10-K 1 c08984e10vk.htm ANNUAL REPORT e10vk
 

 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-K
     
(Mark One)
þ
  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the fiscal year ended August 31, 2006
 
OR
 
o
  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the transition period from           to          .
Commission File Number: 001-16565
 
ACCENTURE LTD
(Exact name of Registrant as specified in its charter)
     
Bermuda
  98-0341111
(State or other jurisdiction of
incorporation or organization)
  (I.R.S. Employer Identification No.)
Canon’s Court
22 Victoria Street
Hamilton HM 12 Bermuda
(Address of principal executive offices)
(441) 296-8262
(Registrant’s telephone number, including area code)
         Securities registered pursuant to Section 12(b) of the Act:
     
Title of Each Class   Name of Each Exchange on Which Registered
     
Class A common shares, par value $0.0000225 per share
  New York Stock Exchange
 
         Securities registered pursuant to Section 12(g) of the Act:
Class X common shares, par value $0.0000225 per share
     Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes þ         No o
     Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.    Yes o         No þ
     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes þ         No o
     Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    þ
     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer þ         Accelerated filer o         Non-accelerated filer o
     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.)    Yes o         No þ
     The aggregate market value of the common equity of the registrant held by non-affiliates of the registrant on February 28, 2006 was approximately $18,788,093,481, based on the closing price of the registrant’s Class A common shares, par value $0.0000225 per share, reported on the New York Stock Exchange on such date of $32.66 per share and on the par value of the registrant’s Class X common shares, par value $0.0000225 per share.
     The number of shares of the registrant’s Class A common shares, par value $0.0000225 per share, outstanding as of October 12, 2006 was 584,360,126 (which number does not include 35,306,040 issued shares held by subsidiaries of the registrant). The number of shares of the registrant’s Class X common shares, par value $0.0000225 per share, outstanding as of October 12, 2006 was 237,733,470.
DOCUMENTS INCORPORATED BY REFERENCE
     Portions of the Proxy Statement for the 2007 Annual General Meeting of Shareholders                  Part III
 
 


 

TABLE OF CONTENTS
             
        Page
         
           
   Business     1  
   Risk Factors     20  
   Unresolved Staff Comments     36  
   Properties     36  
   Legal Proceedings     36  
   Submission of Matters to a Vote of Security Holders     36  
           
   Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities     39  
   Selected Financial Data     43  
   Management’s Discussion and Analysis of Financial Condition and Results of Operations     44  
   Quantitative and Qualitative Disclosures about Market Risk     72  
   Financial Statements and Supplementary Data     73  
   Changes in and Disagreements with Accountants on Accounting and Financial Disclosure     73  
   Controls and Procedures     73  
   Other Information     74  
           
   Directors and Executive Officers of the Registrant     75  
   Executive Compensation     75  
   Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters     75  
   Certain Relationships and Related Transactions     75  
   Principal Accounting Fees and Services     75  
Part IV
           
   Exhibits, Financial Statement Schedules     76  
 Signatures        


 

