will generate sufficient taxable income to realize these deferred tax assets. During fiscal
2013
, the Company recorded a net decrease of
$16,454
in the valuation allowance, primarily due to the realization of foreign tax credits.
The Company had net operating loss carryforwards as of
August 31, 2013
of
$724,484
. Of this amount,
$142,937
expires between
2014 and 2023
,
$30,061
expires between
2024 and 2033
, and
$551,486
has an indefinite carryforward period. The Company had tax credit carryforwards as of
August 31, 2013
of
$94,417
, of which
$26,269
will expire between
2014 and 2023
,
$10,405
will expire between
2024 and 2033
, and
$57,743
has an indefinite carryforward period.
As of
August 31, 2013
, the Company had
$1,263,070
of unrecognized tax benefits, of which
$647,208
, if recognized, would favorably affect the Company’s effective tax rate. As of
August 31, 2012
, the Company had
$1,604,745
of unrecognized tax benefits, of which
$813,721
, if recognized, would favorably affect the Company’s effective tax rate. The differences of
$615,862
and
$791,024
, respectively, represent items recorded as adjustments to equity and offsetting tax benefits associated with the correlative effects of potential transfer pricing adjustments, state income taxes and timing adjustments.
ACCENTURE PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)
A reconciliation of the beginning and ending amounts of unrecognized tax benefits was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
|
|
|
2013
|
|
2012
|
|
Balance, at beginning of period
|
$
|
1,604,745
|
|
|
$
|
1,645,831
|
|
|
Additions for tax positions related to the current year
|
171,133
|
|
|
271,305
|
|
|
Additions for tax positions related to prior years
|
124,372
|
|
|
328,210
|
|
|
Reductions for tax positions related to prior years
|
(533,570
|
)
|
|
(458,767
|
)
|
|
Statute of limitations expirations
|
(67,891
|
)
|
|
(26,766
|
)
|
|
Settlements with tax authorities
|
(36,218
|
)
|
|
(112,520
|
)
|
|
Cumulative foreign currency translation
|
499
|
|
|
(42,548
|
)
|
|
Balance, at end of period
|
$
|
1,263,070
|
|
|
$
|
1,604,745
|
|
The Company recognizes interest and penalties related to unrecognized tax benefits in the Provision for income taxes. During fiscal
2013, 2012 and 2011
, the Company recognized (benefit) expense of
$(46,602)
,
$(98,765)
and
$59,950
in interest and penalties, respectively. The Company had accrued interest and penalties related to unrecognized tax benefits of
$119,937
(
$100,939
, net of tax benefits) and
$171,556
(
$125,993
, net of tax benefits) on the Company’s Consolidated Balance Sheets as of
August 31, 2013 and 2012
, respectively.
The Company is currently under audit by the U.S. Internal Revenue Service for fiscal 2010 to 2011. The audit by the U.S. Internal Revenue Service for fiscal 2006 to 2009 closed during fiscal 2013. The Company is also currently under audit in numerous state and non-U.S. tax jurisdictions. Although the outcome of tax audits is always uncertain and could result in significant cash tax payments, the Company does not believe the outcome of these audits will have a material adverse effect on the Company’s consolidated financial position or results of operations. With limited exceptions, the Company is no longer subject to income tax audits by taxing authorities for the years before 2006. The Company believes that it is reasonably possible that its unrecognized tax benefits could decrease by approximately
$732,000
or increase by approximately
$112,000
in the next 12 months as a result of settlements, lapses of statutes of limitations and other adjustments. The majority of these amounts relate to transfer pricing matters in both U.S. and non-U.S. tax jurisdictions.
As of
August 31, 2013
, the Company had not recognized a deferred tax liability on
$2,847,544
of undistributed earnings for certain foreign subsidiaries, because these earnings are intended to be permanently reinvested. If such earnings were distributed, some countries may impose additional taxes. It is not practicable to determine the amount of the related unrecognized deferred income tax liability.
Portions of the Company’s operations are subject to reduced tax rates or are free of tax under various tax holidays which expire between fiscal
2014 and 2017
. Some of the holidays are renewable at reduced levels, with renewal periods through
2027
. The income tax benefits attributable to the tax status of these subsidiaries were estimated to be approximately
$84,000
,
$84,000
and
$72,000
in fiscal
2013, 2012 and 2011
, respectively.
ACCENTURE PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)
10. RETIREMENT AND PROFIT SHARING PLANS
Defined Benefit Pension Plans
In the United States and certain other countries, the Company maintains and administers defined benefit retirement plans for certain current, retired and resigned employees. In addition, the Company’s U.S. defined benefit pension plans include a frozen plan for former pre-incorporation partners, which is unfunded. Benefits under the employee retirement plans are primarily based on years of service and compensation during the years immediately preceding retirement or termination of participation in the plan. The defined benefit pension disclosures include the Company's U.S. and material non-U.S. defined benefit pension plans.
Postemployment Plans
Certain postemployment benefits, including severance benefits, disability-related benefits and continuation of benefits, such as healthcare benefits and life insurance coverage, are provided to former or inactive employees after employment but before retirement. These costs are not material and are substantially provided for on an accrual basis.
Assumptions
The weighted-average assumptions used to determine the defined benefit pension obligations as of August 31 and the net periodic pension expense for the subsequent year were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
August 31,
|
|
|
2013
|
|
2012
|
|
2011
|
|
|
U.S. Plans
|
|
Non-U.S. Plans
|
|
U.S. Plans
|
|
Non-U.S. Plans
|
|
U.S. Plans
|
|
Non-U.S. Plans
|
|
Discount rate
|
5.00
|
%
|
|
4.18
|
%
|
|
4.00
|
%
|
|
4.23
|
%
|
|
5.25
|
%
|
|
4.99
|
%
|
|
Expected rate of return on plan assets
|
5.50
|
%
|
|
4.79
|
%
|
|
5.50
|
%
|
|
4.72
|
%
|
|
7.50
|
%
|
|
5.12
|
%
|
|
Rate of increase in future compensation
|
3.60
|
%
|
|
3.79
|
%
|
|
4.00
|
%
|
|
3.81
|
%
|
|
4.00
|
%
|
|
4.03
|
%
|
The Company’s methodology for selecting the discount rate for the U.S. Plans is to match the plans’ cash flows to that of the average of two yield curves that provide the equivalent yields on zero-coupon corporate bonds for each maturity. The discount rate assumption for the non-U.S. Plans primarily reflects the market rate for high-quality, fixed-income debt instruments. The discount rate assumptions are based on the expected duration of the benefit payments for each of the Company’s defined benefit pension plans as of the annual measurement date and is subject to change each year. The expected long-term rate of return on plan assets should, over time, approximate the actual long-term returns on defined benefit pension plan assets and is based on historical returns and the future expectations for returns for each asset class, as well as the target asset allocation of the asset portfolio.
Pension Expense
Pension expense for fiscal
2013, 2012 and 2011
was
$91,771
,
$102,555
and
$110,332
respectively.
