Commitments and Contingencies

9 Months Ended

Apr. 30, 2012

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies Disclosure [Text Block]

Note 9—Commitments and Contingencies

Purchase Commitments

The Company had purchase commitments of $2.6 million as of April 30, 2012.

Tax Audits

The Company is subject to audits in various jurisdictions for various taxes, including utility excise tax, sales and use tax, communications services tax, gross receipts tax and property tax. As of April 30, 2012, the Company had accrued an aggregate of $2.9 million related to these audits. The following is a summary of the more significant ongoing audits:

• In December 2010, the New Jersey Division of Taxation filed a Certificate of Debt related to a sales and use tax audit of IDT Domestic Telecom, Inc. that resulted in the entry of a judgment in the amount of $2.1 million, which allows the Division of Taxation to place a lien or levy on the Company’s assets.

• In January 2011 and May 2011, the Company received Notices of Proposed Tax Adjustments from the New York City Finance Department related to a utility excise tax audit of IDT Telecom for the period from January 2004 through December 2009 that included aggregate assessments of tax, interest and penalties of $2.5 million. In February 2012, the Company agreed to resolve these matters and paid $0.9 million. In addition, in April 2012, the Company paid a nominal amount to settle an audit assessment for the period from January 2010 through December 2011.

• In May 2011, the Company received a Notice of Proposed Assessment from the Florida Department of Revenue related to communications services tax that included an aggregate assessment of tax and interest of $2.7 million. The Company’s reasonably possible liability for this assessment in excess of the amount accrued is a range from nil to approximately $2.4 million.

At April 30, 2012, the Company has accrued for the estimated loss from these audits for which it is probable that a liability has been incurred, however amounts asserted by taxing authorities or the amount ultimately assessed against the Company could be greater than the accrued amounts. Accordingly, additional provisions may be recorded in the future as revised estimates are made or underlying matters are settled or resolved. Imposition of assessments as a result of audits related to these other taxes could have an adverse affect on the Company’s results of operations, cash flows and financial condition.

In February 2011, the Company liquidated its Puerto Rico legal entity. The final Puerto Rico tax return was filed in April 2011 claiming a refund of $4.8 million. The Company expects to receive the refund shortly after the completion of the audits of the liquidated entity’s Puerto Rico tax returns for fiscal years 2009 and 2010.

Letters of Credit

As of April 30, 2012, the Company had letters of credit and surety bonds outstanding totaling $17.0 million. These letters of credit and surety bonds were primarily collateral to secure mortgage repayments and the $10.1 million Alexsam judgment (see Note 8), respectively. The letters of credit outstanding as of April 30, 2012 expire as follows: $2.0 million in the twelve month period ending April 30, 2013, $0.1 million in May and June 2013 and $2.7 million in August 2015.

Other

As of April 30, 2012 and July 31, 2011, “Trade accounts payable” in the Company’s consolidated balance sheets included refundable customer deposits of $6.9 million and $1.5 million, respectively, related to the Company’s Boss Revolution Pinless product, and European prepaid payment services businesses. The Boss Revolution Pinless product is a pay-as-you-go, card-less international calling service sold through the Company’s Boss Revolution payment platform.

The Company’s restricted cash and cash equivalents include collateral for letters of credit and restricted balances pursuant to banking regulatory and other requirements related to IDT Financial Services, the Company’s Gibraltar-based bank. Restricted cash and cash equivalents consist of the following:

	April 30, 2012		July 31, 2011
	(in thousands)
Restricted cash and cash equivalents-short-term
Letters of credit related	$	1,449	$	2,880
IDT Financial Services customer deposits		5,172		1,248
Total short-term		6,621		4,128
Restricted cash and cash equivalents-long-term
Letters of credit related		2,762		3,538
IDT Financial Services related		7,704		8,703
Total long-term		10,466		12,241
Total restricted cash and cash equivalents	$	17,087	$	16,369