PART I
Disclosure Regarding Forward-Looking Statements
      This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”) relating to our operations and our results of operations that are based on our current expectations, estimates and projections. Words such as “expects,” “intends,” “plans,” “projects,” “believes,” “estimates” and similar expressions are used to identify these forward-looking statements. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Forward-looking statements are based upon assumptions as to future events that might not prove to be accurate. Actual outcomes and results could differ materially from what is expressed or forecast in these forward-looking statements. The reasons for these differences include changes in general economic and political conditions, including fluctuations in exchange rates, and the factors discussed below under the section entitled “Risk Factors.”
Available Information
      Our website address is www.accenture.com. We make available free of charge on the Investor Relations section of our website (http://investor.accenture.com) our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all amendments to those reports as soon as reasonably practicable after such material is electronically filed or furnished with the Securities and Exchange Commission (the “SEC”) pursuant to Section 13(a) or 15(d) of the Exchange Act. We also make available through our website other reports filed with or furnished to the SEC under the Exchange Act, including our proxy statements and reports filed by officers and directors under Section 16(a) of that Act, as well as our Code of Business Ethics. We do not intend for information contained in our website to be part of this Annual Report on Form 10-K.
      Any materials we file with the SEC may be read and copied at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, DC, 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site (http://www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.
      In this Annual Report on Form 10-K, we use the terms “Accenture,” “we,” “our Company,” “our” and “us” to refer to Accenture Ltd and its subsidiaries. All references to years, unless otherwise noted, refer to our fiscal year, which ends on August 31.
ITEM 1. BUSINESS
Overview
      Accenture is one of the world’s leading management consulting, technology services and outsourcing organizations, with approximately 140,000 employees; offices and operations in more than 150 cities in 49 countries; and revenues before reimbursements of $16.65 billion for fiscal 2006.
      Our “high performance business” strategy builds on our expertise in consulting, technology and outsourcing to help clients perform at the highest levels so they can create sustainable value for their customers, stakeholders and shareholders. We use our industry and business-process knowledge, our service offering expertise and our insight into and deep understanding of emerging technologies to identify new business and technology trends and formulate and implement solutions for clients under demanding time constraints. We help clients identify and enter new markets, increase revenues in

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existing markets, improve operational performance and deliver their products and services more effectively and efficiently.
      We operate globally with one common brand and business model designed to enable us to provide clients around the world with the same high level of service. Drawing on a combination of industry expertise, functional capabilities, alliances, global resources and technology, we deliver competitively priced, high-value services that help our clients measurably improve business performance. Our global delivery model enables us to provide a complete end-to-end delivery capability by drawing on Accenture’s global resources to deliver high-quality, cost-effective solutions to clients under demanding timeframes.
Consulting, Technology and Outsourcing Services and Solutions
      Our business is structured around five operating groups, which together comprise 17 industry groups serving clients in major industries around the world. Our industry focus gives us an understanding of industry evolution, business issues and applicable technologies, enabling us to deliver innovative solutions tailored to each client or, as appropriate, more-standardized capabilities to multiple clients.
      Our three growth platforms—business consulting, systems integration and technology, and outsourcing—are the innovation engines through which we develop our knowledge capital; build world-class skills and capabilities; and create, acquire and manage key assets central to the development of solutions for our clients. The subject matter experts within these areas work closely with the professionals in our operating groups to develop and deliver solutions to clients.
      Client engagement teams—which typically consist of industry experts, capability specialists and professionals with local market knowledge—leverage the full capabilities of our global delivery model to deliver price-competitive solutions and services.
Operating Groups
      The following table shows the organization of our five operating groups and their 17 industry groups. For financial reporting purposes, our operating groups are our reportable operating segments. We do not allocate total assets by operating group, although our operating groups do manage and control certain assets. For certain historical financial information regarding our operating groups (including certain asset information), as well as financial information by geographical areas (including long-lived asset information), see Footnote 16 (Segment Reporting) to our Consolidated Financial Statements below under “Financial Statements and Supplementary Data.”
                 
Operating Groups
 
Communications   Financial    
& High Tech   Services   Products   Resources   Government
• Communications
• Electronics & High Tech
• Media & Entertainment
  • Banking
• Capital Markets
• Insurance
  • Automotive
• Consumer Goods & Services
• Health & Life Sciences
• Industrial Equipment
• Retail & Consumer
• Transportation & Travel Services
  • Chemicals
• Energy
• Natural Resources
• Utilities
  • Government

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Communications & High Tech
      We are a leading provider of business consulting, technology, systems integration and outsourcing services and solutions to the communications, electronics, high technology, media and entertainment industries. Our Communications & High Tech professionals help clients enhance their business results through industry-specific solutions and by seizing the opportunities made possible by the convergence of communications, computing and content. Examples of our services and solutions include the application of mobile technology, advanced communications network optimization, broadband and Internet protocol solutions, product innovation and digital rights management as well as systems integration, customer care, supply chain and workforce transformation services. In support of these services, we have developed an array of assets, repeatable solutions, methodologies and research facilities to demonstrate how new technologies and industry-leading practices can be applied in new and innovative ways to enhance our clients’ business performance. Our Communications & High Tech operating group comprises the following industry groups:
  •  Communications. Our Communications industry group serves many of the world’s leading wireline, wireless, cable and satellite communications network operators and service providers. We provide a wide range of services designed to help our communications clients increase margins, improve asset utilization, improve customer retention, increase revenues, reduce overall costs and accelerate sales cycles. We offer a suite of reusable solutions, called Accenture Communications Solutions, designed to address major business and operational issues related to broadband and Internet protocol-based networks and services, including business intelligence, billing transformation, customer contact transformation, sales force transformation, service fulfillment and next-generation network optimization. Our Communications industry group represented approximately 62% of our Communications & High Tech operating group’s revenues before reimbursements in fiscal 2006.
 