ACCENTURE PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)
Benefit Obligation, Plan Assets and Funded Status
The changes in the defined benefit pension obligations, plan assets and funded status for fiscal
2013 and 2012
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
August 31,
|
|
|
2013
|
|
2012
|
|
|
U.S. Plans
|
|
Non-U.S. Plans
|
|
U.S. Plans
|
|
Non-U.S. Plans
|
|
Reconciliation of benefit obligation
|
|
|
|
|
|
|
|
|
Benefit obligation, beginning of year
|
$
|
1,881,544
|
|
|
$
|
1,145,964
|
|
|
$
|
1,433,884
|
|
|
$
|
1,046,251
|
|
|
Service cost
|
11,472
|
|
|
60,173
|
|
|
11,437
|
|
|
53,086
|
|
|
Interest cost
|
74,664
|
|
|
47,042
|
|
|
74,403
|
|
|
47,800
|
|
|
Participant contributions
|
—
|
|
|
5,792
|
|
|
—
|
|
|
7,058
|
|
|
Acquisitions/divestitures/transfers
|
—
|
|
|
(34
|
)
|
|
—
|
|
|
7,211
|
|
|
Amendments
|
—
|
|
|
(3,120
|
)
|
|
—
|
|
|
—
|
|
|
Curtailments
|
—
|
|
|
(471
|
)
|
|
—
|
|
|
—
|
|
|
Actuarial (gain) loss
|
(317,291
|
)
|
|
47,699
|
|
|
395,636
|
|
|
94,896
|
|
|
Benefits paid
|
(36,295
|
)
|
|
(38,899
|
)
|
|
(33,816
|
)
|
|
(30,710
|
)
|
|
Exchange rate impact
|
—
|
|
|
(32,569
|
)
|
|
—
|
|
|
(79,628
|
)
|
|
Benefit obligation, end of year
|
$
|
1,614,094
|
|
|
$
|
1,231,577
|
|
|
$
|
1,881,544
|
|
|
$
|
1,145,964
|
|
|
Reconciliation of fair value of plan assets
|
|
|
|
|
|
|
|
|
Fair value of plan assets, beginning of year
|
$
|
1,185,961
|
|
|
$
|
846,494
|
|
|
$
|
1,006,507
|
|
|
$
|
779,754
|
|
|
Actual return on plan assets
|
(95,320
|
)
|
|
78,312
|
|
|
202,018
|
|
|
67,724
|
|
|
Acquisitions/divestitures/transfers
|
—
|
|
|
—
|
|
|
—
|
|
|
6,935
|
|
|
Employer contributions (1)
|
511,418
|
|
|
55,490
|
|
|
11,252
|
|
|
55,052
|
|
|
Participant contributions
|
—
|
|
|
5,792
|
|
|
—
|
|
|
7,058
|
|
|
Benefits paid
|
(36,295
|
)
|
|
(38,899
|
)
|
|
(33,816
|
)
|
|
(30,710
|
)
|
|
Exchange rate impact
|
—
|
|
|
(33,895
|
)
|
|
—
|
|
|
(39,319
|
)
|
|
Fair value of plan assets, end of year
|
$
|
1,565,764
|
|
|
$
|
913,294
|
|
|
$
|
1,185,961
|
|
|
$
|
846,494
|
|
|
Funded status, end of year
|
$
|
(48,330
|
)
|
|
$
|
(318,283
|
)
|
|
$
|
(695,583
|
)
|
|
$
|
(299,470
|
)
|
|
Amounts recognized in the Consolidated Balance Sheets
|
|
|
|
|
|
|
|
|
Non-current assets
|
$
|
91,316
|
|
|
$
|
59,758
|
|
|
$
|
—
|
|
|
$
|
30,365
|
|
|
Current liabilities
|
(11,570
|
)
|
|
(9,511
|
)
|
|
(11,709
|
)
|
|
(8,953
|
)
|
|
Non-current liabilities
|
(128,076
|
)
|
|
(368,530
|
)
|
|
(683,874
|
)
|
|
(320,882
|
)
|
|
Funded status, end of year
|
$
|
(48,330
|
)
|
|
$
|
(318,283
|
)
|
|
$
|
(695,583
|
)
|
|
$
|
(299,470
|
)
|
_______________
|
|
|
|
(1)
|
The Company made a discretionary cash contribution of
$500,000
to its U.S. defined benefit pension plan during fiscal 2013.
|
ACCENTURE PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)
Accumulated Other Comprehensive Loss
The pre-tax accumulated net actuarial loss and prior service (credit) cost recognized in Accumulated other comprehensive loss as of
August 31, 2013 and 2012
was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
August 31,
|
|
|
2013
|
|
2012
|
|
|
U.S. Plans
|
|
Non-U.S.
Plans
|
|
U.S. Plans
|
|
Non-U.S.
Plans
|
|
Net actuarial loss
|
$
|
456,347
|
|
|
$
|
193,503
|
|
|
$
|
607,011
|
|
|
$
|
203,608
|
|
|
Prior service (credit) cost
|
—
|
|
|
(14,275
|
)
|
|
3
|
|
|
(15,281
|
)
|
|
Accumulated other comprehensive loss, pre-tax
|
$
|
456,347
|
|
|
$
|
179,228
|
|
|
$
|
607,014
|
|
|
$
|
188,327
|
|
The estimated amounts that will be amortized from Accumulated other comprehensive loss as of
August 31, 2013
into net periodic pension expense during fiscal
2014
are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Plans
|
|
Non-U.S.
Plans
|
|
Actuarial loss
|
$
|
10,003
|
|
|
$
|
9,467
|
|
|
Prior service credit
|
—
|
|
|
(2,719
|
)
|
|
Total
|
$
|
10,003
|
|
|
$
|
6,748
|
|
Funded Status for Defined Benefit Plans
The accumulated benefit obligation as of
August 31, 2013 and 2012
was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
August 31,
|
|
|
2013
|
|
2012
|
|
|
U.S. Plans
|
|
Non-U.S.
Plans
|
|
U.S. Plans
|
|
Non-U.S.
Plans
|
|
Accumulated benefit obligation
|
$
|
1,603,868
|
|
|
$
|
1,134,505
|
|
|
$
|
1,867,820
|
|
|
$
|
1,046,280
|
|
The following information is provided for defined benefit pension plans with projected benefit obligations in excess of plan assets and for plans with accumulated benefit obligations in excess of plan assets as of
August 31, 2013 and 2012
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
August 31,
|
|
|
2013
|
|
2012
|
|
|
U.S. Plans
|
|
Non-U.S.
Plans
|
|
U.S. Plans
|
|
Non-U.S.
Plans
|
|
Projected benefit obligation in excess of plan assets
|
|
|
|
|
|
|
|
|
Projected benefit obligation
|
$
|
139,646
|
|
|
$
|
484,162
|
|
|
$
|
1,881,544
|
|
|
$
|
672,195
|
|
|
Fair value of plan assets
|
—
|
|
|
106,120
|
|
|
1,185,961
|
|
|
342,361
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
August 31,
|
|
|
2013
|
|
2012
|
|
|
U.S. Plans
|
|
Non-U.S.
Plans
|
|
U.S. Plans
|
|
Non-U.S.
Plans
|
|
Accumulated benefit obligation in excess of plan assets
|
|
|
|
|
|
|
|
|
Accumulated benefit obligation
|
$
|
139,646
|
|
|
$
|
403,788
|
|
|
$
|
1,867,820
|
|
|
$
|
436,499
|
|
|
Fair value of plan assets
|
—
|
|
|
81,416
|
|
|
1,185,961
|
|
|
178,600
|
|
ACCENTURE PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)
Investment Strategies
U.S. Pension Plans
The overall investment objective of the plans is to provide growth in the defined benefit pension plans’ assets to help fund future defined benefit pension obligations while managing risk in order to meet current defined benefit pension obligations. The plans’ future prospects, their current financial conditions, the Company’s current funding levels and other relevant factors suggest that the plans can tolerate some interim fluctuations in market value and rates of return in order to achieve long-term objectives without undue risk to the plans’ ability to meet their current benefit obligations. The Company recognizes that asset allocation of the defined benefit pension plans’ assets is an important factor in determining long-term performance. Actual asset allocations at any point in time may vary from the target asset allocations and will be dictated by current and anticipated market conditions, required cash flows and investment decisions of the investment committee and the pension plans’ investment funds and managers. Ranges are established to provide flexibility for the asset allocation to vary around the targets without the need for immediate rebalancing.
