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Income Taxes
9 Months Ended
Oct. 31, 2014
Income Tax Disclosure [Abstract]  
Income Taxes
Income Taxes
Effective Tax Rate
The Company computes its year-to-date provision for income taxes by applying the estimated annual effective tax rate to year to date pretax loss and adjusts the provision for discrete tax items recorded in the period. For the nine months ended October 31, 2014, the Company reported a tax provision of $37.3 million on a pretax loss of $159.6 million, which resulted in a negative effective tax rate of 23 percent. The tax provision recorded was primarily related to income taxes in profitable jurisdictions outside of the U.S.
For the nine months ended October 31, 2013, the Company reported a tax benefit of $119.2 million on a pretax loss of $234.8 million, which resulted in an effective tax rate of 51 percent. The Company’s effective tax rate substantially differed from the federal statutory tax rate of 35 percent primarily due to a partial release of the tax valuation allowance related to the acquisition of ExactTarget in the second quarter of fiscal 2014. The valuation allowance was established in the third quarter of fiscal 2013. The net deferred tax liability from acquisitions provided an additional source of income to support the realizability of the Company’s pre-existing deferred tax assets and as a result, the Company released a portion of its valuation allowance and recorded a tax benefit of $135.5 million for the nine months ended October 31, 2013.
Tax Benefits Related to Stock-Based Compensation
The total income tax benefit related to stock-based awards was $125.7 million and $104.3 million for the nine months ended October 31, 2014 and 2013, respectively, the majority of which was not recognized as a result of the valuation allowance.
Unrecognized Tax Benefits and Other Considerations
The Company records liabilities related to its uncertain tax positions. Tax positions for the Company and its subsidiaries are subject to income tax audits by multiple tax jurisdictions throughout the world. Certain prior year tax returns are currently being examined by various taxing authorities in countries including the United States, Canada, Japan, Germany and the United Kingdom. To date, the Company has not received any material proposed adjustments.
The Company believes that it has provided adequate reserves for its income tax uncertainties in all open tax years. In the next 12 months, the Company does not expect the unrecognized tax benefits balance to materially change.