XML 40 R25.htm IDEA: XBRL DOCUMENT
v3.8.0.1

Note 17 - Income Taxes | 12 Months Ended
--- | ---
Jan. 31, 2018
Notes to Financial Statements |
Income Tax Disclosure [Text Block] | Note 17 - Income Taxes Income before income taxes is earned in the following tax jurisdictions:
|  |  | January 31, 2018 |  |  |  | January 31, 2017 |  |  |  | January 31, 2016 |
Canada |  |  | 17,964 |  |  |  | 19,560 |  |  |  | 13,933 |
United States |  |  | 6,203 |  |  |  | 2,670 |  |  |  | 4,773 |
Other countries |  |  | 10,581 |  |  |  | 9,270 |  |  |  | 9,064 |
|  |  | 34,748 |  |  |  | 31,500 |  |  |  | 27,770 |
Income tax expense is incurred in the following jurisdictions:
|  |  | January 31, 2018 |  |  |  | January 31, 2017 |  |  |  | January 31, 2016 |
Current income tax expense |  |  |  |  |  |  |  |  |  |  |  |
Canada |  |  | 1,243 |  |  |  | 447 |  |  |  | 94 |
United States |  |  | 494 |  |  |  | 873 |  |  |  | 70 |
Other countries |  |  | 4,835 |  |  |  | 2,702 |  |  |  | 1,279 |
|  |  | 6,572 |  |  |  | 4,022 |  |  |  | 1,443 |
Deferred income tax expense (recovery) |  |  |  |  |  |  |  |  |  |  |  |
Canada |  |  | 2,051 |  |  |  | 4,251 |  |  |  | 3,493 |
United States |  |  | 1,876 |  |  |  | 1,272 |  |  |  | 800 |
Other countries |  |  | (2,630 | ) |  |  | (1,883 | ) |  |  | 1,472 |
|  |  | 1,297 |  |  |  | 3,640 |  |  |  | 5,765 |
|  |  | 7,869 |  |  |  | 7,662 |  |  |  | 7,208 |
On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act makes broad and complex changes to the U.S. tax code, including, but not limited to, ( 1 ) reducing the U.S. federal corporate tax rate from 35 percent to 21 percent; ( 2 ) eliminating the corporate alternative minimum tax (AMT) and changing how existing AMT credits can be realized; ( 3 ) requiring companies to pay a one -time transition tax on certain unrepatriated earnings of foreign subsidiaries; ( 4 ) creating a new limitation on deductible interest expense; ( 5 ) changing rules related to uses and limitations of net operating loss carryforwards created in tax years beginning after December 31, 2017; ( 6 ) requiring a current inclusion in U.S. federal taxable income of certain earnings of controlled foreign corporations; ( 7 ) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries; and ( 8 ) creating the base erosion anti-abuse, a new minimum tax. Due to the timing of the enactment and the complexity involved in applying the provisions of the Tax Act, we have made reasonable estimates of the effects and recorded provisional amounts in our consolidated financial statements as of January 31, 2018. As we collect and prepare necessary data, and interpret the Tax Act and any additional guidance issued by the U.S. Treasury Department, the Internal Revenue Service, and other standard-setting bodies, we may make adjustments to the provisional amounts. Those adjustments are not expected to materially impact our provision for income taxes and effective tax rate in the period in which the adjustments are made. The accounting for the tax effects of the Tax Act will be completed in fiscal 2019. Additional impacts from the enactment of the Tax Act will be recorded as they are identified during the measurement period as provided for in Staff Accounting Bulletin 118 (“SAB 118” ). The following amounts for the income tax effects of the Tax Act have been recorded as of January 31, 2018: Deferred and current tax effects The Tax Act reduces the U.S. statutory tax rate from 35% to 21% effective January 1, 2018. Accordingly, we have remeasured our deferred taxes as of January 31, 2018 to reflect the reduced rate that will apply in future periods when these deferred taxes are settled or realized. In addition, we have remeasured a related uncertain tax position to reflect the reduced tax rate that would apply in future periods. We recognized a tax benefit of $0.7 million to reflect the reduced U.S. tax rate and other effects of the Tax Act. Alternative minimum tax The Tax Act has eliminated AMT. Existing AMT credits are now refundable if not used to offset taxes owing. Consequently, we have recorded a decrease related to deferred tax assets of $1.9 million and a corresponding increase to other long-term assets to reflect the refundable nature of these credits. The net tax recovery recognized in 2018 related to the Tax Act was $0.7 million. We have reviewed the earnings and profits calculations of our foreign controlled subsidiaries under U.S. ownership and have determined that there are no untaxed earnings that are required to be repatriated and therefore no transition tax has been recorded. As we complete our analysis of the Tax Act and incorporate additional guidance that may be issued by the U.S. Treasury Department, the IRS or other standard-setting bodies, and as we finalize fiscal 2018 income tax filings and detailed earnings and profit calculations for foreign subsidiaries, there may be changes to the provisional amounts during the SAB 118 measurement period which are not expected to be material. Income tax expense for 2018, 2017 and 2016 was 23%, 24% and 26% of income before income taxes, respectively, with current income tax expense being 19%, 13% and 5% of income before income taxes, respectively. Current tax expense increased in 2018 compared to 2017 primarily due to a charge of $1.5 million attributable to changes in the estimate of our uncertain tax positions, $0.8 million in Canada as a result of less income being sheltered by loss carry-forwards and other attributes and $0.3 million in adjustments in respect to income tax of previous periods. Current tax expense increased in 2017 compared to 2016 primarily due to a $1.7 million increase in expenses not deductible for tax purposes, an increase of $0.7 million attributable to changes in the estimate of our uncertain tax positions partially offset by an increase of $0.5 million in adjustments in respect to income tax of previous periods. Deferred income tax expense decreased in 2018 compared to 2017 primarily due to $1.1 million in tax rate reductions in the US and EMEA and $0.7 million reduction in deferred tax charges and recognition of deferred tax assets related to stock compensation. Deferred income tax expense decreased in 2017 compared to 2016 primarily due to changes in estimates of valuation allowances partially offset by the effect of tax rate reductions against certain deferred tax assets in EMEA. The components of the deferred income tax assets and liabilities are as follows:
|  |  | January 31, 2018 |  |  |  | January 31, 2017 |
Assets |  |  |  |  |  |  |  |
Accruals not currently deductible |  |  | 9,060 |  |  |  | 11,975 |
Accumulated net operating losses |  |  | 13,868 |  |  |  | 17,571 |
Corporate minimum taxes |  |  | - |  |  |  | 1,767 |
Research and development and other tax credits and expenses |  |  | 1,580 |  |  |  | 3,424 |
Other timing differences |  |  | - |  |  |  | 683 |
Total deferred income tax assets |  |  | 24,508 |  |  |  | 35,420 |
Liabilities |  |  |  |  |  |  |  |
Difference between tax and accounting basis of intangible assets |  |  | (12,976 | ) |  |  | (23,393 | )
Difference between tax and accounting basis of property and equipment |  |  | (6,933 | ) |  |  | (2,655 | )
Uncertain tax positions incurred in loss years |  |  | (133 | ) |  |  | (205 | )
Other timing differences |  |  | (134 | ) |  |  | - |
Total deferred income tax liabilities |  |  | (20,176 | ) |  |  | (26,253 | )
Net deferred income taxes |  |  | 4,332 |  |  |  | 9,167 |
Valuation allowance |  |  | (11,257 | ) |  |  | (12,115 | )
Net deferred income taxes, net of valuation allowance |  |  | (6,925 | ) |  |  | (2,948 | )
As at January 31, 2018, we have not accrued for foreign withholding taxes and Canadian income taxes applicable to approximately $284.1 million of unremitted earnings of subsidiaries operating outside of Canada. These earnings, which we consider to be invested indefinitely, will become subject to these taxes if and when they are remitted as dividends or if we sell our stock in the subsidiaries. If we decide to repatriate the foreign earnings, we would need to adjust our income tax provision in the period we determined that the earnings will no longer be indefinitely invested outside Canada. The provision (recovery) for income taxes varies from the expected provision at the statutory rates for the reasons detailed in the table below:
