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Description of Business and Summary of Significant Accounting Policies | 6 Months Ended
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Jan. 31, 2024
Accounting Policies [Abstract] |
Description of Business and Summary of Significant Accounting Policies |
1. Description of Business and Summary of Significant Accounting Policies
Description of Business
Intuit helps consumers and small businesses prosper by delivering financial management, compliance, and marketing products and services. We also provide specialized tax products to accounting professionals, who are key partners that help us serve small business customers. Our global financial technology platform, which includes TurboTax, Credit Karma, QuickBooks, and Mailchimp, is designed to help consumers and small businesses manage their finances, get and retain customers, save money, pay off debt, and do their taxes with ease and confidence. For those customers who run small businesses, we are also focused on helping them find and keep customers, get paid faster, pay their employees, manage and get access to capital, and ensure their books are done right. Lacerte, ProSeries, and ProConnect Tax Online are our leading tax preparation offerings for professional accountants. Incorporated in 1984 and headquartered in Mountain View, California, we sell our products and services primarily in the United States.
Basis of Presentation
These condensed consolidated financial statements include the financial statements of Intuit and its wholly-owned subsidiaries. We have eliminated all intercompany balances and transactions in consolidation. We have included all adjustments, consisting only of normal recurring items, which we considered necessary for a fair presentation of our financial results for the interim periods presented. We have reclassified certain amounts previously reported in our financial statements to conform to the current presentation. In the first quarter of fiscal 2024, to align our presentation of revenue and cost of revenue with our current revenue mix, we began to aggregate other revenue with product revenue, rather than service revenue, and cost of other revenue with cost of product revenue, rather than cost of service revenue. We reclassified the previously reported balances to conform to the current presentation. The reclassification was not material and had no impact on previously reported total net revenue or cost of revenue. On August 1, 2023, we reorganized certain technology functions in our Consumer and ProTax segments that support and benefit our overall platform. Additionally, certain workplace and real estate functions in our Small Business & Self-Employed segment are now managed at the corporate level. As a result of these reorganizations, costs associated with these functions are no longer included in segment operating income and are now included in other corporate expenses. For the three and six months ended January 31, 2023, we reclassified expenses totaling $10 million and $19 million from Small Business & Self-Employed, $43 million and $83 million from Consumer, and $16 million and $31 million from ProTax to other corporate expenses, respectively. See Note 12, "Segment Information," for more information. These unaudited condensed consolidated financial statements and accompanying notes should be read together with the audited consolidated financial statements in Part II, Item 8 of our Annual Report on Form 10-K for the fiscal year ended July 31, 2023. Results for the six months ended January 31, 2024 are not necessarily indicative of the results we expect for the fiscal year ending July 31, 2024 or any other future period.
Seasonality
Our Consumer and ProTax offerings have a significant and distinct seasonal pattern as sales and revenue from our income tax preparation products and services are typically heavily concentrated in the period from November through April. This seasonal pattern typically results in higher net revenues during our second and third quarters ending January 31 and April 30, respectively.
Significant Accounting Policies
We described our significant accounting policies in Note 1 to the financial statements in Part II, Item 8 of our Annual Report on Form 10-K for the fiscal year ended July 31, 2023. There have been no changes to our significant accounting policies during the first six months of fiscal 2024.
Use of Estimates
In preparing our condensed consolidated financial statements in accordance with U.S. generally accepted accounting principles (GAAP), we make certain judgments, estimates, and assumptions that affect the amounts reported in our financial statements and the disclosures made in the accompanying notes. For example, we use judgments and estimates in determining how revenue should be recognized. These judgments and estimates include identifying performance obligations, determining if the performance obligations are distinct, determining the standalone sales price (SSP) and timing of revenue recognition for each distinct performance obligation, and estimating variable consideration to be included in the transaction price. We use estimates in determining the collectibility of accounts receivable and notes receivable held for investment, the appropriate levels of various accruals including accruals for litigation contingencies, the discount rate used to calculate lease liabilities, the amount of our worldwide tax provision, the realizability of deferred tax assets, the credit losses of available-for-sale debt securities, reserves for losses, and the fair value of assets acquired and liabilities assumed for business combinations. We also use estimates in determining the remaining economic lives and fair values of acquired intangible assets, property and equipment, and other long-lived assets. In addition, we use assumptions to estimate the fair value of reporting units and share-based compensation. Despite our intention to establish accurate estimates and use reasonable assumptions, actual results may differ from our estimates.
