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Income Taxes
6 Months Ended
Jun. 30, 2012
Income Tax Disclosure [Abstract]  
Income Tax Disclosure [Text Block]
Income Taxes
For the six months ended June 30, 2012, income taxes were calculated using the liability method. The provision for income taxes reflects the Company’s estimate of the effective rate expected to be applicable for the full fiscal year, adjusted by any discrete events, which are reported in the period in which they occur. This estimate is re-evaluated each quarter based on our estimated tax expense for the year.
We recorded an income tax provision of $6.3 million and $4.7 million for the three months ended June 30, 2012 and 2011, respectively, representing effective income tax rates of 37% and 27%, respectively. We recorded an income tax provision of $9.1 million and $9.9 million for the six months ended June 30, 2012 and 2011, respectively, representing effective income tax rates of 37% and 14%, respectively. Our effective income tax rate during the three and six months ended June 30, 2012 differs from our statutory rate of 35% primarily due to the mix of revenue by jurisdiction and state income taxes (net of federal benefit). Our effective income tax rate during the three and six months ended June 30, 2011 differs from our statutory rate of 35% primarily due to the mix of revenue by jurisdiction, state income taxes (net of federal benefit) and the tax benefits related to a specified tax deduction that offsets a substantial portion of our litigation settlements received in the first quarter of 2011 as well as settlement of foreign tax liabilities in the second quarter of 2011.
As of June 30, 2012 approximately $7.4 million of unrecognized tax benefits would impact our effective tax rate if recognized. It is reasonably possible that approximately $0.2 million of unrecognized tax benefits will be recognized within the next twelve months. We have recorded a valuation allowance against the Arizona research and development credit, certain state net operating losses and certain foreign tax attribute carryforwards as we do not expect to be able to utilize them prior to their expiration.
We treat interest and penalties related to uncertain tax positions as a component of income tax expense. We have accrued interest and penalties related to uncertain tax positions of $(0.2) million and $0.2 million in the six months ended June 30, 2012 and 2011, respectively. As of June 30, 2012 and December 31, 2011 there are approximately $2.9 million and $3.1 million, respectively, of interest and penalty accruals related to uncertain tax positions which are reflected in the Condensed Consolidated Balance Sheet. To the extent interest and penalties are not assessed with respect to the uncertain tax positions, the accrued amounts for interest and penalties will be reduced and reflected as a reduction of the overall tax provision.
We conduct business globally and, as a result, JDA Software Group, Inc. or one or more of our subsidiaries files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. In the normal course of business we are subjected to examination by taxing authorities throughout the world, including significant jurisdictions in the United States, India and the United Kingdom. We are currently under audit in the U.S. for the 2010 and 2011 tax years. Audits are in process in India covering multiple years. The finalization of these audits has not yet occurred. However, we do not anticipate any material adjustments.
JDA Software Group, Inc. has participated in the Compliance Audit Assurance Program ("CAP") since 2007. The Internal Revenue Service has completed their review of our tax returns for 2009 and prior years. No material adjustments effecting tax expense have been made as a result of these examinations.