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INCOME TAXES | 3 Months Ended
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Sep. 30, 2022
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES The Company’s effective tax rate for the three months ended September 30, 2022, was (40.4)%, compared to a provision of 24.8% for the three months ended September 30, 2021. The Company’s effective tax rate for the three months ended September 30, 2022, differs from the Canadian statutory rate of 26.5% primarily due to the pre-tax loss created by the mark-to-market valuation on the derivatives not designated as hedges that the Company entered into in connection with the proposed Micro Focus Acquisition, and the inability to recognize a majority of the mark-to-market losses for tax purposes (see Note 17 “Derivative Instruments and Hedging Activities”). The mark-to-market losses are considered capital losses for tax purposes and require capital income to be recognized. Therefore we recorded a valuation allowance on the portion of the losses that are not supportable by capital gains. Other items impacting the rate include provision to return adjustments, a net increase in uncertain tax positions, and permanent items such as disallowed stock-based compensation and foreign passive income inclusion, partially offset by research and development credits. The Company’s effective tax rate for the three months ended September 30, 2021, differs from the Canadian statutory rate primarily due to research and development credits, partially offset by US Base Erosion and Anti-Abuse Tax (US BEAT). As of September 30, 2022, the gross amount of unrecognized tax benefits accrued is $58.9 million, which is inclusive of interest and penalties accrued of $8.6 million (June 30, 2022 — $54.1 million and $8.4 million, respectively). We believe that it is reasonably possible that the gross unrecognized tax benefit could decrease by $6.8 million in the next 12 months, 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. We are subject to income tax audits in all major taxing jurisdictions in which we operate, and remain subject to income tax audits by applicable tax authorities for a certain length of time following the tax year to which those tax filings relate. We currently have income tax audits open in Canada, the United States, Germany and other immaterial jurisdictions. The earliest fiscal years open for examination for our major jurisdictions are 2012 for Canada, 2016 for the United States and 2012 for Germany. As of December 31, 2021, the Fiscal 2015 and Fiscal 2016 tax years for Luxembourg became statute barred. 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 Canada audits are included in Note 14 “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 income tax audits, please refer to Note 14 “Guarantees and Contingencies.” As of September 30, 2022, we have recognized a provision of $20.7 million (June 30, 2022—$19.9 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 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.

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