  •  Electronics & High Tech. Our Electronics & High Tech industry group serves the communications technology, consumer technology, enterprise technology, semiconductor, software and aerospace/ defense segments. This industry group provides services in areas such as strategy, enterprise resource management, customer relationship management, supply chain management, software development, human performance, and merger/acquisition activities, including post-merger integration. We also offer a suite of reusable solutions, called Accenture High Tech Solutions, designed to address the industry’s major business and operational challenges, such as new product innovation and development, customer service and support, sales and marketing, and globalization.
 
  •  Media & Entertainment. Our Media & Entertainment industry group serves the broadcast, entertainment (television, music and movie), print, publishing and portal industries. Professionals in this industry group provide a wide range of services, including digital content solutions designed to help companies effectively manage, distribute and protect content across numerous media channels.
Financial Services
      Our Financial Services operating group focuses on the opportunities created by our clients’ needs to adapt to changing market conditions, including increased cost pressures, industry consolidation, regulatory changes, the creation of common industry standards and protocols, and the move to a more integrated industry model. We help clients meet these challenges through a variety of assets, services and solutions, including consulting and outsourcing strategies to increase cost efficiency and transform businesses, and customer relationship management initiatives that enable them to acquire and retain

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profitable customers and improve their cross-selling capabilities. Our Financial Services operating group comprises the following industry groups:
  •  Banking. Our Banking industry group works with retail and commercial banks and diversified financial enterprises. We help these organizations develop and execute strategies to target, acquire and retain customers more effectively, expand product and service offerings, comply with new regulatory initiatives, and leverage new technologies and distribution channels. Our Banking industry group represented approximately 55% of our Financial Services operating group’s revenues before reimbursements in fiscal 2006.
 
  •  Capital Markets. Our Capital Markets industry group helps investment banks, broker/ dealers, asset management firms, depositories, clearing organizations and exchanges improve operational efficiency and transform their businesses to remain competitive.
 
  •  Insurance. Our Insurance industry group helps property and casualty insurers, life insurers, reinsurance firms and insurance brokers improve business processes, develop Internet-based insurance businesses and improve the quality and consistency of risk selection decisions. Our Insurance industry group has also developed a claims management capability that enables insurers to provide better customer service while optimizing claims costs. We also provide a variety of outsourced solutions to help insurers improve working capital and cash flow, deliver permanent cost savings and enhance long-term growth. Our Insurance industry group represented approximately 31% of our Financial Services operating group’s revenues before reimbursements in fiscal 2006.
Products
      Our Products operating group comprises the following industry groups:
  •  Automotive. Our Automotive industry group works with auto manufacturers, suppliers, dealers, retailers and service providers. Professionals in this industry group help clients develop and implement innovative solutions focused on product development and commercialization, customer service and retention, channel strategy and management, branding, buyer-driven business models, cost reduction, customer relationship management and integrated supplier partnerships.
 
  •  Consumer Goods & Services. Our Consumer Goods & Services industry group serves food, beverage, household goods and personal care, tobacco and footwear/apparel manufacturers around the world. We add value to these companies through service offerings designed to enhance performance by addressing critical elements of success, including sales and marketing productivity, customer and consumer insight, working capital productivity improvement, supply chain collaboration, and overhead productivity improvement.
 
