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Income Taxes | 12 Months Ended
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Aug. 31, 2017
Income Taxes [Abstract] |
Income Taxes |
5. Income Taxes
Provision for Income Taxes
|  | Income (loss) from continuing operations before income tax expense is summarized below (in thousands):
|  |  |  |  | Fiscal Year Ended August 31, |
|  |  |  |  | 2017 |  | 2016 |  | 2015 |
|  |  |  | U.S.(1) | $ | (373,690) |  | $ | (317,427) |  | $ | (295,521) |
|  |  |  | Non-U.S.(1) |  | 629,923 |  |  | 704,472 |  |  | 727,167 |
|  |  |  |  | $ | 256,233 |  | $ | 387,045 |  | $ | 431,646 |
| (1) | The U.S. and non-U.S. components of income (loss) from continuing operations before income tax expense include
|  | the elimination of intercompany foreign dividends paid to the U.S. |
| Income tax expense (benefit) is summarized below (in thousands):
|  |  | Fiscal Year Ended August 31, |  | Current |  | Deferred |  | Total |
|  |  | 2017: | U.S. – Federal |  | $ | 2,436 |  | $ | 253 |  | $ | 2,689 |
|  |  |  | U.S. – State |  |  | 12 |  |  | 30 |  |  | 42 |
|  |  |  | Non-U.S. |  |  | 188,872 |  |  | (62,537) |  |  | 126,335 |
|  |  |  |  |  | $ | 191,320 |  | $ | (62,254) |  | $ | 129,066 |
|  |  | 2016: | U.S. – Federal |  | $ | (649) |  | $ | 73 |  | $ | (576) |
|  |  |  | U.S. – State |  |  | (166) |  |  | 9 |  |  | (157) |
|  |  |  | Non-U.S. |  |  | 157,069 |  |  | (24,187) |  |  | 132,882 |
|  |  |  |  |  | $ | 156,254 |  | $ | (24,105) |  | $ | 132,149 |
|  |  | 2015: | U.S. – Federal |  | $ | 1,169 |  | $ | (1,653) |  | $ | (484) |
|  |  |  | U.S. – State |  |  | 164 |  |  | (300) |  |  | (136) |
|  |  |  | Non-U.S. |  |  | 147,199 |  |  | (9,118) |  |  | 138,081 |
|  |  |  |  |  | $ | 148,532 |  | $ | (11,071) |  | $ | 137,461 |
| Reconciliations of the income tax expense at the U.S. federal statutory income tax rate compared to the actual income tax
expense are summarized below (in thousands):
|  |  |  | Fiscal Year Ended August 31, |
|  |  |  | 2017 |  | 2016 |  | 2015 |
|  |  | Tax at U.S. federal statutory income tax rate (35%) | $ | 89,682 |  | $ | 135,470 |  | $ | 151,076 |
|  |  | State income taxes, net of federal tax benefit |  | (8,474) |  |  | (5,121) |  |  | (4,474) |
|  |  | Impact of foreign tax rates |  | (109,466) |  |  | (144,521) |  |  | (157,827) |
|  |  | Permanent impact of non-deductible cost |  | 7,336 |  |  | 3,408 |  |  | 8,951 |
|  |  | Income tax credits |  | (16,254) |  |  | (5,040) |  |  | (12,773) |
|  |  | Changes in tax rates on deferred tax assets and liabilities |  | 688 |  |  | 182 |  |  | (1,206) |
|  |  | Valuation allowance |  | 37,934 |  |  | 11,770 |  |  | 72,604 |
|  |  | Non-deductible equity compensation |  | 11,531 |  |  | 18,350 |  |  | 11,600 |
|  |  | Impact of intercompany charges and dividends |  | 98,052 |  |  | 94,596 |  |  | 49,843 |
|  |  | Other, net |  | 18,037 |  |  | 23,055 |  |  | 19,667 |
|  |  | Total income tax expense | $ | 129,066 |  | $ | 132,149 |  | $ | 137,461 |
For the fiscal year ended August 31, 2017, the change in the impact of foreign tax rates was due to a decrease in income in low tax-rate jurisdictions. The valuation allowance increase was due to an increase of deferred tax assets for sites with existing valuation allowances, partially offset by an income tax benefit of $27.5 million for the reversal of valuation allowances related to non-U.S. jurisdictions. The Company has been granted tax incentives for its Brazilian, Chinese, Malays ian, Polish, Singaporean and Vietnamese subsidiaries. The majority of the tax incentive benefits expire at various dates through fiscal year 2021 and are subject to certain conditions with which the Company expects to comply. These subsidiaries generated income from continuing operations during the fiscal years ended August 31, 2017, 2016 and 2015, resulting in a tax benefit of approximately $38.6 million ($0.22 per basic share), $50.5 million ($0.27 per basic share) and $74.7 million ($0.39 per basic share), respectively. The benefits of these incentives are record ed as the impact of foreign tax rates and income tax credits.