Computation of Net Income Per Share
We compute basic net income or loss per share using the weighted-average number of common shares outstanding during the period. We compute diluted net income per share using the weighted-average number of common shares and dilutive potential common shares outstanding during the period. Dilutive potential common shares consist of the shares issuable upon the exercise of stock options and upon the vesting of restricted stock units (RSUs) under the treasury stock method. We include stock options with combined exercise prices and unrecognized compensation expense that are less than the average market price for our common stock, and RSUs with unrecognized compensation expense that is less than the average market price for our common stock, in the calculation of diluted net income per share. We exclude stock options with combined exercise prices and unrecognized compensation expense that are greater than the average market price for our common stock, and RSUs with unrecognized compensation expense that is greater than the average market price for our common stock, from the calculation of diluted net income per share because their effect is anti-dilutive. Under the treasury stock method, the amount that must be paid to exercise stock options and the amount of compensation expense for future service that we have not yet recognized for stock options and RSUs are assumed to be used to repurchase shares. All of the RSUs we grant have dividend rights. Dividend rights are accumulated and paid when the underlying RSUs vest. Since the dividend rights are subject to the same vesting requirements as the underlying equity awards, they are considered a contingent transfer of value. Consequently, the RSUs are not considered participating securities, and we do not present them separately in earnings per share. In loss periods, basic net loss per share and diluted net loss per share are the same since the effect of potential common shares is anti-dilutive and therefore excluded. The following table presents the composition of shares used in the computation of basic and diluted net income per share for the periods indicated.
| Three Months Ended |  | Six Months Ended
(In millions, except per share amounts) | January 31, 2024 |  | January 31, 2023 |  | January 31, 2024 |  | January 31, 2023
Numerator: |  |  |  |  |  |  |
Net income | $ | 353 |  |  | $ | 168 |  |  | $ | 594 |  |  | $ | 208 |
Denominator: |  |  |  |  |  |  |
Shares used in basic per share amounts: |  |  |  |  |  |  |
Weighted-average common shares outstanding | 280 |  |  | 281 |  |  | 280 |  |  | 281 |
Shares used in diluted per share amounts: |  |  |  |  |  |  |
Weighted-average common shares outstanding | 280 |  |  | 281 |  |  | 280 |  |  | 281 |
Dilutive common equivalent shares from stock options |  |  |  |  |  |  |
and restricted stock awards | 4 |  |  | 1 |  |  | 4 |  |  | 2 |
Dilutive weighted-average common shares outstanding | 284 |  |  | 282 |  |  | 284 |  |  | 283 |
Basic and diluted net income per share: |  |  |  |  |  |  |
Basic net income per share | $ | 1.26 |  |  | $ | 0.60 |  |  | $ | 2.12 |  |  | $ | 0.74 |
Diluted net income per share | $ | 1.25 |  |  | $ | 0.60 |  |  | $ | 2.10 |  |  | $ | 0.73 |
Shares excluded from diluted net income per share: |  |  |  |  |  |  |
Weighted-average stock options and restricted stock units that have been excluded from dilutive common equivalent shares outstanding due to their anti-dilutive effect | — |  |  | 7 |  |  | 1 |  |  | 3 |
Deferred Revenue
We record deferred revenue when we have entered into a contract with a customer, and cash payments are received or due prior to transfer of control or satisfaction of the related performance obligation. During the three and six months ended January 31, 2024, we recognized revenue of $167 million and $805 million, respectively, that was included in deferred revenue at July 31, 2023. During the three and six months ended January 31, 2023, we recognized revenue of $158 million and $693 million, respectively, that was included in deferred revenue at July 31, 2022. Our performance obligations are generally satisfied within 12 months of the initial contract date. As of January 31, 2024 and July 31, 2023, the deferred revenue balance related to performance obligations that will be satisfied after 12 months was $3 million and $5 million, respectively, and is included in other long-term obligations on our condensed consolidated balance sheets.
Concentration of Credit Risk and Significant Customers
No customer accounted for 10% or more of total net revenue in the three or six months ended January 31, 2024 or January 31, 2023. No customer accounted for 10% or more of gross accounts receivable at January 31, 2024 or July 31, 2023.
Accounting Standards Not Yet Adopted
Segment Information - In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures." This standard requires incremental segment information disclosures, including disclosures of significant segment expenses that are regularly provided to the chief operating decision maker (CODM), a description of other segment items by reportable segment, and any additional measures of a segment's profit or loss used by the CODM when deciding how to allocate resources. The standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, which means that it will be effective for our annual reporting for the fiscal year ending July 31, 2025 and for interim period reporting beginning in fiscal 2026. Early adoption is permitted, and retrospective adoption is required for all prior periods presented. We are currently evaluating the impact of our pending adoption of ASU 2023-07 on our consolidated financial statements and related disclosures. Income Tax - In December 2023, the FASB issued Accounting Standard Update (ASU) 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures." This standard requires additional disclosures related to the income tax rate reconciliation, income taxes paid by jurisdiction, and other income tax-related disclosures. The standard is effective for fiscal years beginning after December 15, 2024, which means that it will be effective for us for the fiscal year ending July 31, 2026. Early adoption is permitted. The standard should be applied on a prospective basis, and retrospective application is permitted. We are currently evaluating the impact of adopting ASU 2023-09 on our consolidated financial statements and related disclosures.

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