|  |  | January 31, 2018 |  |  |  | January 31, 2017 |  |  |  | January 31, 2016 |
Net income before taxes |  |  | 34,748 |  |  |  | 31,500 |  |  |  | 27,770 |
Combined basic Canadian statutory rates |  |  | 26.5 | % |  |  | 26.5 | % |  |  | 26.5 | %
Income tax expense based on the above rates |  |  | 9,207 |  |  |  | 8,347 |  |  |  | 7,359 |
Increase (decrease) in income taxes resulting from: |  |  |  |  |  |  |  |  |  |  |  |
Permanent differences including amortization of intangible assets |  |  | (1,870 | ) |  |  | (882 | ) |  |  | (2,593 | )
Effect of differences between Canadian and foreign tax rates |  |  | 595 |  |  |  | 213 |  |  |  | 169 |
Effect of rate changes on current year timing differences |  |  | (571 | ) |  |  | 495 |  |  |  | 1,150 |
Adjustments relating to previous periods |  |  | (152 | ) |  |  | (431 | ) |  |  | 36 |
Increase (decrease) in tax reserves |  |  | 1,954 |  |  |  | 492 |  |  |  | (172 | )
Valuation allowance |  |  | (1,564 | ) |  |  | (1,580 | ) |  |  | (41 | )
Stock compensation |  |  | (135 | ) |  |  | 351 |  |  |  | 345 |
Deferred tax charges |  |  | 179 |  |  |  | 400 |  |  |  | 270 |
Other, including foreign exchange |  |  | 226 |  |  |  | 257 |  |  |  | 685 |
Income tax expense |  |  | 7,869 |  |  |  | 7,662 |  |  |  | 7,208 |
We have income tax loss carry forwards which expire as follows:
Expiry year |  |  | United States |  |  |  | EMEA |  |  |  | Asia Pacific |  |  |  | Total |
2019 |  |  | 883 |  |  |  | - |  |  |  | 732 |  |  |  | 1,615 |
2020 |  |  | - |  |  |  | - |  |  |  | 291 |  |  |  | 291 |
2021 |  |  | - |  |  |  | - |  |  |  | 12 |  |  |  | 12 |
2022 |  |  | 1 |  |  |  | - |  |  |  | 23 |  |  |  | 24 |
2023 |  |  | 190 |  |  |  | 1,507 |  |  |  | - |  |  |  | 1,697 |
Thereafter |  |  | 6,686 |  |  |  | 54,657 |  |  |  | 6,361 |  |  |  | 67,704 |
|  |  | 7,760 |  |  |  | 56,164 |  |  |  | 7,419 |  |  |  | 71,343 |
The following is a tabular reconciliation of the total estimated liability associated with uncertain tax positions taken:
|  |  | January 31, 2018 |  |  |  | January 31, 2017 |
Liability, beginning of year |  |  | 6,388 |  |  |  | 5,768 |
Gross increases – current period |  |  | 3,368 |  |  |  | 1,939 |
Lapsing due to statutes of limitations |  |  | (779 | ) |  |  | (1,319 | )
Liability, end of year |  |  | 8,977 |  |  |  | 6,388 |
We have identified accruals of $9.0 million with respect to uncertain tax positions as at January 31, 2018. It is possible that these uncertain tax positions will not be realized in which case up to $8.7 million of the recorded liability will decrease the effective tax rate in future years if this liability is reversed. We believe that it is reasonably possible that $1.0 million of the uncertain tax positions could decrease tax expense in the next 12 months relating primarily to tax years becoming statute barred for purposes of future tax examinations by local taxing jurisdictions. We recognize accrued interest and penalties related to uncertain tax positions as a current tax expense. As at January 31, 2018 and January 31, 2017, the unrecognized tax positions have resulted in no material liability for estimated interest and penalties. Descartes and our subsidiaries file their tax returns as prescribed by the tax laws of the jurisdictions within which they operate. We are no longer subject to income tax examinations by tax authorities in our major tax jurisdictions as follows:
|  |  | Years No Longer Subject to Audit |
Tax Jurisdiction |  |  |  |
United States Federal |  |  | 2014 and prior |
Canada |  |  | 2013 and prior |
United Kingdom |  |  | 2014 and prior |
Sweden |  |  | 2011 and prior |
Norway |  |  | 2014 and prior |
Netherlands |  |  | 2014 and prior |
Belgium |  |  | 2014 and prior |

X
- References No definition available. + Details
Name: | us-gaap_DisclosureTextBlockAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- 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
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration