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Income Taxes | 12 Months Ended
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Aug. 31, 2018
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes Provision for Income Taxes Income (loss) before income tax expense is summarized below (in thousands):
| Fiscal Year Ended August 31,
| 2018 |  | 2017 |  | 2016
U.S.(1) | $ | (426,897 | ) |  | $ | (373,690 | ) |  | $ | (317,427 | )
Non-U.S.(1) | 800,298 |  |  | 629,923 |  |  | 704,472 |
| $ | 373,401 |  |  | $ | 256,233 |  |  | $ | 387,045 |
(1) | The U.S. and non-U.S. components of income (loss) 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
2018: | U.S. – Federal | $ | 69,080 |  |  | $ | (24,342 | ) |  | $ | 44,738 |
| U.S. – State | 134 |  |  | 93 |  |  | 227 |
| Non-U.S. | 178,790 |  |  | 62,105 |  |  | 240,895 |
|  | $ | 248,004 |  |  | $ | 37,856 |  |  | $ | 285,860 |
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 |
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,
| 2018 |  | 2017 |  | 2016
Tax at U.S. federal statutory income tax rate(1) | $ | 95,852 |  |  | $ | 89,682 |  |  | $ | 135,470 |
State income taxes, net of federal tax benefit | (5,417 | ) |  | (8,474 | ) |  | (5,121 | )
Impact of foreign tax rates(2) | (71,889 | ) |  | (109,466 | ) |  | (144,521 | )
Permanent impact of non-deductible cost | 21,988 |  |  | 7,336 |  |  | 3,408 |
Income tax credits | (10,405 | ) |  | (16,254 | ) |  | (5,040 | )
Changes in tax rates on deferred tax assets and liabilities(3) | 15,048 |  |  | 688 |  |  | 182 |
Transition tax related to the Tax Act(4) | 232,405 |  |  | — |  |  | — |
Change in indefinite reinvestment assertion related to the Tax Act(5) | 21,754 |  |  | — |  |  | — |
Valuation allowance(6) | (61,186 | ) |  | 37,934 |  |  | 11,770 |
Non-deductible equity compensation | 20,443 |  |  | 11,531 |  |  | 18,350 |
Impact of intercompany charges and dividends(7) | 27,442 |  |  | 98,052 |  |  | 94,596 |
Reclassification of stranded tax effects in AOCI | (14,811 | ) |  | — |  |  | — |
Other, net | 14,636 |  |  | 18,037 |  |  | 23,055 |
Total income tax expense | $ | 285,860 |  |  | $ | 129,066 |  |  | $ | 132,149 |
(1) | The U.S. federal statutory income tax rate was 25.7%, 35% and 35% for fiscal years ended August 31, 2018, 2017 and 2016, respectively. As a result of the Tax Cuts and Jobs Act of 2017 ("Tax Act"), the Company will be subject to a blended U.S. federal tax rate of 25.7% for the fiscal year ended August 31, 2018 and a 21.0% U.S. federal tax rate for future fiscal years.
(2) | For the fiscal year ended August 31, 2018, the decrease in the impact of foreign tax rates was primarily due to a decrease in the U.S. federal statutory income tax rate from 35% to 25.7% due to the Tax Act.
(3) | For the fiscal year ended August 31, 2018, the increase in the changes in tax rates on deferred tax assets and liabilities was primarily due to the Tax Act. This increase excludes the impact of the enacted rate change on the U.S. valuation allowance.
(4) | The Tax Act introduced a one-time mandatory income inclusion of the historically untaxed foreign earnings of a U.S. company's foreign subsidiaries and will effectively tax such income at reduced tax rates ("transition tax"). For the fiscal year ended August 31, 2018, the transition tax related to the Tax Act reflects the $65.9 million provisional one-time transition tax inclusive of unrecognized tax benefits and the corresponding utilization of U.S. federal net operating losses and tax credits that historically had valuation allowances.