Non-U.S. Pension Plans
Plan assets in non-U.S. defined benefit pension plans conform to the investment policies and procedures of each plan and to relevant legislation. The pension committee or trustee of each plan regularly, but at least annually, reviews the investment policy and the performance of the investment managers. In certain countries, the trustee is also required to consult with the Company. Asset allocation decisions are made to provide risk adjusted returns that align with the overall investment strategy for each plan. Generally, the investment return objective of each plan is to achieve a total annualized rate of return that exceeds inflation over the long term by an amount based on the target asset allocation mix of that plan. In certain countries, plan assets are invested in funds that are required to hold a majority of assets in bonds, with a smaller proportion in equities. Also, certain plan assets are entirely invested in contracts held with the plan insurer, which determines the strategy. Defined benefit pension plans in certain countries are unfunded.
Risk Management
Plan investments are exposed to certain risks including market, interest rate and operating risk. In order to mitigate significant concentrations of these risks, the assets are invested in a diversified portfolio primarily consisting of fixed income instruments and equities. To minimize asset volatility relative to the liabilities, plan assets allocated to debt securities appropriately match the duration of individual plan liabilities. Equities are diversified between U.S. and non-U.S. index funds and are intended to achieve long term capital appreciation. Plan asset allocation and investment managers’ guidelines are reviewed on a regular basis.
Plan Assets
The Company’s target allocation for fiscal
2014
and weighted-average plan assets allocations as of
August 31, 2013 and 2012
by asset category, for defined benefit pension plans were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014 Target
Allocation
|
|
2013
|
|
2012
|
|
|
U.S.
Plans
|
|
Non-U.S.
Plans
|
|
U.S.
Plans
|
|
Non-U.S.
Plans
|
|
U.S.
Plans
|
|
Non-U.S.
Plans
|
|
Asset Category
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities
|
20
|
%
|
|
46-48%
|
|
23
|
%
|
|
43
|
%
|
|
55
|
%
|
|
40
|
%
|
|
Debt securities
|
80
|
|
|
40-42
|
|
76
|
|
|
43
|
|
|
44
|
|
|
44
|
|
|
Cash and short-term investments
|
—
|
|
|
2-3
|
|
1
|
|
|
2
|
|
|
1
|
|
|
2
|
|
|
Insurance contracts
|
—
|
|
|
5-10
|
|
—
|
|
|
8
|
|
|
—
|
|
|
11
|
|
|
Other
|
—
|
|
|
2-3
|
|
—
|
|
|
4
|
|
|
—
|
|
|
3
|
|
|
Total
|
100
|
%
|
|
n/m
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
_______________
n/m = not meaningful
ACCENTURE PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)
Fair Value Measurements
Fair value is the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability. The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity.
The three-level hierarchy of fair value measurements is based on whether the inputs to those measurements are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. The fair-value hierarchy requires the use of observable market data when available and consists of the following levels:
|
|
|
|
•
|
Level 1—Quoted prices for identical instruments in active markets;
|
|
|
|
|
•
|
Level 2—Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs are observable in active markets; and
|
|
|
|
|
•
|
Level 3—Valuations derived from valuation techniques in which one or more significant inputs are unobservable.
|
The fair values of defined benefit pension plan assets as of
August 31, 2013
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Plans
|
|
|
|
|
|
|
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Equity
|
|
|
|
|
|
|
|
|
U.S. equity securities
|
$
|
—
|
|
|
$
|
216,231
|
|
|
$
|
—
|
|
|
$
|
216,231
|
|
|
Non-U.S. equity securities
|
—
|
|
|
135,899
|
|
|
—
|
|
|
135,899
|
|
|
Fixed Income
|
|
|
|
|
|
|
|
|
U.S. government, state and local debt securities
|
—
|
|
|
649,255
|
|
|
—
|
|
|
649,255
|
|
|
Non-U.S. government debt securities
|
—
|
|
|
16,482
|
|
|
—
|
|
|
16,482
|
|
|
U.S. corporate debt securities
|
—
|
|
|
190,924
|
|
|
—
|
|
|
190,924
|
|
|
Non-U.S. corporate debt securities
|
—
|
|
|
22,944
|
|
|
—
|
|
|
22,944
|
|
|
Mutual fund debt securities
|
314,528
|
|
|
—
|
|
|
—
|
|
|
314,528
|
|
|
Cash and short-term investments
|
—
|
|
|
19,501
|
|
|
—
|
|
|
19,501
|
|
|
Total
|
$
|
314,528
|
|
|
$
|
1,251,236
|
|
|
$
|
—
|
|
|
$
|
1,565,764
|
|
|
|
|
|
|
|
|
|
|
|
Non-U.S. Plans
|
|
|
|
|
|
|
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Equity
|
|
|
|
|
|
|
|
|
U.S. equity securities
|
$
|
—
|
|
|
$
|
63,827
|
|
|
$
|
—
|
|
|
$
|
63,827
|
|
|
Non-U.S. equity securities
|
—
|
|
|
279,257
|
|
|
—
|
|
|
279,257
|
|
|
Mutual fund equity securities
|
—
|
|
|
46,773
|
|
|
—
|
|
|
46,773
|
|
|
Fixed Income
|
|
|
|
|
|
|
|
|
|
Non-U.S. government debt securities
|
12,147
|
|
|
253,375
|
|
|
—
|
|
|
265,522
|
|
|
Non-U.S. corporate debt securities
|
—
|
|
|
60,692
|
|
|
—
|
|
|
60,692
|
|
|
Mutual fund debt securities
|
—
|
|
|
65,954
|
|
|
—
|
|
|
65,954
|
|
|
Cash and short-term investments
|
16,528
|
|
|
7,399
|
|
|
—
|
|
|
23,927
|
|
|
Insurance contracts
|
—
|
|
|
71,103
|
|
|
—
|
|
|
71,103
|
|
|
Other
|
—
|
|
|
36,239
|
|
|
—
|
|
|
36,239
|
|
|
Total
|
$
|
28,675
|
|
|
$
|
884,619
|
|
|
$
|
—
|
|
|
$
|
913,294
|
|
There were no transfers between Levels 1 and 2 during
fiscal 2013
.
ACCENTURE PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)
Expected Contributions
Generally, annual contributions are made at such times and in amounts as required by law and may, from time to time, exceed minimum funding requirements. The Company estimates it will pay approximately
$66,644
in fiscal
2014
related to contributions to its U.S. and non-U.S. defined benefit pension plans and benefit payments related to the unfunded frozen plan for former pre-incorporation partners. The Company has not determined whether it will make additional voluntary contributions for its defined benefit pension plans.
Estimated Future Benefit Payments
Benefit payments for defined benefit pension plans, which reflect expected future service, as appropriate, are expected to be paid as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Plans
|
|
Non-U.S.
