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Income Taxes
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9 Months Ended |
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May 31, 2011
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| Income Taxes | |
| Income Taxes |
Note 12. Income Taxes In determining the quarterly provision for income taxes, the Company uses an estimated annual effective tax rate, which is based on various factors, including taxable earnings derived in foreign jurisdictions, statutory tax rates, tax planning opportunities in the various jurisdictions in which it operates, permanent items, state tax rates and the ability to utilize various tax credits and net operating loss carryforwards. Subsequent recognition, derecognition and measurement of a tax position taken in a previous period are separately recognized in the quarter in which they occur and can be a source of variability in effective tax rates from quarter to quarter. The effective income tax rate was 23.0% and 22.0% for the three and nine months ended May 31, 2011, respectively, and 11.6% and 17.2% for the comparable prior year periods. The lower effective income tax rates for 2011, relative to the U.S. federal statutory tax rate, reflect higher foreign tax credit utilization and increased taxable earnings in foreign jurisdictions with lower statutory tax rates. The fiscal 2010 effective tax rates were impacted by $3.1 million of favorable tax adjustments including changes in valuation allowances and the lapsing of various tax statutes of limitations. The gross liability for unrecognized tax benefits, excluding interest and penalties, increased from $28.2 million at August 31, 2010 to $28.4 million at May 31, 2011. Substantially all of these unrecognized tax benefits, if recognized, would reduce the effective income tax rate. In addition, as of May 31, 2011 and August 31, 2010, the Company had liabilities totaling $5.3 million and $4.2 million, respectively, for accrued interest and penalties related to its unrecognized tax benefits. |