XML 29 R16.htm IDEA: XBRL DOCUMENT v3.22.1
Income Taxes
 12 Months Ended
Mar. 31, 2022
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The Company is incorporated in Switzerland but operates in various countries with differing tax laws and rates. Further, a portion of the Company's income before taxes and the provision for (benefit from) income taxes is generated outside of Switzerland.
Income from continuing operations before income taxes for fiscal years 2022, 2021 and 2020 is summarized as follows (in thousands):
 Years Ended March 31,
 202220212020
Swiss$579,258 $984,185 $238,303 
Non-Swiss196,560 163,935 86,023 
Income before taxes$775,818 $1,148,120 $324,326 
The provision for (benefit from) income taxes is summarized as follows (in thousands):
Years Ended March 31,
202220212020
Current:
Swiss$59,659 $121,199 $5,474 
Non-Swiss44,094 45,056 29,078 
Deferred:
Swiss29,198 31,558 (153,210)
Non-Swiss(1,646)3,050 (6,739)
Provision for (benefit from) income taxes$131,305 $200,863 $(125,397)
The difference between the provision for (benefit from) income taxes and the expected tax provision (tax benefit) at the statutory income tax rate of 8.5% is reconciled below (in thousands):
 Years Ended March 31,
 202220212020
Expected tax provision at statutory income tax rates$65,945 $97,590 $27,568 
Income taxes at different rates61,296 88,760 (5,592)
Research and development tax credits(5,957)(3,844)(4,692)
Executive compensation4,683 4,821 1,582 
Stock-based compensation(9,141)(3,161)(2,735)
Deferred tax effects from TRAF— 1,944 (206,792)
Valuation allowance887 (247)(538)
Restructuring charges / (credits)— (5)12 
Unrecognized tax benefits16,577 15,978 64,683 
Audit settlement(3,655)— — 
Other, net670 (973)1,107 
Provision for (benefit from) income taxes$131,305 $200,863 $(125,397)
Deferred income tax assets and liabilities consist of the following (in thousands):
 March 31,
 20222021
Deferred tax assets:  
Tax attributes carryforward$34,736 $42,482 
Accruals88,060 79,884 
Depreciation and amortization585 1,628 
Tax step-up of goodwill from TRAF118,000 134,122 
Share-based compensation13,152 12,784 
Gross deferred tax assets254,533 270,900 
Valuation allowance(29,858)(28,926)
Deferred tax assets after valuation allowance224,675 241,974 
Deferred tax liabilities:  
Acquired intangible assets and other(33,008)(32,789)
Deferred tax liabilities(33,008)(32,789)
Deferred tax assets, net$191,667 $209,185 
Included in tax attributes carryforward above are net operating loss and tax credit carryforwards.
Management regularly assesses the ability to realize deferred tax assets recorded in the Company's entities based upon the weight of available evidence, including such factors as recent earnings history and expected future taxable income. In the event that the Company changes its determination as to the amount of deferred tax assets that can be realized, the Company will adjust its valuation allowance with a corresponding impact to the provision for income taxes in the period in which such determination is made.
The Company had a valuation allowance against deferred tax assets of $29.9 million at March 31, 2022, compared to $28.9 million at March 31, 2021. The Company had a valuation allowance of $29.7 million as of March 31, 2022 against deferred tax assets in the state of California, an increase from $28.5 million as of March 31, 2021 from activities during the year. The remaining valuation allowance primarily represents $0.2 million for various tax attribute carryforwards. The Company determined that it is more likely than not that the Company would not generate sufficient taxable income in the future to utilize such deferred tax assets.
As of March 31, 2022, the Company had foreign net operating loss and tax credit carryforwards for income tax purposes of $81.9 million and $74.0 million, respectively. Unused net operating loss carryforwards will expire at various dates beginning in fiscal year 2029. Certain net operating loss carryforwards in the United States relate to acquisitions and, as a result, are limited in the amount that can be utilized in any one year. The tax credit carryforwards will begin to expire in fiscal year 2025.
Swiss income taxes and non-Swiss withholding taxes associated with the repatriation of earnings or for other temporary differences related to investments in non-Swiss subsidiaries have not been provided for, as the Company intends to reinvest the earnings of such subsidiaries indefinitely. If these earnings were distributed to Switzerland in the form of dividends or otherwise, or if the shares of the relevant non-Swiss subsidiaries were sold or otherwise transferred, the Company may be subject to additional Swiss income taxes and non-Swiss withholding taxes. As of March 31, 2022, the cumulative amount of unremitted earnings of non-Swiss subsidiaries for which no income taxes have been provided is approximately $245.6 million. The amount of unrecognized deferred income tax liability related to these earnings is estimated to be approximately $6.0 million.
The Company follows a two-step approach in recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon ultimate settlement.
As of March 31, 2022 and 2021, the total amount of unrecognized tax benefits due to uncertain tax positions was $176.0 million and $160.3 million, respectively, all of which would affect the effective income tax rate if recognized.
As of March 31, 2022 and 2021, the Company had $83.4 million and $59.2 million, respectively, in non-current income taxes payable, including interest and penalties, related to the Company's income tax liability for uncertain tax positions.
The aggregate changes in gross unrecognized tax benefits in fiscal years 2022, 2021 and 2020 were as follows (in thousands).
March 31, 2019$76,549 
Lapse of statute of limitations(3,501)
Decreases in balances related to tax positions taken during prior years(679)
Increases in balances related to tax positions taken during the year71,128 
March 31, 2020$143,497 
Lapse of statute of limitations(4,024)
Decreases in balances related to tax positions taken during prior years— 
Increases in balances related to tax positions taken during the year23,780 
March 31, 2021$163,253 
Lapse of statute of limitations(4,232)
Settlements with taxing authorities(2,015)
Increases in balances related to tax positions taken during the year22,366 
March 31, 2022$179,372 
Fiscal year 2020 includes gross unrecognized tax benefits recorded as a result of the enactment of the Tax Reform and AHV Financing ("TRAF") in Switzerland.
The Company recognizes interest and penalties related to unrecognized tax positions in income tax expense. The Company recognized $1.5 million, $1.1 million, and $2.0 million in interest and penalties in income tax expense during fiscal years 2022, 2021 and 2020, respectively. As of March 31, 2022 and 2021, the Company had $3.6 million, and $4.9 million, respectively, of accrued interest and penalties related to uncertain tax positions.
The Company files Swiss and foreign tax returns. The Company received final tax assessments in Switzerland through fiscal year 2019. For other material foreign jurisdictions such as the United States and China, the Company is generally not subject to tax examinations for years prior to fiscal year 2019 and calendar year 2019, respectively. In the United States, the federal and state tax agencies have the authority to examine periods prior to fiscal year 2019, to the extent allowed by law, where tax attributes were generated, carried forward, and being utilized in subsequent years. The Company is under examination in foreign tax jurisdictions. If the examinations are resolved unfavorably, there is a possibility they may have a material negative impact on its results of operations. In fiscal year 2022, uncertain tax positions decreased by $4.2 million from an effective settlement of an income tax audit in a foreign jurisdiction.
Although the Company has adequately provided for uncertain tax positions, the provisions on these positions may change as revised estimates are made or the underlying matters are settled or otherwise resolved. During the next 12 months, it is reasonably possible that the amount of unrecognized tax benefits could increase or decrease significantly due to changes in tax law in various jurisdictions, new tax audits and changes in the U.S. Dollar as compared to other currencies. Excluding these factors, uncertain tax positions may decrease by as much as $4.2 million primarily from the lapse of the statutes of limitations in various jurisdictions during the next 12 months.