Plans
|
|
2014
|
$
|
37,588
|
|
|
$
|
40,247
|
|
|
2015
|
40,070
|
|
|
36,183
|
|
|
2016
|
42,868
|
|
|
42,826
|
|
|
2017
|
46,038
|
|
|
47,967
|
|
|
2018
|
49,401
|
|
|
51,449
|
|
|
2019-2023
|
310,930
|
|
|
303,012
|
|
Defined Contribution Plans
In the United States and certain other countries, the Company maintains and administers defined contribution plans for certain current, retired and resigned employees. Defined contribution plans in countries other than the United States and the United Kingdom are individually immaterial. Total expenses recorded for the United States and the United Kingdom defined contribution plans were
$248,242
,
$255,606
and
$235,439
in fiscal
2013, 2012 and 2011
, respectively.
11. SHARE-BASED COMPENSATION
Share Incentive Plans
On
February 6, 2013
the Company’s shareholders approved an amendment to the Accenture plc 2010 Share Incentive Plan (the “Amended 2010 SIP”), which the Board of Directors of Accenture approved on
December 6, 2012
. The Amended 2010 SIP is substantially the same as the Accenture plc 2010 Share Incentive Plan (the “2010 SIP”), except that it was amended to authorize an additional
24,000,000
shares and expressly prohibit the repricing of options and share appreciation rights. The 2010 SIP was originally approved by the Company's shareholders on February 4, 2010. No new awards were granted under the 2001 Share Incentive Plan (the “2001 SIP”) on or after February 4, 2010, and any share capacity remaining under the 2001 SIP was cancelled and not incorporated in the 2010 SIP. However, outstanding awards granted under the 2001 SIP, before the approval of the 2010 SIP, continue to be satisfied from shares authorized under the 2001 SIP.
The Amended 2010 SIP is administered by the Compensation Committee of the Board of Directors of Accenture and provides for the grant of nonqualified share options, incentive stock options, restricted share units and other share-based awards. A maximum of
74,000,000
Accenture plc Class A ordinary shares are currently authorized for awards under the Amended 2010 SIP. As of
August 31, 2013
, there were
37,517,583
shares available for future grants under the Amended 2010 SIP. Accenture plc Class A ordinary shares covered by awards that terminate, lapse or are cancelled may again be used to satisfy awards under the Amended 2010 SIP. The Company issues new Accenture plc Class A ordinary shares and shares from treasury for shares delivered under the Amended 2010 SIP.
A summary of information with respect to share-based compensation is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
|
|
|
2013
|
|
2012
|
|
2011
|
|
Total share-based compensation expense included in Net income
|
$
|
615,878
|
|
|
$
|
538,086
|
|
|
$
|
450,137
|
|
|
Income tax benefit related to share-based compensation included in Net income
|
186,839
|
|
|
167,109
|
|
|
138,984
|
|
ACCENTURE PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)
Restricted Share Units
Under the Amended 2010 SIP, participants may be, and previously under the 2001 SIP participants were, granted restricted share units, each of which represents an unfunded, unsecured right, which is nontransferable except in the event of death of the participant, to receive an Accenture plc Class A ordinary share on the date specified in the participant’s award agreement. The fair value of the awards is determined on the grant date based on the Company’s stock price. The restricted share units granted under these plans are subject to cliff or graded vesting, generally ranging from
two
to
seven
years. For awards with graded vesting, compensation expense is recognized over the vesting term of each separately vesting portion. Compensation expense is recognized on a straight-line basis for awards with cliff vesting. Restricted share unit activity during fiscal
2013
was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
Number of Restricted
Share Units
|
|
Weighted Average
Grant-Date Fair Value
|
|
Nonvested balance as of August 31, 2012
|
34,454,315
|
|
|
$
|
44.27
|
|
|
Granted (1)
|
12,001,178
|
|
|
67.56
|
|
|
Vested (2)
|
(13,417,667
|
)
|
|
45.75
|
|
|
Forfeited
|
(1,328,782
|
)
|
|
47.65
|
|
|
Nonvested balance as of August 31, 2013
|
31,709,044
|
|
|
$
|
52.32
|
|
_______________
|
|
|
|
(1)
|
The weighted average grant-date fair value for restricted share units granted for fiscal
2013, 2012 and 2011
was
$67.56
,
$53.98
and
$47.87
, respectively.
|
|
|
|
|
(2)
|
The total grant-date fair value of restricted share units vested for fiscal
2013, 2012 and 2011
was
$613,920
,
$488,085
and
$592,482
, respectively.
|
As of
August 31, 2013
, there was
$623,117
of total restricted share unit compensation expense related to nonvested awards not yet recognized, which is expected to be recognized over a weighted average period of
1.4
years. As of
August 31, 2013
, there were
1,520,776
restricted share units vested but not yet delivered as Accenture plc Class A ordinary shares.
Stock Options
Stock options may be granted to members of Accenture Leadership and other employees under the Amended 2010 SIP and were previously granted under the 2001 SIP. Options generally have an exercise price that is at least equal to the fair value of the Accenture plc Class A ordinary shares on the date the option is granted. Options granted under the Amended 2010 SIP and previously under the 2001 SIP are subject to cliff or graded vesting, generally ranging from
two
to
five
years, and generally have a contractual term of
10
years. For awards with graded vesting, compensation expense is recognized over the vesting period of each separately vesting portion. Compensation expense is recognized on a straight-line basis for awards with cliff vesting. The fair value of each options grant is estimated on the date of grant using the Black-Scholes-Merton option pricing model. Stock option activity for fiscal
2013
was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
of Options
|
|
Weighted
Average
Exercise Price
|
|
Weighted Average
Remaining
Contractual Term
(In Years)
|
|
Aggregate
Intrinsic
Value
|
|
Options outstanding as of August 31, 2012
|
5,836,662
|
|
|
$
|
24.49
|
|
|
2.3
|
|
$
|
216,291
|
|
|
Granted
|
—
|
|
|
—
|
|
|
|
|
|
|
Exercised
|
(2,071,005
|
)
|
|
23.43
|
|
|
|
|
|
|
Forfeited
|
(51,248
|
)
|
|
18.06
|
|
|
|
|
|
|
Options outstanding as of August 31, 2013
|
3,714,409
|
|
|
$
|
25.18
|
|
|
1.5
|
|
$
|
175,110
|
|
|
Options exercisable as of August 31, 2013
|
3,660,375
|
|
|
$
|
25.04
|
|
|
1.4
|
|
$
|
173,051
|
|
|
Options exercisable as of August 31, 2012
|
5,715,100
|
|
|
24.32
|
|
|
2.2
|
|
212,750
|
|
|
Options exercisable as of August 31, 2011
|
7,902,845
|
|
|
23.79
|
|
|
3.0
|
|
237,690
|
|
ACCENTURE PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)
Other information pertaining to option activity is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
|
|
|
2013
|
|
2012
|
|
2011
|
|
Weighted average grant-date fair value of stock options granted
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
13.73
|
|
|
Total fair value of stock options vested
|
771
|
|
|
726
|
|
|
3,757
|
|
|
Total intrinsic value of stock options exercised
|
100,487
|
|
|
83,470
|
|
|
450,956
|
|
Cash received from the exercise of stock options was
$48,519
and the income tax benefit realized from the exercise of stock options was
$20,244
for fiscal
2013
. As of
August 31, 2013
, there was
$36
of total stock option compensation expense related to nonvested awards not yet recognized, which is expected to be recognized over a weighted average period of
1
year.
