8.	INCOME TAXES

During the first quarter of fiscal year 2015 QAD adopted ASU 2013-11. The new standard requires the netting of unrecognized tax benefits against deferred tax assets for a loss or credit that would apply in settlement of the uncertain tax position. As of October 31, 2014, the Company net $1.4 million of its uncertain tax benefits against $1.4 million of deferred tax assets on its financial statements and the total amount of unrecognized tax benefits (before netting) was $2.0 million. This amount includes penalties and interest. These unrecognized tax benefits, if recognized, will impact the Company’s effective tax rate. This liability is classified as long-term unless the liability is expected to conclude within twelve months of the reporting date. In the current quarter the Company released $0.6 million of its reserve due to the expiration of the statute of limitations. The entire release was recorded to the income statement as a discrete benefit during the quarter. In the next twelve months, due to potential settlements with a domestic tax authority related to tax credits and a foreign tax authority related to transfer pricing an estimated $0.2 million of unrecognized tax benefits may be recognized.

The Company’s policy is to recognize interest and penalties, if any, related to unrecognized tax benefits as a component of income tax expense. As of October 31, 2014, the Company has accrued approximately $0.2 million of interest and penalty expense relating to unrecognized tax benefits.

The Company files U.S. federal, state, and foreign tax returns that are subject to audit by various tax authorities. The Company is currently under audit in:

India for fiscal years ended March 31, 1998, 1999, 2008, 2009, 2010, and 2012

California for the fiscal year ended 2004

Minnesota for the fiscal years ended 2010, 2011, 2012, 2013

During the first three quarters of fiscal year 2015 the Company settled audits in the following locations:

South Africa for the fiscal year ended 2008

Thailand for the fiscal year ended 2012

India for the fiscal year ended March 31, 2011

France for the fiscal years ended 2011, 2012 and 2013

City of Wilmington, Delaware for the calendar years 2009, 2010, 2011, 2012, 2013

No material adjustments were made as a result of such settlements.