(5) | For the fiscal year ended August 31, 2018, the change in indefinite reinvestment assertion related to the Tax Act reflects the $85.0 million of foreign taxes that would be incurred upon future remittances of certain foreign earnings less the write off of a previously recorded U.S. deferred tax liability that is no longer taxable due to the Tax Act.
(6) | For the fiscal year ended August 31, 2018, the valuation allowance decrease was due to utilization of U.S. federal net operating losses and tax credits against the one-time transition tax and the change in enacted tax rate applied to U.S. deferred tax assets and liabilities. The tax benefit from the valuation allowance reversal on U.S. federal net operating losses utilized in the one-time transition tax was $85.0 million. The valuation allowance decrease is partially offset by the current year increase of deferred tax assets in sites with existing valuation allowances.
(7) | For the fiscal year ended August 31, 2018, the decrease in the impact of intercompany charges and dividends was due to a change in the U.S. taxation of foreign dividends as a result of the Tax Act.
On December 22, 2017, the U.S. government enacted comprehensive tax legislation. The Tax Act reduced the corporate tax rate, limited or eliminated certain tax deductions, established the transition tax, and changed the taxation of foreign earnings of U.S. multinational companies. The Securities and Exchange Commission ("SEC") Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cut and Jobs Act (“SAB 118”), provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under Accounting Standards Codification Topic 740, “Income Taxes” (“ASC 740”). In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete. To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete, but it is able to determine a reasonable estimate, it must record a provisional estimate in its financial statements. For the fiscal year ended August 31, 2018, the Company made reasonable estimates related to certain impacts of the Tax Act and, in accordance with SAB 118, recorded a net provisional income tax expense of $142.3 million. This net provisional expense is mainly comprised of $65.9 million related to the one-time transition tax inclusive of unrecognized tax benefits, $(10.5) million related to the re-measurement of the Company’s U.S. deferred tax attributes, and $85.0 million related to a change in the indefinite reinvestment assertion on certain earnings from its foreign subsidiaries. For the three months ended August 31, 2018, the Company recorded $111.4 million associated with the Tax Act, mainly comprised of $24.9 million related to the one-time transition tax to adjust the amount recorded previously through the nine months ended May 31, 2018 and $85.0 million for the change in indefinite reinvestment assertion on certain earnings from the Company's foreign subsidiaries, resulting in a combined net increase of 29.8% to the Company's effective tax rate for the fiscal year ended August 31, 2018. The calculation of the one-time transition tax of $65.9 million for the fiscal year ended August 31, 2018 is based upon preliminary estimates of post-1986 earnings and profits, applicable foreign tax credits and relevant limitations, utilization of U.S. federal net operating losses and tax credits and the amounts of foreign earnings held in cash and non-cash assets. The adjustment to the transition tax of $24.9 million for the three months ended August 31, 2018 was primarily related to further analysis of earnings and profits of the Company's foreign subsidiaries and utilization of foreign tax credits, a revised provisional calculation of foreign earnings held in cash and other specified assets, and the Company's interpretation of additional regulatory guidance issued. The transition tax remains provisional pending additional regulatory guidance that may be issued, changes in interpretations and assumptions, and finalization of calculations of the impact of the Tax Act, including foreign earnings and profits of the Company's foreign subsidiaries and applicable foreign tax credits and relevant limitations for fiscal year 2018. The provisional income tax benefit of $(10.5) million recorded for the fiscal year ended August 31, 2018 relates to the re-measurement of the Company’s deferred tax balances, inclusive of valuation allowances, and is based primarily on the rates at which the deferred tax assets and liabilities are expected to reverse in the current and future fiscal years. The enactment date re-measurement of U.S. deferred tax assets and liabilities is provisional as the final re-measurement cannot be determined until the final calculation of underlying