8.	INCOME TAXES

The gross amount of unrecognized tax benefits was $1.8 million at July 31, 2015, including interest and penalties. During the first quarter of fiscal 2015 the Company adopted ASU 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists ("ASU 2013-11"), which requires an unrecognized tax benefit to be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, similar tax loss, or a tax credit carryforward. As a result of adoption of ASU 2013-11, the Company reduced its unrecognized tax benefits by $1.3 million with an accompanying reduction of deferred tax assets by $1.3 million. The entire amount of unrecognized tax benefits, if recognized, will impact the Company’s effective tax rate. This liability is classified as long-term unless the liability is expected to conclude within twelve months of the reporting date. In the next twelve months, due to potential settlements with domestic tax authorities related to tax credits and lapse in statute of limitations, an estimated $0.1 million of unrecognized tax benefits may be recognized.

The Company’s policy is to recognize interest and penalties, if any, related to unrecognized tax benefits as a component of income tax expense. As of July 31, 2015, the Company has accrued approximately $0.2 million of interest and penalty expense relating to unrecognized tax benefits.

The Company files U.S. federal, state, and foreign tax returns that are subject to audit by various tax authorities. The Company is currently under audit in:

India for fiscal years ended March 31, 1998, 1999, 2009, 2010, 2012 and 2013

Italy for the fiscal years ended 2011, 2012, 2013 and 2014

During the first six months of fiscal 2016, QAD has settled the following audits with immaterial or no adjustments made as a result of the settlements:

India for the fiscal year ended March 31, 2008

California for the fiscal year ended 2004

Minnesota for the fiscal years ended 2010, 2011, 2012 and 2013