  •  Health & Life Sciences. Our Health & Life Sciences industry group works with healthcare providers, government health departments, policy-making authorities/regulators, managed care organizations, health insurers and pharmaceutical, biotechnology, medical products and other industry-related companies to improve the quality, accessibility and affordability of healthcare. Our key offerings include health clinical transformation, electronic health records and hospital back-office services in the provider/government segment; research and development transformation, commercial effectiveness and customer interaction, and integrated electronic compliance (manufacturing and supply chain) in the pharmaceuticals and medical products segment; and health information and data management, claims excellence/cost containment and health plan back-office services in the payor segment.

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  •  Industrial Equipment. Our Industrial Equipment industry group serves the industrial and electrical equipment, construction, consumer durable and heavy equipment industries. We help our clients increase operating and supply chain efficiencies by improving processes and leveraging technology. We also help clients generate value from strategic mergers and acquisitions. In addition, our Industrial Equipment industry group develops and deploys innovative solutions in the areas of channel management, collaborative product design, remote field maintenance, enterprise application integration and outsourcing.
 
  •  Retail. Our Retail industry group serves a wide spectrum of retailers and distributors, including supermarkets, specialty premium retailers and large mass-merchandise discounters. We provide service offerings that help clients address new ways of reaching the retail trade and consumers through precision marketing; maximize brand synergies and cost reductions in mergers and acquisitions; improve supply chain efficiencies through collaborative commerce business models; and enhance the efficiency of internal operations. Our Retail industry group represented approximately 31% of our Products operating group’s revenues before reimbursements in fiscal 2006.
 
  •  Transportation & Travel Services. Our Transportation & Travel Services industry group serves companies in the airline, freight transportation, third-party logistics, hospitality, gaming, car rental, passenger rail and travel distribution industries. We help clients develop and implement strategies and solutions to improve customer relationship management capabilities, operate more-efficient networks, integrate supply chains, develop procurement and electronic business marketplace strategies, and more effectively manage maintenance, repair and overhaul processes and expenses. Through our Navitaire subsidiary, we offer airlines a range of services, including reservations, direct ticket distribution, revenue protection, decision support, passenger revenue accounting and revenue management on an outsourced basis.
Resources
      Our Resources operating group serves the chemicals, energy, forest products, metals and mining, utilities and related industries. With market conditions driving energy companies to seek new ways of creating value for shareholders, deregulation fundamentally reforming the utilities industry and yielding cross-border opportunities, and an intensive focus on productivity and portfolio management in the chemicals industry, we are working with clients to create innovative solutions that are designed to help them differentiate themselves in the marketplace and gain competitive advantage. Our Resources operating group comprises the following industry groups:
  •  Chemicals. Our Chemicals industry group works with a wide cross-section of industry segments, including petrochemicals, specialty chemicals, polymers and plastics, gases and life science companies. We also have long-term outsourcing contracts with many industry leaders.
 
  •  Energy. Our Energy industry group serves a wide range of companies in the oil and gas industry, including upstream, downstream and oil services companies. Our key areas of focus include helping clients optimize production, manage the hydrocarbon supply chain, streamline retail operations and realize the full potential of third-party enterprise-wide technology solutions. In addition, our multi-client outsourcing centers enable clients to increase operational efficiencies and exploit cross-industry synergies.
 
  •  Natural Resources. Our Natural Resources industry group serves the forest products and metals and mining industries. We help lumber, pulp, papermaking, converting and packaging companies as well as iron, steel, aluminum, coal, copper and precious metals companies develop and implement new business strategies, redesign business processes, manage complex

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  change initiatives, and integrate processes and technologies to achieve higher levels of performance.
 
  •  Utilities. Our Utilities industry group works with electric, gas and water utilities around the world to respond to an evolving and highly competitive marketplace. The group’s work includes helping utilities transform themselves from regulated, and sometimes state-owned, local entities to global deregulated corporations, as well as developing diverse products and service offerings to help our clients deliver higher levels of service to their customers. These offerings include customer relationship management, workforce enablement, supply chain optimization, and trading and risk management. We also provide a range of outsourced customer-care services to utilities and retail energy companies in North America. Our Utilities industry group represented approximately 42% of our Resources operating group’s revenues before reimbursements in fiscal 2006.