Employee Share Purchase Plan
2010 ESPP
The 2010 Employee Share Purchase Plan (the “2010 ESPP”) is a nonqualified plan that provides eligible employees of the Company with an opportunity to purchase Accenture plc Class A ordinary shares through payroll deductions. Under the 2010 ESPP, eligible employees may purchase Accenture plc Class A ordinary shares through the Employee Share Purchase Plan (the “ESPP”) or the Voluntary Equity Investment Program (the “VEIP”). Under the ESPP, eligible employees may elect to contribute
1%
to
10%
of their compensation during each semi-annual offering period (up to
$7.5
per offering period) to purchase Accenture plc Class A ordinary shares at a discount. Under the VEIP, eligible members of Accenture Leadership may elect to contribute up to
30%
of their total compensation towards the monthly purchase of Accenture plc Class A ordinary shares at fair market value. At the end of the VEIP program year, Accenture Leadership participants, who did not withdraw from the program, will be granted restricted share units under the Amended 2010 SIP equal to
50%
of the number of shares purchased during that year.
A maximum of
45,000,000
Accenture plc Class A ordinary shares may be issued under the 2010 ESPP. As of
August 31, 2013
, the Company had issued
23,429,599
Accenture plc Class A ordinary shares under the 2010 ESPP. The Company issued
6,916,088
,
7,406,727
and
7,382,949
shares to employees in fiscal
2013, 2012 and 2011
, respectively, under the 2010 ESPP.
12. SHAREHOLDERS’ EQUITY
Accenture plc
Ordinary Shares
The Company has
40,000
authorized ordinary shares, par value
€1
per share. Each ordinary share of Accenture plc entitles its holder to receive payments upon a liquidation of Accenture plc; however a holder of an ordinary share is not entitled to vote on matters submitted to a vote of shareholders of Accenture plc or to receive dividends.
Class A Ordinary Shares
An Accenture plc Class A ordinary share entitles its holder to
one
vote per share, and holders of those shares do not have cumulative voting rights. Each Class A ordinary share entitles its holder to a pro rata part of any dividend at the times and in the amounts, if any, which Accenture plc’s Board of Directors from time to time determines to declare, subject to any preferred dividend rights attaching to any preferred shares. Each Class A ordinary share is entitled on a winding-up of Accenture plc to be paid a pro rata part of the value of the assets of Accenture plc remaining after payment of its liabilities, subject to any preferred rights on liquidation attaching to any preferred shares.
Class X Ordinary Shares
An Accenture plc Class X ordinary share entitles its holder to
one
vote per share, and holders of those shares do not have cumulative voting rights. A Class X ordinary share does not entitle its holder to receive dividends, and holders of those shares are not entitled to be paid any amount upon a winding-up of Accenture plc. Most of the Company’s partners who received Accenture SCA Class I common shares or Accenture Canada Holdings Inc. exchangeable shares in connection with the Company’s transition to a corporate structure received a corresponding number of Accenture plc Class X ordinary shares. Accenture plc may redeem, at its option, any Class X ordinary share for a redemption price equal to the par value of the Class X ordinary share. Accenture plc has separately agreed with the original holders of Accenture SCA Class I common shares and Accenture Canada Holdings Inc. exchangeable shares not to redeem any Class X ordinary share of such holder if the redemption would reduce the number of Class X ordinary shares held by that holder to a number that is less than the number of Accenture SCA Class I common shares or Accenture Canada Holdings Inc. exchangeable shares owned by that holder, as the case may be. Accenture plc will redeem Class X
ACCENTURE PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)
ordinary shares upon the redemption or exchange of Accenture SCA Class I common shares and Accenture Canada Holdings Inc. exchangeable shares so that the aggregate number of Class X ordinary shares outstanding at any time does not exceed the aggregate number of Accenture SCA Class I common shares and Accenture Canada Holdings Inc. exchangeable shares outstanding. Class X ordinary shares are not transferable without the consent of Accenture plc.
Equity of Subsidiaries Redeemable or Exchangeable for Accenture plc Class A Ordinary Shares
Accenture SCA Class I Common Shares
Members of Accenture Leadership in certain countries, including the United States, received Accenture SCA Class I common shares in connection with the Company’s transition to a corporate structure. Only the Company and its current and former senior executives and their permitted transferees hold Accenture SCA Class I common shares. Each Accenture SCA Class I common share entitles its holder to
one
vote on all matters submitted to a vote of shareholders of Accenture SCA and entitles its holders to dividends and liquidation payments.
Accenture SCA is obligated, at the option of the holder, to redeem any outstanding Accenture SCA Class I common share at a redemption price per share generally equal to its current market value as determined in accordance with Accenture SCA’s articles of association. Under Accenture SCA’s articles of association, the market value of a Class I common share will be deemed to be equal to (i) the average of the high and low sales prices of an Accenture plc Class A ordinary share as reported on the New York Stock Exchange (or on such other designated market on which the Class A ordinary shares trade), net of customary brokerage and similar transaction costs, or (ii) if Accenture plc sells its Class A ordinary shares on the date that the redemption price is determined (other than in a transaction with any employee or an affiliate or pursuant to a preexisting obligation), the weighted average sales price of an Accenture plc Class A ordinary share on the New York Stock Exchange (or on such other market on which the Class A ordinary shares primarily trade), net of customary brokerage and similar transaction costs. Accenture SCA may, at its option, pay this redemption price with cash or by delivering Accenture plc Class A ordinary shares on a
one
-for-one basis. Each holder of Class I common shares is entitled to a pro rata part of any dividend and to the value of any remaining assets of Accenture SCA after payment of its liabilities upon dissolution.
Accenture Canada Holdings Inc. Exchangeable Shares
Partners resident in Canada and New Zealand received Accenture Canada Holdings Inc. exchangeable shares in connection with the Company’s transition to a corporate structure. Holders of Accenture Canada Holdings Inc. exchangeable shares may exchange their shares for Accenture plc Class A ordinary shares at any time on a one-for-one basis. The Company may, at its option, satisfy this exchange with cash at a price per share generally equal to the market price of an Accenture plc Class A ordinary share at the time of the exchange. Each exchangeable share of Accenture Canada Holdings Inc. entitles its holder to receive distributions equal to any distributions to which an Accenture plc Class A ordinary share entitles its holder.
ACCENTURE PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)
13. MATERIAL TRANSACTIONS AFFECTING SHAREHOLDERS’ EQUITY
Share Purchases and Redemptions
The Board of Directors of Accenture plc has authorized funding for the Company’s publicly announced open-market share purchase program for acquiring Accenture plc Class A ordinary shares and for purchases and redemptions of Accenture plc Class A ordinary shares, Accenture SCA Class I common shares and Accenture Canada Holdings Inc. exchangeable shares held by the Company’s current and former members of Accenture Leadership and their permitted transferees. As of
August 31, 2013
, the Company’s aggregate available authorization was
$1,964,096
for its publicly announced open-market share purchase and these other share purchase programs.
