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Income Taxes | 12 Months Ended
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Aug. 31, 2017
Income Taxes [Abstract] |
Income Taxes | ﻿ ﻿ 15.INCOME TAXES ﻿ Our benefit (provision) for income taxes consisted of the following (in thousands):
﻿ |  |  |  |  |  |
﻿ |  |  |  |  |  |
﻿YEAR ENDED |  |  |  |  |  |
﻿AUGUST 31, |  | 2017 |  | 2016 |  | 2015
﻿Current: |  |  |  |  |  |
﻿Federal | $ | 69 | $ | (380) | $ | (220)
﻿State |  | (71) |  | (197) |  | (208)
﻿Foreign |  | (2,320) |  | (2,553) |  | (2,691)
﻿ |  | (2,322) |  | (3,130) |  | (3,119)
﻿ |  |  |  |  |  |
﻿Deferred: |  |  |  |  |  |
﻿Federal |  | (1,227) |  | (1,584) |  | (3,239)
﻿State |  | (17) |  | 70 |  | (138)
﻿Foreign |  | 468 |  | 50 |  | 200
﻿Operating loss carryforward |  | 6,964 |  | - |  | -
﻿Valuation allowance |  | (129) |  | (301) |  | -
﻿ |  | 6,059 |  | (1,765) |  | (3,177)
﻿ | $ | 3,737 | $ | (4,895) | $ | (6,296)
﻿ The allocation of our total income tax provision (benefit) is as follows (in thousands):
﻿ |  |  |  |  |  |
﻿ |  |  |  |  |  |
﻿YEAR ENDED |  |  |  |  |  |
﻿AUGUST 31, |  | 2017 |  | 2016 |  | 2015
﻿Net income (loss) | $ | 3,737 | $ | (4,895) | $ | (6,296)
﻿Other comprehensive income |  | 37 |  | 115 |  | 52
﻿ | $ | 3,774 | $ | (4,780) | $ | (6,244)
﻿ Income (loss) before income taxes consisted of the following (in thousands):
﻿ |  |  |  |  |  |
﻿ |  |  |  |  |  |
﻿YEAR ENDED |  |  |  |  |  |
﻿AUGUST 31, |  | 2017 |  | 2016 |  | 2015
﻿United States | $ | (10,126) | $ | 9,328 | $ | 15,073
﻿Foreign |  | (783) |  | 2,583 |  | 2,339
﻿ | $ | (10,909) | $ | 11,911 | $ | 17,412
﻿ The differences between income taxes at the statutory federal income tax rate and the consolidated income tax rate reported in our consolidated statements of operations were as follows: ﻿
﻿ |  |  |
YEAR ENDED AUGUST 31, | 2017 | 2016 | 2015
﻿Federal statutory income tax rate | 35.0% | (35.0)% | (35.0)%
﻿State income taxes, net of federal effect | 2.3 | (1.9) | (2.3)
﻿Valuation allowance | (1.2) | (2.5) | -
﻿Foreign jurisdictions tax differential | (1.9) | 0.6 | (1.2)
﻿Tax differential on income subject to both U.S. and foreign taxes | 0.4 | (1.9) | (0.5)
﻿Effect of claiming foreign tax credits instead of deductions for prior years | - | - | 3.2
﻿Uncertain tax positions | 4.4 | 0.4 | 0.9
﻿Non-deductible executive compensation | (1.6) | - | (0.2)
﻿Non-deductible meals and entertainment | (2.2) | (1.6) | (1.1)
﻿Other | (0.9) | 0.8 | -
﻿ | 34.3% | (41.1)% | (36.2)%
﻿ In prior fiscal years, we elected to take deductions on our U.S. federal income tax returns for foreign income taxes paid, rather than claiming foreign tax credits. During those years we either generated or used net operating loss carryforwards and were therefore unable to utilize foreign tax credits. In fiscal 2011, we began claiming foreign tax credits on our U.S. federal income tax returns. Although we could not utilize the credits we claimed for fiscal 2012 and fiscal 2011 in those respective years, we concluded it was more likely than not that these foreign tax credits will be utilized in the future. ﻿ Our overall U.S. taxable income and foreign source income for fiscal 2014 and 2013 were sufficient to utilize all of the foreign tax credits generated during those fiscal years, plus additional credits generated in prior years. Accordingly, we amended our U.S. federal income tax returns from fiscal 2003 through fiscal 2010 to claim foreign tax credits instead of foreign tax deductions. In fiscal 2015, we finalized the calculations of the impact of amending previously filed federal income tax returns to realize foreign tax credits previously treated as expired under the tax positions taken in the original returns. The income tax benefit recognized from these foreign tax credits totaled $0.6 million in fiscal 2015. ﻿ We recognized tax benefits from deductions for stock-based compensation in excess of the corresponding expense recorded for financial statement purposes. Instead of reducing our income tax expense for these benefits, we recorded $0.2 million and $0.1 million for the fiscal years ending August 31, 2017 and 2015. Tax expense related to stock-based compensation recorded in additional paid-in capital for fiscal 2016 was insignificant. Following the adoption of ASU 2016-09 in fiscal 2018, the benefits and deductions resulting from stock-based compensation in excess of the corresponding book expense will be recorded as a component of our income tax provision or benefit for the period. ﻿ The significant components of our deferred tax assets and liabilities were comprised of the following (in thousands):