Government
      Our Government operating group helps governments around the world transform to meet the challenges of a rapidly changing public-sector environment. We typically work with defense, revenue, human services, health, justice, postal and education authorities, and our clients are national, provincial or state-level government organizations, as well as local governments. Our work with clients in the U.S. Federal government represented approximately 36% of our Government operating group’s revenues before reimbursements in fiscal 2006.
      Our offerings help public-sector clients address their most pressing needs, including increasing operational efficiency, enhancing revenues, improving customer service, and ensuring the security of citizens and businesses. We work with clients to transform their customer-facing and back-office operations and enable services to be delivered through appropriate technologies. We also provide processing services in areas such as human resources, social services, transportation, collections and procurement.
      As governments are pressed to achieve higher performance levels with reduced resources, we are introducing innovative approaches derived from the private sector that are becoming increasingly popular with governments. For instance, Accenture has pioneered Public Service Value, a patent-pending approach that assesses the true value of the services that governments provide by measuring outcomes and quantifying results. This approach, which helps governments make decisions that directly improve services to citizens, is similar to the ways in which publicly traded companies measure shareholder value to enhance the value they deliver to shareholders.
Growth Platforms
      Our business consulting, systems integration and technology, and outsourcing growth platforms are the skill-based “innovation engines” through which we develop our knowledge capital; build world-class skills and capabilities; and create, acquire and manage key assets central to the development of solutions for our clients. The professionals within these areas work closely with our operating groups to deliver integrated services and solutions to clients.

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Business Consulting
      Our business consulting growth platform is responsible for the development and delivery of our functional and industry consulting capabilities, working closely with the professionals in our operating groups. The growth platform comprises five service lines:
  •  Customer Relationship Management. The professionals in our Customer Relationship Management (“CRM”) service line help companies acquire, develop and retain more profitable customer relationships. We offer a full range of innovative capabilities that address every aspect of CRM, including marketing, direct and indirect sales, customer service, field support and customer contact operations. These capabilities include rigorous approaches to improving the return on marketing investment, methods for building insight into customers’ purchase habits and service preferences, tailoring offers and service treatment based upon that insight, and unique methods of optimizing the quality, cost and revenue impact of sales and service operations. Together with our alliance partners, we bring these skills to our clients to help them accelerate growth, improve marketing and sales productivity and reduce customer-care costs—thus increasing the value of their customer relationships and enhancing the economic value of their brands.
 
  •  Finance & Performance Management. The professionals in our Finance & Performance Management service line work with our clients’ finance and business unit executives to develop financial transaction processing, risk management and business performance reporting capabilities. Among the services we provide are strategic consulting with regard to the design and structure of the finance function; the establishment of shared service centers; and the configuration of enterprise resource planning platforms for streamlining transaction processing. Our finance capability services also address revenue cycle management, billing, credit risk and collection effectiveness, electronic invoicing and settlement, tax processing, lending and debt recovery. Our performance management services address shareholder value targeting, scorecard and performance metrics development, performance reporting solutions and applied business analytics to improve profitability. Our professionals, who often utilize the resources of Accenture Finance Solutions, one of our Business Process Outsourcing (“BPO”) businesses, work with finance executives to develop and implement solutions that help them align their companies’ investments with their business objectives and establish security relating to the exchange of information to reporting institutions.
 
  •  Human Performance. The professionals in our Human Performance service line work with clients on a wide range of workforce and organizational issues to deliver improved business and operational results. Our integrated approach and end-to-end capabilities include services and solutions in organization and change management, human resources (HR) administration, learning, knowledge management, performance management, talent management, HR IT systems implementation and overall transformation of key workforces. Through our Human Performance service line, we help companies and governments improve the efficiency and effectiveness of their HR services while lowering associated costs; deliver improvements in employee and workforce performance; and transform organizations through project-, program- and enterprise-level change management.
 