temporary differences is completed, rather than estimated. In addition, the Company is also analyzing the impact of the Tax Act to the existing valuation allowance assessments from both a federal and state tax perspective, which could potentially affect the realizability of the existing deferred tax assets. The change in indefinite reinvestment assertion of $85.0 million recorded during the three months and fiscal year ended August 31, 2018 relates to certain foreign earnings and the foreign taxes that would be incurred upon future remittances of such earnings. This amount remains provisional as the Company completes further analysis of available distributable earnings from its foreign subsidiaries and continued review of its capital structure. The Company is still evaluating the Global Intangible Low-Taxed Income ("GILTI") provisions and the associated election to record its effects as a period cost or a component of deferred taxes. This analysis has not been completed due to the complexity of the new GILTI tax rules, which is dependent, in part, on analyzing the Company's global income to determine whether the Company expects to have future U.S. inclusions in taxable income related to GILTI and the associated estimated amount. Because the Company’s expectations around U.S. inclusions in taxable income related to GILTI depend on its estimated future results of global operations and preparation and analysis of information not previously relevant or regularly produced, this accounting election remains open as of August 31, 2018. For the fiscal year ended August 31, 2018, the Company believes $142.3 million is a reasonable net estimate related to the Tax Act based on the analysis, interpretations and guidance available at this time. As the Company finalizes the accounting for the tax effects of the enactment of the Tax Act during the measurement period, the Company will reflect adjustments to the provisional amounts recorded and record additional tax effects in the periods such adjustments are identified. For the reasons outlined above, the Company has not completed its accounting for any aspect of the Tax Act. The Company has been granted tax incentives for its Brazilian, Chinese, Malaysian, Polish, Singaporean and Vietnamese subsidiaries. The majority of the tax incentive benefits expire at various dates through fiscal year 2028 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, 2018, 2017 and 2016, resulting in a tax benefit of approximately $52.1 million ($0.30 per basic share), $38.6 million ($0.22 per basic share) and $50.5 million ($0.27 per basic share), respectively. The benefits of these incentives are classified as the impact of foreign tax rates and income tax credits in the reconciliation of income tax expense table above. 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,
| 2018 |  | 2017
Deferred tax assets: |  |  |
Net operating loss carry forward | $ | 119,259 |  |  | $ | 268,853 |
Receivables | 7,111 |  |  | 7,497 |
Inventories | 7,634 |  |  | 11,618 |
Compensated absences | 8,266 |  |  | 10,981 |
Accrued expenses | 81,912 |  |  | 93,413 |
Property, plant and equipment, principally due to differences in depreciation and amortization | 97,420 |  |  | 81,954 |
U.S. federal and state tax credits | 70,153 |  |  | 57,122 |
Foreign jurisdiction tax credits | 25,887 |  |  | 24,641 |
Equity compensation – U.S. | 7,566 |  |  | 16,460 |
Equity compensation – Non-U.S. | 2,401 |  |  | 2,700 |
Other | 18,176 |  |  | 14,573 |
Total deferred tax assets before valuation allowances | 445,785 |  |  | 589,812 |
Less valuation allowances | (223,487 | ) |  | (285,559 | )
Net deferred tax assets | $ | 222,298 |  |  | $ | 304,253 |
Deferred tax liabilities: |  |  |
Unremitted earnings of non-U.S. subsidiaries | 74,654 |  |  | 86,202 |
Intangible assets | 39,122 |  |  | 48,229 |
Cash flow hedges | — |  |  | 8,564 |
Other | 4,655 |  |  | 4,863 |
Total deferred tax liabilities | $ | 118,431 |  |  | $ | 147,858 |
Net deferred tax assets | $ | 103,867 |  |  | $ | 156,395 |