The Company’s share purchase activity during fiscal
2013
was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accenture plc Class A
Ordinary Shares
|
|
Accenture SCA Class I
Common Shares and Accenture Canada
Holdings Inc. Exchangeable Shares
|
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Open-market share purchases (1)
|
26,547,155
|
|
|
$
|
1,996,622
|
|
|
—
|
|
|
$
|
—
|
|
|
Other share purchase programs
|
—
|
|
|
—
|
|
|
3,062,148
|
|
|
218,123
|
|
|
Other purchases (2)
|
4,750,122
|
|
|
329,607
|
|
|
—
|
|
|
—
|
|
|
Total
|
31,297,277
|
|
|
$
|
2,326,229
|
|
|
3,062,148
|
|
|
$
|
218,123
|
|
_______________
|
|
|
|
(1)
|
The Company conducts a publicly announced, open-market share purchase program for Accenture plc Class A ordinary shares. These shares are held as treasury shares by Accenture plc and may be utilized to provide for select employee benefits, such as equity awards to the Company’s employees.
|
|
|
|
|
(2)
|
During fiscal
2013
, as authorized under the Company’s various employee equity share plans, the Company acquired Accenture plc Class A ordinary shares primarily via share withholding for payroll tax obligations due from employees and former employees in connection with the delivery of Accenture plc Class A ordinary shares under those plans. These purchases of shares in connection with employee share plans do not affect the Company’s aggregate available authorization for the Company’s publicly announced open-market share purchase and the other share purchase programs.
|
Other Share Redemptions
During fiscal
2013
, the Company issued
11,019,187
Accenture plc Class A ordinary shares upon redemptions of an equivalent number of Accenture SCA Class I common shares pursuant to its registration statement on Form S-3 (the “registration statement”). The registration statement allows the Company, at its option, to issue freely tradable Accenture plc Class A ordinary shares in lieu of cash upon redemptions of Accenture SCA Class I common shares held by current and former members of Accenture Leadership and their permitted transferees.
Dividends
The Company’s dividend activity during fiscal
2013
was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividend Per
Share
|
|
Accenture plc Class A
Ordinary Shares
|
|
Accenture SCA Class I Common
Shares and Accenture Canada
Holdings Inc. Exchangeable
Shares
|
|
Total Cash
Outlay
|
|
Dividend Payment Date
|
Record Date
|
|
Cash Outlay
|
|
Record Date
|
|
Cash Outlay
|
|
|
November 15, 2012
|
$
|
0.81
|
|
|
October 12, 2012
|
|
$
|
516,170
|
|
|
October 9, 2012
|
|
$
|
43,965
|
|
|
$
|
560,135
|
|
|
May 15, 2013
|
0.81
|
|
|
April 12, 2013
|
|
526,747
|
|
|
April 9, 2013
|
|
34,856
|
|
|
561,603
|
|
|
Total Dividends
|
|
|
|
|
$
|
1,042,917
|
|
|
|
|
$
|
78,821
|
|
|
$
|
1,121,738
|
|
The payment of the cash dividends also resulted in the issuance of additional restricted share units to holders of restricted share units. Diluted weighted average Accenture plc Class A ordinary share amounts have been restated for all periods presented to reflect this issuance.
ACCENTURE PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)
Subsequent Events
On
September 25, 2013
, the Board of Directors of Accenture plc declared a semi-annual cash dividend of
$0.93
per share on its Class A ordinary shares for shareholders of record at the close of business on
October 11, 2013
. Accenture plc will cause Accenture SCA to declare a semi-annual cash dividend of
$0.93
per share on its Class I common shares for shareholders of record at the close of business on
October 8, 2013
. Both dividends are payable on
November 15, 2013
. The payment of the cash dividends will result in the issuance of an immaterial number of additional restricted share units to holders of restricted share units.
On September 25, 2013, the Board of Directors of Accenture plc approved
$5,000,000
in additional share repurchase authority bringing the Company’s total outstanding authority to
$6,964,096
.
14. LEASE COMMITMENTS
The Company has operating leases, principally for office space, with various renewal options. Substantially all operating leases are non-cancelable or cancelable only by the payment of penalties. Rental expense in agreements with rent holidays and scheduled rent increases is recorded on a straight-line basis over the lease term. Rental expense, including operating costs and taxes and sublease income from third parties, during fiscal
2013, 2012 and 2011
was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
|
|
|
2013
|
|
2012
|
|
2011
|
|
Rental expense
|
$
|
529,342
|
|
|
$
|
541,182
|
|
|
$
|
493,734
|
|
|
Sublease income from third parties
|
(31,663
|
)
|
|
(33,171
|
)
|
|
(32,503
|
)
|
Future minimum rental commitments under non-cancelable operating leases as of
August 31, 2013
, were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Lease
Payments
|
|
Operating
Sublease
Income
|
|
2014
|
$
|
454,655
|
|
|
$
|
(28,280
|
)
|
|
2015
|
364,701
|
|
|
(23,821
|
)
|
|
2016
|
283,849
|
|
|
(19,794
|
)
|
|
2017
|
219,043
|
|
|
(15,680
|
)
|
|
2018
|
163,549
|
|
|
(13,500
|
)
|
|
Thereafter
|
674,603
|
|
|
(20,351
|
)
|
|
|
$
|
2,160,400
|
|
|
$
|
(121,426
|
)
|
ACCENTURE PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)
15. COMMITMENTS AND CONTINGENCIES
Commitments
The Company has the right to purchase or may also be required to purchase substantially all of the remaining outstanding shares of its Avanade Inc. subsidiary (“Avanade”) not owned by the Company at fair value if certain events occur. Certain holders of Avanade common stock and options to purchase the stock have put rights that, under certain circumstances and conditions, would require Avanade to redeem shares of its stock at fair value. As of
August 31, 2013 and 2012
, the Company has reflected the fair value of
$94,310
and
$95,957
, respectively, related to Avanade’s redeemable common stock and the intrinsic value of the options on redeemable common stock in Other accrued liabilities on the Consolidated Balance Sheets.
Indemnifications and Guarantees
In the normal course of business and in conjunction with certain client engagements, the Company has entered into contractual arrangements through which it may be obligated to indemnify clients with respect to certain matters. These arrangements with clients can include provisions whereby the Company has joint and several liability in relation to the performance of certain contractual obligations along with third parties also providing services and products for a specific project. In addition, the Company's consulting arrangements may include warranty provisions that the Company's solutions will substantially operate in accordance with the applicable system requirements. Indemnification provisions are also included in arrangements under which the Company agrees to hold the indemnified party harmless with respect to third-party claims related to such matters as title to assets sold or licensed or certain intellectual property rights.
Typically, the Company has contractual recourse against third parties for certain payments made by the Company in connection with arrangements where third-party nonperformance has given rise to the client’s claim. Payments by the Company under any of the arrangements described above are generally conditioned on the client making a claim, which may be disputed by the Company typically under dispute resolution procedures specified in the particular arrangement. The limitations of liability under these arrangements may be expressly limited or may not be expressly specified in terms of time and/or amount.
As of
August 31, 2013 and 2012
, the Company’s aggregate potential liability to its clients for expressly limited guarantees involving the performance of third parties was approximately
$748,000
and
$596,000
, respectively, of which all but approximately
$15,000
and
$21,000
, respectively, may be recovered from the other third parties if the Company is obligated to make payments to the indemnified parties that are the consequence of a performance default by the other third parties. For arrangements with unspecified limitations, the Company cannot reasonably estimate the aggregate maximum potential liability, as it is inherently difficult to predict the maximum potential amount of such payments, due to the conditional nature and unique facts of each particular arrangement.
To date, the Company has not been required to make any significant payment under any of the arrangements described above. The Company has assessed the current status of performance/payment risk related to arrangements with limited guarantees, warranty obligations, unspecified limitations and/or indemnification provisions and believes that any potential payments would be immaterial to the Consolidated Financial Statements, as a whole.
