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Income Taxes | 9 Months Ended
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Mar. 31, 2018
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES Our effective tax rate represents the net effect of the mix of income earned in various tax jurisdictions that are subject to a wide range of income tax rates. We recognize interest expense and penalties related to income tax matters in income tax expense. For the three and nine months ended March 31, 2018 and 2017, we recognized the following amounts as income tax-related interest expense and penalties:
| Three Months Ended March 31, |  | Nine Months Ended March 31,
| 2018 |  | 2017 |  | 2018 |  | 2017
Interest expense | $ | 18 |  |  | $ | 1,673 |  |  | $ | 3,915 |  |  | $ | 4,456 |
Penalties expense (recoveries) | 453 |  |  | 6 |  |  | (90 | ) |  | (318 | )
Total | $ | 471 |  |  | $ | 1,679 |  |  | $ | 3,825 |  |  | $ | 4,138 |
The following amounts have been accrued on account of income tax-related interest expense and penalties:
| As of March 31, 2018 |  | As of June 30, 2017
Interest expense accrued * | $ | 52,094 |  |  | $ | 47,402 |
Penalties accrued * | $ | 2,325 |  |  | $ | 2,160 |
* These balances have been included within "Long-term income taxes payable" within the Condensed Consolidated Balance Sheets. We believe that it is reasonably possible that the gross unrecognized tax benefits, as of March 31, 2018, could decrease tax expense in the next 12 months by $7.5 million, relating primarily to the expiration of competent authority relief and tax years becoming statute barred for purposes of future tax examinations by local taxing jurisdictions. Our four most significant tax jurisdictions are Canada, the United States, Luxembourg and Germany. Our tax filings remain subject to audits by applicable tax authorities for a certain length of time following the tax year to which those filings relate. The earliest fiscal years open for examination are 2009 for Germany, 2010 for the United States, 2011 for Luxembourg, and 2012 for Canada. We are subject to tax audits in all major taxing jurisdictions in which we operate and currently have tax audits open in Canada, the United States, France, Germany, India, Malaysia, and the United Kingdom. On a quarterly basis we assess the status of these examinations and the potential for adverse outcomes to determine the adequacy of the provision for income and other taxes. Statements regarding the United States and Canada audits are included in note 13 "Guarantees and Contingencies". The timing of the resolution of income tax audits is highly uncertain, and the amounts ultimately paid, if any, upon resolution of the issues raised by the taxing authorities may differ from the amounts accrued. It is reasonably possible that within the next 12 months we will receive additional assessments by various tax authorities or possibly reach resolution of income tax audits in one or more jurisdictions. These assessments or settlements may or may not result in changes to our contingencies related to positions on tax filings. The actual amount of any change could vary significantly depending on the ultimate timing and nature of any settlements. We cannot currently provide an estimate of the range of possible outcomes. For more information relating to certain tax audits, please refer to note 13 "Guarantees and Contingencies". As at March 31, 2018, we have provided $28.3 million (June 30, 2017—$22.1 million) in respect of both additional foreign taxes or deferred income tax liabilities for temporary differences related to the undistributed earnings of certain non-United States subsidiaries, and planned periodic repatriations from certain United States and German subsidiaries, that will be subject to withholding taxes upon distribution. We have not provided for additional foreign withholding taxes or deferred income tax liabilities related to undistributed earnings of all other non-Canadian subsidiaries, since such earnings are considered permanently invested in those subsidiaries, or are not subject to withholding taxes. It is not practicable to reasonably estimate the amount of additional deferred income tax liabilities or foreign withholding taxes that may be payable should these earnings be distributed in the future. The effective tax rate decreased to a provision of 25.5% for the three months ended March 31, 2018, from a provision of 37.9% for the three months ended March 31, 2017. Tax expense increased by $6.9 million, primarily due to (i) the impact of changes in US tax legislation in Fiscal 2018 resulting in a provisional expense of $4.7 million (see below), (ii) an increase of $8.2 million on account of the Company having higher income before taxes, including the impact of foreign tax rates, and (iii) an increase of $1.4 million relating to differences in tax filings from provisions, offset by (i) a decrease of $5.7 million resulting from the net impact of reversals and accruals of reserves, and (ii) a decrease of $1.2 million relating to a decrease in amortization of deferred charges. The remainder of the difference was due to normal course movements and non-material items. The effective tax rate increased to a provision of 35.8% for the nine months ended March 31, 2018, compared to a recovery of 496.3% for the nine months ended March 31, 2017. The increase in tax expense of $916.0 million was primarily due to (i) a significant tax benefit of $876.1 million resulting from the Fiscal 2017 internal reorganization as described below which did not reoccur in Fiscal 2018, (ii) the impact of changes in US tax legislation in Fiscal 2018 resulting in a provisional charge of $20.0 million (see below), and (iii) an increase of $25.3 million on account of the Company having higher income before taxes, including the impact of foreign tax rates, offset by (i) a decrease of $0.5 million resulting from the net impact of reversals and accruals of reserves, (ii) a decrease of $1.2 million relating to differences in tax filings from provisions, and (iii) a decrease of $3.3 million relating to a decrease in amortization of deferred charges. The remainder of the difference was due to normal course movements and non-material items. In July 2016, we implemented a reorganization of our subsidiaries worldwide with the view to continuing to enhance operational and administrative efficiencies through further consolidated ownership, management, and development of our intellectual property (IP) in Canada, continuing to reduce the number of entities in our group and working towards our objective of having a single operating legal entity in each jurisdiction. A significant tax benefit of $876.1 million, associated primarily with the recognition of a net deferred tax asset arising from the entry of the IP into Canada, was recognized in the first quarter of Fiscal 2017. For more information relating to this, please refer to our Annual Report on Form 10-K for the year ended June 30, 2017. On December 22, 2017, the United States enacted tax reform legislation through the Tax Cuts and Jobs Act, which significantly changed the existing US tax laws, including a reduction in the federal corporate tax rate from 35% to 21%, and the transition of US international taxation from a worldwide tax system to a territorial tax system. As a result of the enactment of the legislation, the Company incurred a provisional one-time tax expense of $4.7 million for the three months ended March 31, 2018 and $20.0 million for the nine months ended March 31, 2018, respectively, primarily related to the transition tax on accumulated foreign earnings and the re-measurement of certain deferred tax assets and liabilities. The portion of this anticipated increase to tax expense attributable to the transition tax is payable over a period of up to eight years. The impact of the $20.0 million adjustment resulting from the US legislation on the effective tax rate is an increase of 6.0% for the three months ended March 31, 2018 and an increase of 7.1% for the nine months ended March 31, 2018. The $20.0 million is a provisional amount in respect of rate change, Alternative Minimum Tax (AMT), and foreign earnings in accordance with Staff Accounting Bulletin 118 “Income Tax Accounting Implications of the Tax Cuts and Jobs Act” (SAB 118). The finalization of the provisional one-time amount is pending finalization of the re-assessment of the timing of reversals of certain deferred tax assets and liabilities and additional considerations related to undistributed foreign earnings and evaluating whether any portion of our existing AMT credit carryforwards are not expected to be refundable as a result of the repeal of corporate AMT. Additional information such as final Fiscal 2018 income and detailed earnings and profits calculations for foreign subsidiaries may result in changes to the provisional amount during the SAB 118 measurement period. The Company continues to assess the impact of the new law on its consolidated financial statements and anticipates finalizing the determination on or before December 22, 2018 in accordance with SAB 118.

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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 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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