As of August 31, 2018, the Company had state (tax-effected) and foreign income tax net operating loss carry forwards (net of unrecognized tax benefits) of approximately $55.4 million and $318.0 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 2019 through 2038 or have an indefinite carry forward period. The Company has U.S. federal and state tax credit carry forwards of $65.6 million and $4.8 million, respectively, which are available to reduce future taxes, if any. Most of the U.S. federal tax credits expire through fiscal year 2027. Most of the U.S. state tax credits expire through fiscal year 2027. As of August 31, 2018, the foreign jurisdiction tax credits include foreign investment tax credits of $23.3 million that expire predominantly in fiscal year 2027 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 believes 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 in the total valuation allowance for the fiscal years ended August 31, 2018 and 2017 were $(62.1) million and $(59.3) million, respectively. The fiscal year ended August 31, 2018 decrease in valuation allowance is primarily related to the decrease of a U.S. federal net operating loss carry forward due to utilization against the one-time transition tax under the Tax Act. This decrease is partially offset by the increase of deferred tax assets in sites with existing valuation allowances. As a result of the one-time transition tax, the Company will have a substantial amount of previously taxed earnings that can be distributed to the U.S. without additional U.S. federal taxation. Additionally, the Tax Act provides for a 100% dividends received deduction for dividends received by U.S. corporations from 10-percent or more owned foreign corporations. During the fiscal year ended August 31, 2018, the Company recorded liabilities of $85.0 million from a change in the indefinite reinvestment assertion on certain earnings from its foreign subsidiaries, primarily associated with foreign withholding taxes that would be incurred upon such future remittances of cash. Of these liabilities, $74.7 million remained as a deferred tax liability as of August 31, 2018 after current year remittances. The 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. While the Company has made a reasonable estimate of the impact of the Tax Act on its indefinite reinvestment assertion, the Company continues to evaluate its indefinite reinvestment assertion and may further adjust this estimate during the measurement period. As of August 31, 2018, the indefinitely reinvested earnings in foreign subsidiaries upon which taxes had not been provided were approximately $2.4 billion. 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,
| 2018 |  | 2017 |  | 2016
Beginning balance | $ | 201,355 |  |  | $ | 149,898 |  |  | $ | 154,648 |
Additions for tax positions of prior years | 14,465 |  |  | 2,155 |  |  | 7,974 |
Reductions for tax positions of prior years | (21,045 | ) |  | (12,233 | ) |  | (20,045 | )
Additions for tax positions related to current year | 81,866 |  |  | 77,807 |  |  | 25,892 |
Cash settlements | (1,659 | ) |  | (2,298 | ) |  | (6,553 | )
Reductions from lapses in statutes of limitations | (7,496 | ) |  | (10,446 | ) |  | (7,099 | )
Reductions from settlements with taxing authorities | (5,928 | ) |  | (6,061 | ) |  | (1,787 | )
Foreign exchange rate adjustment | (4,853 | ) |  | 2,533 |  |  | (3,132 | )
Ending balance | $ | 256,705 |  |  | $ | 201,355 |  |  | $ | 149,898 |
Unrecognized tax benefits that would affect the effective tax rate (if recognized) | $ | 117,455 |  |  | $ | 75,223 |  |  | $ | 72,152 |
For the fiscal year ended August 31, 2018, the additions for tax positions related to current year primarily related to the impacts of the Tax Act and U.S. taxation of certain intercompany transactions. It is reasonably possible that the August 31, 2018 unrecognized tax benefits could decrease during the next 12 months by $106.1 million, primarily related to a taxing authority ruling associated with an internal restructuring and a potential audit settlement associated with intercompany transactions. Both of these tax positions were previously offset with valuation allowances. 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. The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense. The Company’s accrued interest and penalties were approximately $20.4 million and $27.1 million as of August 31, 2018 and 2017, respectively. The Company recognized interest and penalties of approximately $(6.7) million, $5.2 million and $1.8 million during the fiscal years ended August 31, 2018, 2017 and 2016, respectively. The Company is no longer subject to U.S. federal and state income tax examinations for fiscal years before August 31, 2009. In major non-U.S. jurisdictions, the Company is no longer subject to income tax examinations for fiscal years before August 31, 2008. The Internal Revenue Service (“IRS”) completed its field examination of the Company’s tax returns for fiscal years 2009 through 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 an RAR on April 19, 2017. The proposed 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 with 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, management 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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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