Legal Contingencies
As of
August 31, 2013
, the Company or its present personnel had been named as a defendant in various litigation matters. The Company and/or its personnel also from time to time are involved in investigations by various regulatory or legal authorities concerning matters arising in the course of its business around the world. Based on the present status of these matters, management believes the range of reasonably possible losses in addition to amounts accrued, net of insurance recoveries, will not have a material effect on the Company’s results of operations or financial condition.
ACCENTURE PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)
16. SEGMENT REPORTING
Operating segments are components of an enterprise where separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance.
The Company’s chief operating decision maker is its Chief Executive Officer. The Company’s operating segments are managed separately because each operating segment represents a strategic business unit providing management consulting, technology and outsourcing services to clients in different industries.
The Company’s reportable operating segments are the five operating groups, which are Communications, Media & Technology, Financial Services, Health & Public Service, Products and Resources. Information regarding the Company’s reportable operating segments is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013
|
Communications, Media &
Technology
|
|
Financial
Services
|
|
Health &
Public
Service
|
|
Products
|
|
Resources
|
|
Other
|
|
Total
|
|
Net revenues
|
$
|
5,686,370
|
|
|
$
|
6,165,663
|
|
|
$
|
4,739,483
|
|
|
$
|
6,806,615
|
|
|
$
|
5,143,073
|
|
|
$
|
21,606
|
|
|
$
|
28,562,810
|
|
|
Depreciation (1)
|
65,857
|
|
|
64,844
|
|
|
62,048
|
|
|
81,888
|
|
|
50,360
|
|
|
—
|
|
|
324,997
|
|
|
Operating income
|
785,543
|
|
|
1,002,785
|
|
|
594,417
|
|
|
985,375
|
|
|
970,560
|
|
|
—
|
|
|
4,338,680
|
|
|
Assets as of August 31 (2)
|
712,074
|
|
|
176,601
|
|
|
552,888
|
|
|
667,415
|
|
|
617,743
|
|
|
(54,965
|
)
|
|
2,671,756
|
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues
|
$
|
5,906,724
|
|
|
$
|
5,842,776
|
|
|
$
|
4,255,631
|
|
|
$
|
6,562,974
|
|
|
$
|
5,275,001
|
|
|
$
|
19,224
|
|
|
$
|
27,862,330
|
|
|
Depreciation (1)
|
64,202
|
|
|
63,251
|
|
|
61,994
|
|
|
72,532
|
|
|
56,013
|
|
|
—
|
|
|
317,992
|
|
|
Operating income
|
845,411
|
|
|
809,633
|
|
|
376,125
|
|
|
863,860
|
|
|
976,519
|
|
|
—
|
|
|
3,871,548
|
|
|
Assets as of August 31 (2)
|
582,652
|
|
|
215,741
|
|
|
477,536
|
|
|
533,522
|
|
|
484,095
|
|
|
(91,557
|
)
|
|
2,201,989
|
|
|
2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues
|
$
|
5,434,024
|
|
|
$
|
5,380,674
|
|
|
$
|
3,861,146
|
|
|
$
|
5,931,333
|
|
|
$
|
4,882,248
|
|
|
$
|
17,611
|
|
|
$
|
25,507,036
|
|
|
Depreciation (1)
|
63,524
|
|
|
56,256
|
|
|
56,207
|
|
|
68,136
|
|
|
53,426
|
|
|
—
|
|
|
297,549
|
|
|
Operating income
|
727,761
|
|
|
898,287
|
|
|
318,430
|
|
|
679,716
|
|
|
846,263
|
|
|
—
|
|
|
3,470,457
|
|
|
Assets as of August 31 (2)
|
556,190
|
|
|
189,611
|
|
|
576,505
|
|
|
579,616
|
|
|
642,250
|
|
|
(86,104
|
)
|
|
2,458,068
|
|
_______________
|
|
|
|
(1)
|
Amounts include depreciation on property and equipment controlled by each operating segment, as well as an allocation for depreciation on property and equipment they do not directly control.
|
|
|
|
|
(2)
|
The Company does not allocate total assets by operating segment. Operating segment assets directly attributed to an operating segment and provided to the chief operating decision maker include Receivables from clients, current and non-current Unbilled services, Deferred contract costs and current and non-current Deferred revenues.
|
The accounting policies of the operating segments are the same as those described in Note 1 (Summary of Significant Accounting Policies) to these Consolidated Financial Statements.
ACCENTURE PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)
Revenues are attributed to geographic regions and countries based on where client services are supervised. Information regarding geographic regions and countries is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
|
Americas
|
|
EMEA(1)
|
|
Asia Pacific
|
|
Total
|
|
2013
|
|
|
|
|
|
|
|
|
Net revenues
|
$
|
13,518,623
|
|
|
$
|
11,047,417
|
|
|
$
|
3,996,770
|
|
|
$
|
28,562,810
|
|
|
Reimbursements
|
972,217
|
|
|
576,178
|
|
|
283,080
|
|
|
1,831,475
|
|
|
Revenues
|
14,490,840
|
|
|
11,623,595
|
|
|
4,279,850
|
|
|
30,394,285
|
|
|
Property and equipment, net as of August 31
|
317,759
|
|
|
199,593
|
|
|
262,323
|
|
|
779,675
|
|
|
2012
|
|
|
|
|
|
|
|
|
Net revenues
|
$
|
12,522,673
|
|
|
$
|
11,296,207
|
|
|
$
|
4,043,450
|
|
|
$
|
27,862,330
|
|
|
Reimbursements
|
897,483
|
|
|
697,622
|
|
|
320,550
|
|
|
1,915,655
|
|
|
Revenues
|
13,420,156
|
|
|
11,993,829
|
|
|
4,364,000
|
|
|
29,777,985
|
|
|
Property and equipment, net as of August 31
|
256,697
|
|
|
206,356
|
|
|
316,441
|
|
|
779,494
|
|
|
2011
|
|
|
|
|
|
|
|
|
Net revenues
|
$
|
11,270,668
|
|
|
$
|
10,853,684
|
|
|
$
|
3,382,684
|
|
|
$
|
25,507,036
|
|
|
Reimbursements
|
851,081
|
|
|
699,631
|
|
|
295,166
|
|
|
1,845,878
|
|
|
Revenues
|
12,121,749
|
|
|
11,553,315
|
|
|
3,677,850
|
|
|
27,352,914
|
|
|
Property and equipment, net as of August 31
|
235,900
|
|
|
230,805
|
|
|
318,526
|
|
|
785,231
|
|
_______________
|
|
|
|
(1)
|
EMEA includes Europe, Middle East and Africa.
