XML 54 R13.htm IDEA: XBRL DOCUMENT v2.4.0.6
Income Taxes
9 Months Ended
Mar. 31, 2013
Income Tax Expense (Benefit) [Abstract]  
Income Taxes
INCOME TAXES
We determine our global provision for corporate income taxes in accordance with FASB ASC 740, “Income Taxes.” We recognize our deferred tax assets and liabilities based upon the effect of temporary differences between the book and tax basis of recorded assets and liabilities. Further, we follow a methodology in which we identify, recognize, measure and disclose in our financial statements the effects of any uncertain tax return reporting positions that we have taken or expect to take. The methodology is based on the presumption that all relevant tax authorities possess full knowledge of those tax reporting positions, as well as all of the pertinent facts and circumstances. Our quarterly effective income tax rate contains management's estimates of our annual projected profitability in the various taxing jurisdictions in which we operate. Since the statutory tax rates differ in the jurisdictions in which we operate, changes in the distribution of profits and losses may have a significant impact on our effective income tax rate.
As of March 31, 2013, we had $46.6 million of gross unrecognized tax benefits, of which $14.7 million would impact the effective tax rate if recognized. As of June 30, 2012, we had $53.8 million of gross unrecognized tax benefits, of which $10.0 million would impact the effective tax rate if recognized. The reserves for unrecognized tax positions primarily relate to exposures for income tax matters such as changes in the jurisdiction in which income is taxable. The $7.2 million net decrease in gross unrecognized tax benefits is primarily attributable to the expiration of statutes of limitation in Europe, Africa and the United States, and a settlement with tax authorities in Asia.
As of March 31, 2013, we anticipate that the liability for unrecognized tax benefits for uncertain tax positions could decrease by approximately $1.3 million over the next twelve months primarily as a result of the expiration of statutes of limitation and settlements with tax authorities.
We recognize interest and penalties related to income tax matters in income tax expense. As of March 31, 2013, $5.0 million of gross interest and penalties were included in our liability for unrecognized tax benefits. As of June 30, 2012, $6.1 million of gross interest and penalties were included in our liability for unrecognized tax benefits. Income tax expense recorded for the nine months ended March 31, 2013 and 2012 includes a benefit of approximately $1.0 million and $1.6 million, respectively, for interest and penalties.
We are subject to U.S. federal income tax, as well as income tax in multiple state, local and foreign jurisdictions. All material U.S. federal, state, and local income tax matters through 2005 have been concluded with the respective taxing authority. Substantially all material foreign income tax matters have been concluded for all years through 2000 with the respective taxing authority.
For the three and nine months ended March 31, 2013, we had effective income tax rates of 17.6% and 30.2%, respectively. The tax rates for the three and nine months ended March 31, 2013 were lower than the statutory rate of 35% primarily as a result of the reinstatement of the "look-through" provision of the U.S. tax code effective January 2, 2013. The reinstatement of the “look-through” provision, as well as the favorable effect of statutory rates applicable to income earned outside the United States, reduced the projected annual effective tax rate to a level below the expected statutory rate. These reductions were partially offset in the tax rate for the nine months ended March 31, 2013 by the limitation of certain compensation-related deductions. The tax rate for the three months ended March 31, 2013 was further reduced by a release of accrued interest and penalties on income tax exposures as a result of the expiration of statutes of limitation in Europe and Africa and a reduction in U.S. state deferred tax valuation allowances.
For the three and nine months ended March 31, 2012, we had effective income tax rates of (4.2)% and 17.2%, respectively. The tax rates for these periods were lower than the statutory rate primarily as a result of a benefit recorded in the first quarter of fiscal year 2012 related to a reduction in the statutory tax rate in the United Kingdom, a benefit recorded in the third quarter of fiscal year 2012 resulting from the release of income tax reserves and associated reserves for interest and penalties due to settlements with tax authorities and the expiration of statutes of limitation in Europe, as well as the effect of a lower projected annual effective tax rate for Fiscal Year 2012 on both the three and nine month periods. The projected annual effective tax rate is also lower than the expected statutory rate because of the favorable effect of statutory rates applicable to income earned outside the United States on the projected annual effective tax rate.