﻿ |  |  |  |
﻿ |  |  |  |
﻿AUGUST 31, |  | 2017 |  | 2016
﻿Deferred income tax assets: |  |  |  |
﻿Net operating loss carryforward | $ | 10,310 | $ | -
﻿Sale and financing of corporate |  |  |  |
﻿headquarters |  | 8,420 |  | 9,013
﻿Foreign income tax credit |  |  |  |
﻿carryforward |  | 4,382 |  | 2,784
﻿Stock-based compensation |  | 2,954 |  | 2,674
﻿Inventory and bad debt reserves |  | 1,643 |  | 1,147
﻿Bonus and other accruals |  | 1,574 |  | 1,017
﻿Deferred revenue |  | 510 |  | 405
﻿Other |  | 337 |  | 617
﻿Total deferred income tax assets |  | 30,130 |  | 17,657
﻿Less: valuation allowance |  | (612) |  | (301)
﻿Net deferred income tax assets |  | 29,518 |  | 17,356
﻿ |  |  |  |
﻿Deferred income tax liabilities: |  |  |  |
﻿Intangibles step-ups – indefinite lived |  | (8,539) |  | (8,528)
﻿Intangibles step-ups – definite lived |  | (7,607) |  | (6,003)
﻿Intangible asset impairment and |  |  |  |
﻿amortization |  | (4,875) |  | (4,505)
﻿Property and equipment depreciation |  | (4,960) |  | (3,367)
﻿Deferred commissions |  | (2,195) |  | -
﻿Unremitted earnings of foreign |  |  |  |
﻿subsidiaries |  | (492) |  | (574)
﻿Other |  | (236) |  | (399)
﻿Total deferred income tax liabilities |  | (28,904) |  | (23,376)
﻿Net deferred income taxes | $ | 614 | $ | (6,020)
﻿ Deferred income tax amounts are recorded as follows in our consolidated balance sheets (in thousands):
﻿ |  |  |  |
﻿ |  |  |  |
﻿AUGUST 31, |  | 2017 |  | 2016
﻿Other long-term assets | $ | 1,647 | $ | 650
﻿Long-term liabilities |  | (1,033) |  | (6,670)
﻿Net deferred income tax liability | $ | 614 | $ | (6,020)
﻿ As of August 31, 2016, we had utilized all of our U.S. federal net operating loss carryforwards. However, we incurred a federal net operating loss of $17.5 million in fiscal 2017 and acquired a federal net operating loss carryforward of $7.7 million in connection with the purchase of the stock of Jhana Education (Note 2) in fiscal 2017. Our U.S. federal net operating loss carryforwards were comprised of the following at August 31, 2017 (in thousands): ﻿ ﻿
﻿ |  |  |  |  |  |  |  |  |  |
﻿ |  |  |  |  |  |  |  |  |  |
﻿ |  | Loss Carryforward |  |  |  | Loss |  | Loss |  | Operating
﻿Loss Carryforward |  | Expires |  |  |  | Deductions |  | Deductions |  | Loss Carried
﻿for Year Ended |  | August 31, |  | Amount |  | in Prior Years |  | in Current Year |  | Forward
﻿December 31, 2012 |  | 2031 | $ | 243 | $ | - | $ | - | $ | 243
﻿December 31, 2013 |  | 2032 |  | 553 |  | - |  | - |  | 553
﻿December 31, 2014 |  | 2033 |  | 1,285 |  | - |  | - |  | 1,285
﻿December 31, 2015 |  | 2034 |  | 1,491 |  | - |  | - |  | 1,491
﻿December 31, 2016 |  | 2035 |  | 3,052 |  | - |  | - |  | 3,052
﻿July 15, 2017 |  | 2036 |  | 1,117 |  | - |  | - |  | 1,117
﻿ Acquired NOL |  |  |  | 7,741 |  | - |  | - |  | 7,741
﻿August 31, 2017 |  | 2037 |  | 17,500 |  | - |  | - |  | 17,500
﻿ |  |  | $ | 25,241 | $ | - | $ | - | $ | 25,241
﻿ We have U.S. state net operating loss carryforwards generated in fiscal 2009 and before in various jurisdictions that expire primarily between September 1, 2017 and August 31, 2029. The U.S. state net operating loss carryforwards generated in fiscal 2017 primarily expire on August 31, 2037. The state net operating loss carryforwards acquired through the purchase of Jhana Education stock expire between August 31, 2031 and August 31, 2036. ﻿ Our U.S. foreign income tax credit carryforwards were comprised of the following at August 31, 2017 (in thousands): ﻿
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﻿ |  |  |  |  |  |  |  |  |  |
﻿Credit Generated in |  |  |  |  |  | Credits Used |  | Credits Used |  | Credits
﻿Fiscal Year Ended |  | Credit Expires |  | Credits |  | in Prior |  | in Fiscal |  | Carried
﻿August 31, |  | August 31, |  | Generated |  | Years |  | 2017 |  | Forward
﻿2011 |  | 2021 | $ | 3,445 | $ | (859) | $ | - | $ | 2,586