|
The Company conducts business in the following countries that individually comprised 10% or more of consolidated Net revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
|
|
|
2013
|
|
2012
|
|
2011
|
|
United States
|
39
|
%
|
|
36
|
%
|
|
35
|
%
|
|
United Kingdom
|
9
|
|
|
9
|
|
|
10
|
|
The Company conducts business in the following countries that hold 10% or more of its total consolidated Property and equipment, net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
August 31,
|
|
|
2013
|
|
2012
|
|
2011
|
|
United States
|
31
|
%
|
|
26
|
%
|
|
23
|
%
|
|
India
|
17
|
|
|
21
|
|
|
23
|
|
|
Philippines
|
9
|
|
|
10
|
|
|
9
|
|
Net revenues by type of work were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
|
|
|
2013
|
|
2012
|
|
2011
|
|
Consulting
|
$
|
15,383,485
|
|
|
$
|
15,562,321
|
|
|
$
|
14,924,187
|
|
|
Outsourcing
|
13,179,325
|
|
|
12,300,009
|
|
|
10,582,849
|
|
|
Net revenues
|
28,562,810
|
|
|
27,862,330
|
|
|
25,507,036
|
|
|
Reimbursements
|
1,831,475
|
|
|
1,915,655
|
|
|
1,845,878
|
|
|
Revenues
|
$
|
30,394,285
|
|
|
$
|
29,777,985
|
|
|
$
|
27,352,914
|
|
ACCENTURE PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)
17. QUARTERLY DATA (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2013
|
First
Quarter
|
|
Second
Quarter
|
|
Third
Quarter
|
|
Fourth
Quarter
|
|
Annual
|
|
Net revenues
|
$
|
7,219,961
|
|
|
$
|
7,058,042
|
|
|
$
|
7,198,140
|
|
|
$
|
7,086,667
|
|
|
$
|
28,562,810
|
|
|
Reimbursements
|
448,075
|
|
|
435,278
|
|
|
509,795
|
|
|
438,327
|
|
|
1,831,475
|
|
|
Revenues
|
7,668,036
|
|
|
7,493,320
|
|
|
7,707,935
|
|
|
7,524,994
|
|
|
30,394,285
|
|
|
Cost of services before reimbursable expenses
|
4,853,768
|
|
|
4,827,679
|
|
|
4,760,121
|
|
|
4,737,067
|
|
|
19,178,635
|
|
|
Reimbursable expenses
|
448,075
|
|
|
435,278
|
|
|
509,795
|
|
|
438,327
|
|
|
1,831,475
|
|
|
Cost of services
|
5,301,843
|
|
|
5,262,957
|
|
|
5,269,916
|
|
|
5,175,394
|
|
|
21,010,110
|
|
|
Operating income
|
1,048,674
|
|
|
1,164,532
|
|
|
1,141,971
|
|
|
983,503
|
|
|
4,338,680
|
|
|
Net income
|
766,031
|
|
|
1,187,098
|
|
|
874,063
|
|
|
727,327
|
|
|
3,554,519
|
|
|
Net income attributable to Accenture plc
|
698,817
|
|
|
1,101,802
|
|
|
810,258
|
|
|
671,001
|
|
|
3,281,878
|
|
|
Weighted average Class A ordinary shares:
|
|
|
|
|
|
|
|
|
|
|
—Basic
|
639,659,238
|
|
|
649,520,337
|
|
|
650,625,931
|
|
|
642,359,475
|
|
|
645,536,995
|
|
|
—Diluted (1)
|
716,630,385
|
|
|
715,135,968
|
|
|
714,984,161
|
|
|
706,256,084
|
|
|
712,763,616
|
|
|
Earnings per Class A ordinary share:
|
|
|
|
|
|
|
|
|
|
|
—Basic
|
$
|
1.09
|
|
|
$
|
1.70
|
|
|
$
|
1.25
|
|
|
$
|
1.04
|
|
|
$
|
5.08
|
|
|
—Diluted (1)
|
1.06
|
|
|
1.65
|
|
|
1.21
|
|
|
1.01
|
|
|
4.93
|
|
|
Ordinary share price per share:
|
|
|
|
|
|
|
|
|
|
|
—High
|
$
|
71.79
|
|
|
$
|
75.97
|
|
|
$
|
84.22
|
|
|
$
|
83.30
|
|
|
$
|
84.22
|
|
|
—Low
|
60.69
|
|
|
65.20
|
|
|
72.42
|
|
|
69.00
|
|
|
60.69
|
|
_______________
|
|
|
|
(1)
|
The first and second quarters of fiscal
2013
diluted weighted average Accenture plc Class A ordinary shares and earnings per share amounts have been restated to reflect the impact of the issuance of additional restricted share units to holders of restricted share units in connection with the fiscal 2013 payment of cash dividends. This did not result in a change to previously reported Diluted earnings per share.
|
ACCENTURE PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2012
|
First
Quarter
|
|
Second
Quarter
|
|
Third
Quarter
|
|
Fourth
Quarter
|
|
Annual
|
|
Net revenues
|
$
|
7,074,497
|
|
|
$
|
6,797,250
|
|
|
$
|
7,154,690
|
|
|
$
|
6,835,893
|
|
|
$
|
27,862,330
|
|
|
Reimbursements
|
514,611
|
|
|
462,578
|
|
|
486,100
|
|
|
452,366
|
|
|
1,915,655
|
|
|
Revenues
|
7,589,108
|
|
|
7,259,828
|
|
|
7,640,790
|
|
|
7,288,259
|
|
|
29,777,985
|
|
|
Cost of services before reimbursable expenses
|
4,822,957
|
|
|
4,680,884
|
|
|
4,783,785
|
|
|
4,587,003
|
|
|
18,874,629
|
|
|
Reimbursable expenses
|
514,611
|
|
|
462,578
|
|
|
486,100
|
|
|
452,366
|
|
|
1,915,655
|
|
|
Cost of services
|
5,337,568
|
|
|
5,143,462
|
|
|
5,269,885
|
|
|
5,039,369
|
|
|
20,790,284
|
|
|
Operating income
|
981,138
|
|
|
889,299
|
|
|
1,060,761
|
|
|
940,350
|
|
|
3,871,548
|
|
|
Net income
|
711,757
|
|
|
714,190
|
|
|
762,831
|
|
|
636,155
|
|
|
2,824,933
|
|
|
Net income attributable to Accenture plc
|
642,086
|
|
|
643,923
|
|
|
689,219
|
|
|
578,282
|
|
|
2,553,510
|
|
|
Weighted average Class A ordinary shares:
|
|
|
|
|
|
|
|
|
|
|
—Basic
|
644,285,298
|
|
|
646,452,990
|
|
|
645,761,617
|
|
|
636,064,228
|
|
|
643,132,601
|
|
|
—Diluted (1)
|
730,916,739
|
|
|
730,034,891
|
|
|
729,528,085
|
|
|
718,489,744
|
|
|
727,011,059
|
|
|
Earnings per Class A ordinary share:
|
|
|
|
|
|
|
|
|
|
|
—Basic
|
$
|
1.00
|
|
|
$
|
1.00
|
|
|
$
|
1.07
|
|
|
$
|
0.90
|
|
|
$
|
3.97
|
|
|
—Diluted (1)
|
0.96
|
|
|
0.97
|
|
|
1.03
|
|
|
0.88
|
|
|
3.84
|
|
|
Ordinary share price per share:
|
|
|
|
|
|
|
|
|
|
|
—High
|
$
|
61.90
|
|
|
$
|
60.20
|
|
|
$
|
65.89
|
|
|
$
|
61.98
|
|
|
$
|
65.89
|
|
|
—Low
|
48.55
|
|
|
51.08
|
|
|
56.21
|
|
|
54.94
|
|
|
48.55
|
|
_______________
|
|
|
|
(1)
|
Fiscal 2012 diluted weighted average Accenture plc Class A ordinary shares and earnings per share amounts have been restated to reflect the impact of the issuance of additional restricted share units to holders of restricted share units in connection with the fiscal 2013 payment of cash dividends. This did not result in a change to previously reported Diluted earnings per share.
|