Deferred Tax Assets and Liabilities
| The significant components of the deferred tax assets and liabilities are summarized below (in thousands):
|  |  |  | Fiscal Year Ended August 31, |
|  |  |  | 2017 |  | 2016 |
| Deferred tax assets: |  |  |  |  |  |
|  | Net operating loss carry forward | $ | 268,853 |  | $ | 319,685 |
|  | Receivables |  | 7,497 |  |  | 8,643 |
|  | Inventories |  | 11,618 |  |  | 6,970 |
|  | Compensated absences |  | 10,981 |  |  | 9,080 |
|  | Accrued expenses |  | 93,413 |  |  | 75,749 |
|  | Property, plant and equipment, principally due to differences in |  |  |  |  |  |
|  |  | depreciation and amortization |  | 81,954 |  |  | 52,088 |
|  | U.S. federal and state tax credits |  | 57,122 |  |  | 58,725 |
|  | Foreign jurisdiction tax credits |  | 24,641 |  |  | 14,464 |
|  | Equity compensation – U.S. |  | 16,460 |  |  | 17,641 |
|  | Equity compensation – Non-U.S. |  | 2,700 |  |  | 3,873 |
|  | Cash flow hedges |  | ― |  |  | 2,055 |
|  | Other |  | 14,573 |  |  | 18,767 |
|  | Total deferred tax assets before valuation allowances |  | 589,812 |  |  | 587,740 |
|  | Less valuation allowances |  | (285,559) |  |  | (344,828) |
|  | Net deferred tax assets | $ | 304,253 |  | $ | 242,912 |
| Deferred tax liabilities: |  |  |  |  |  |
|  | Unremitted earnings of non-U.S. subsidiaries |  | 86,202 |  |  | 88,445 |
|  | Intangible assets |  | 48,229 |  |  | 54,130 |
|  | Cash flow hedges |  | 8,564 |  |  | ― |
|  | Other |  | 4,863 |  |  | 5,768 |
|  | Total deferred tax liabilities | $ | 147,858 |  | $ | 148,343 |
| Net deferred tax assets | $ | 156,395 |  | $ | 94,569 |
As of August 31, 2017, the Company had federal, state (tax-effected) and foreign income tax net operating loss carry forwards (net of unrecognized tax benefits) of approximately $442.5 million, $58.7 million, and $315.0 million, respectively, which are available to reduce future taxes, if any. The net operating loss carry forwards in the Company’s major tax jurisdictions expire in fiscal years 2018 through 2037 or have an indefinite carry forward period. The Company has U.S. federal and state tax credit carry forwards of $53.9 million and $5.0 million, respectively, which are available to reduce future taxes, if any. Most of the U.S. federal tax credits expire through the year 2024. Most of the U.S. state tax credits expire through the year 2027. As of August 31, 2017, the foreign jurisdiction tax credits include foreign investment tax credits of $21.4 million that expire in 2026 and are based on the deferral method. Based on the Company’s historical operating income, projection of future taxable income, scheduled reversal of taxable temporary differences, and tax planning strategies, management beli eves that it is more likely than not that the Company will realize the benefit of its deferred tax assets, net of valuation allowances recorded. The net (decreases) increases in the total valuation allowance for the fiscal years ended August 31, 2017 and 2016 were $(59.3) million and $40.0 million, respectively. The decrease in valuation allowance is primarily related to the decrease of a net operating loss carry forward due to additional non-U.S. unrecognized tax benefits, the decrea se of a net operating loss carry forward due to a non-U.S. tax audit, and the release of certain non-U.S. valuation allowances. This decrease is partially offset by the increase of deferred tax assets in sites with existing valuation allowances. The Compa ny’s assessment of the valuation allowance release included consideration of all available positive and negative evidence including, among other evidence, historical, cumulative operating income, projected future taxable income and recent utilization of non-U.S. tax credit carryforwards. As of August 31, 2017, t he Company intends to indefinitely reinvest the remaining earnings from its foreign subsidiaries for which a deferred tax liability has not already been recorded. The accumulated earnings are the most significant component of the basis difference which is indefinitely reinvested. The aggregate undistributed earnings of the Company’s foreign subsidiaries for which no deferred tax liability has been recorded is approximately $3.4 billion as of August 31, 2017. Determination of the amount of unrecognized deferred tax liability on these undistributed earnings is not practicable.
Unrecognized Tax Benefits
| Reconciliations of the unrecognized tax benefits are summarized below (in thousands):
|  |  |  | Fiscal Year Ended August 31, |
|  |  |  | 2017 |  | 2016 |  | 2015 |
|  | Beginning balance | $ | 149,898 |  | $ | 154,648 |  | $ | 229,684 |
|  | Additions for tax positions of prior years |  | 2,155 |  |  | 7,974 |  |  | 4,189 |
|  | Reductions for tax positions of prior years |  | (12,233) |  |  | (20,045) |  |  | (7,919) |
|  | Additions for tax positions related to current year |  | 77,807 |  |  | 25,892 |  |  | 21,541 |
|  | Adjustments for tax positions related to acquired entities |  | ― |  |  | ― |  |  | 1,687 |
|  | Cash settlements |  | (2,298) |  |  | (6,553) |  |  | (11,806) |
|  | Reductions from lapses in statutes of limitations |  | (10,446) |  |  | (7,099) |  |  | (1,843) |
|  | Reductions from settlements with taxing authorities |  | (6,061) |  |  | (1,787) |  |  | (72,812) |
|  | Foreign exchange rate adjustment |  | 2,533 |  |  | (3,132) |  |  | (8,073) |
|  | Ending balance | $ | 201,355 |  | $ | 149,898 |  | $ | 154,648 |
|  | Unrecognized tax benefits that would affect the |  |  |  |  |  |  |  |  |
|  |  | effective tax rate (if recognized) | $ | 75,223 |  | $ | 72,152 |  | $ | 80,094 |
For the fiscal year ended August 31, 2017, the additions for tax positions related to current year, primarily related to certain non-U.S. net operating loss carry forwards, previously offset with a valuation allowance, that can no longer be recognized due to an internal restructuring. It is reasonably possible that the August 31, 2017 unrecognized tax benefits could decrease during the next 12 months by $66.3 million, primarily related to a taxing authority ruling associated with the internal restructuring. For the fiscal year ended August 31, 2015, the reductions from settlements with taxing authorities is primarily related to the closure of a non-U.S. audit, which partially disallowed a n et operating loss carry forward and future tax amortization. The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense. The Company’s accrued interest and penalties were approximately $27.1 million and $21.9 million a s of August 31, 2017 and 2016, respectively. The Company recognized interest and penalties of approximately $5.2 million, $1.8 million and $2.1 million during the fiscal years ended August 31, 2017, 2016 and 2015, respectively. The Company is no longer subject to U.S. federal income tax examinations for fiscal years before August 31, 2009. In major state and major non-U.S. jurisdictions, th e Company is no longer subject to income tax examinations for fiscal years before August 31, 2003 and August 31, 2006, respectively. The Internal Revenue Service (“IRS”) completed its field examination of the Company’s tax returns for fiscal years 2009 th rough 2011 and issued a Revenue Agent’s Report (“RAR”) on May 27, 2015, which was updated on June 22, 2016. The IRS completed its field examination of the Company’s tax returns for fiscal years 2012 through 2014 and issued a n RAR on April 19, 2017. The pro posed adjustments in the RAR from both examination periods relate primarily to U.S. taxation of certain intercompany transactions. If the IRS ultimately prevails in its positions, the Company’s income tax payment due for the fiscal years 2009 through 2011 and 2012 through 2014 would be approximately $28.6 million and $5.3 million, respectively, after utilization of tax loss carry forwards available through fiscal year 2014. Also, the IRS has proposed interest and penalties with respect to fiscal years 2009 through 2011. The IRS may make similar claims in future audits with respect to these types of transactions. At this time, anticipating the amount of any future IRS proposed adjustments, interest, and penalties is not practicable. The Company disagrees w ith the proposed adjustments and intends to vigorously contest these matters through the applicable IRS administrative and judicial procedures, as appropriate. As the final resolution of the proposed adjustments remains uncertain, the Company continues to provide for the uncertain tax positions based on the more likely than not standard. While the resolution of the issues may result in tax liabilities, interest and penalties that are significantly higher than the amounts accrued for these matters, managemen t currently believes that the resolution will not have a material adverse effect on the Company’s financial position, results of operations or cash flows. However, there can be no assurance that management’s beliefs will be realized.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32559-109319 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32718-109319 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32639-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32537-109319 + Details
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