﻿2012 |  | 2022 |  | 2,563 |  | (2,563) |  | - |  | -
﻿2013 |  | 2023 |  | 2,815 |  | (2,815) |  | - |  | -
﻿2014 |  | 2024 |  | 1,378 |  | (1,378) |  | - |  | -
﻿2015 |  | 2025 |  | 1,422 |  | (1,422) |  | - |  | -
﻿2016 |  | 2026 |  | 1,569 |  | (1,569) |  | - |  | -
﻿2017 |  | 2027 |  | 1,796 |  | - |  | - |  | 1,796
﻿ |  |  | $ | 14,988 | $ | (10,606) | $ | - | $ | 4,382
﻿ During the year ended August 31, 2016, we determined it was more likely than not that deferred tax assets of a foreign subsidiary would not be realized. Accordingly, we recorded a $0.3 million valuation allowance against these deferred tax assets in fiscal 2016. During fiscal 2017, we increased this valuation allowance by $0.1 million to $0.4 million, which reduced our income tax benefit for the year by $0.1 million. ﻿ We acquired federal and state net operating loss carryforwards in connection with the purchase of Jhana Education stock during fiscal 2017. Section 382 of the Internal Revenue Code limits our ability to use these acquired losses. Accordingly, we recorded valuation allowances in the amount of $0.2 million against the related deferred tax assets. Our income tax benefit for fiscal 2017 was unaffected by this valuation allowance. ﻿ We have determined that projected future taxable income is adequate to allow for realization of all deferred tax assets, except for the assets subject to the valuation allowances. We considered sources of taxable income, including future reversals of taxable temporary differences, future taxable income exclusive of reversing temporary differences and carryforwards, and reasonable, practical tax-planning strategies to generate additional taxable income. Based on the factors described above, we concluded that realization of our deferred tax assets, except those subject to the valuation allowance as described above, is more likely than not at August 31, 2017. ﻿ A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows (in thousands):
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﻿ |  |  |  |  |  |
﻿YEAR ENDED |  |  |  |  |  |
﻿AUGUST 31, |  | 2017 |  | 2016 |  | 2015
﻿Beginning balance | $ | 3,024 | $ | 3,115 | $ | 3,491
﻿Additions based on tax positions |  |  |  |  |  |
﻿related to the current year |  | 10 |  | 199 |  | 244
﻿Additions for tax positions in |  |  |  |  |  |
﻿prior years |  | 85 |  | 3 |  | 144
﻿Reductions for tax positions of prior |  |  |  |  |  |
﻿years resulting from the lapse of |  |  |  |  |  |
﻿applicable statute of limitations |  | (634) |  | (212) |  | (339)
﻿Other reductions for tax positions of |  |  |  |  |  |
﻿prior years |  | (126) |  | (81) |  | (425)
﻿Ending balance | $ | 2,359 | $ | 3,024 | $ | 3,115
﻿ The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate is $1.6 million at August 31, 2017, and $2.1 million at August 31, 2016. Included in the ending balance of gross unrecognized tax benefits at August 31, 2017 is $2.4 million related to individual states’ net operating loss carryforwards. Interest and penalties related to uncertain tax positions are recognized as components of income tax expense. The net accruals and reversals of interest and penalties increased or decreased our income tax expense by an insignificant amount in each of fiscal 2017, fiscal 2016 and fiscal 2015. The balance of interest and penalties included in other liabilities on our consolidated balance sheets at August 31, 2017 and 201 6 was $0.3 million at each date. ﻿ During the next 12 months, we expect a decrease in unrecognized tax benefits totaling $0.2 million relating to state net operating loss deductions upon the lapse of the applicable statute of limitations. ﻿ We file United States federal income tax returns as well as income tax returns in various states and foreign jurisdictions. The tax years that remain subject to examinations for our major tax jurisdictions are shown below. ﻿
﻿ 20 10-2017 | Canada and Australia
201 2-201 7 | Japan and the United Kingdom
2013-2017 | United States – state and local income tax
2014-2017 | United States – federal income tax
2016-2017 | China
﻿ 2017 | Singapore
﻿

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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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