  •  Strategy. Our Strategy professionals utilize a combination of strategy and operations experience to help senior executives translate insights into results at both the enterprise and business-unit level. With deep skills and capabilities in corporate strategy, corporate restructuring, growth and innovation strategies, mergers and acquisitions, merger integration, organization strategy, pricing strategy and profitability assessment, shareholder value analysis

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  and strategic IT effectiveness, we help clients develop—and execute—pragmatic solutions that transform organizations and drive sustained high performance.
 
  •  Supply Chain Management. The professionals in our Supply Chain Management service line work with clients across a broad range of industries to develop and implement supply chain operations strategies that enable profitable growth in new and existing markets. Our professionals combine global industry expertise and skills in supply chain strategy, sourcing and procurement, supply chain planning, manufacturing and design, fulfillment and service management to help organizations achieve high performance. We work with clients to implement innovative consulting and outsourcing solutions that align operating models to support business strategies; optimize global operations; support profitable product launches; and enhance the skills and capabilities of the supply chain workforce.

Systems Integration and Technology
      Accenture provides a wide variety of systems integration and related technology services. Our key services in this area include:
  •  Information Management Services. We provide services to help organizations manage the full range of their information needs to improve data quality, enhance decision-making capabilities and meet compliance requirements. This includes managing both structured data (business intelligence) and unstructured content (content management and portals).
 
  •  Complex Solution Architecture. With deep skills and expertise in both J2EE (Java-based) and .NET technology architectures, we work with clients to address gaps in the functionality provided by commercial packaged applications; address technical aspects of the business process that are unique to a client; and develop customized technical solutions for business processes for which no packaged solutions are available.
 
  •  Enterprise Architecture. We provide solutions that integrate information technology (“IT”) with business capabilities to provide a seamless operating environment for organizations. Our solutions provide a reference point for measuring both IT investment and results in the delivery roadmap that defines how IT systems need to change to drive future business growth and higher performance.
 
  •  Enterprise Solutions. We implement a variety of application software—including SAP and Oracle, among others—to streamline business processes, systems and information and help organizations access, manage and exploit data to make more-informed business decisions.
 
  •  Integration. We use a variety of technology architectures and platforms—including service-oriented architectures (see below), among others—and Web services standards to connect and streamline business processes, systems and information to reduce costs and improve business and IT performance.
 
  •  Infrastructure Consulting Services. We provide solutions to help organizations optimize their IT infrastructures while reducing costs. From data center, operations engineering and network infrastructure to desktop and security solutions, our services enable clients to rationalize, standardize, secure and transform their IT infrastructures for improved performance of mission-critical business processes, applications and end users.
 
  •  IT Strategy & Transformation. We help CEOs and CIOs with critical IT challenges, such as advising on IT investments based on bottom-line return, and help them understand how

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  technologies can enable their business solutions and turn technology innovation into business results for competitive advantage.
 
  •  Microsoft Solutions. Together with our alliance partner Microsoft and our Avanade subsidiary, we develop and deliver cost-efficient, innovative business solutions based on Microsoft Windows Server 2003 and other .NET technologies, leveraging our deep industry expertise and practical applications of leading-edge technologies.
 
  •  Mobile Solutions. We help clients develop solutions that give their workforces access to key enterprise applications—including supply chain management, telematics, field force enablement, customer relationship management and customer database applications—through mobile devices and/or the Internet.
 
  •  Service-Oriented Architecture. We help CIOs and business leaders unleash the potential of service-oriented architecture to enable improvement in IT efficiency and a more effective alignment between business processes and applications. Accenture guides organizations through a four-phased approach for designing and building flexible IT solutions that enable business process components to be assembled and used more efficiently to deliver distinctive business services and capabilities for higher performance.
 
  •  Research & Development. We use new and emerging technologies to develop business solutions that we believe will be the drivers of our clients’ growth and enable them to be first to market with unique capabilities. Key areas of focus include information insight and sensor technologies.

Outsourcing
      Accenture provides a wide range of outsourcing services, including business process outsourcing, application outsourcing and infrastructure outsourcing.
  •  Business Process Outsourcing. We work with clients to develop and deliver business process innovations that transform their businesses and deliver higher performance levels at lower costs. Through our BPO services, we manage specific business processes or functions for clients, providing solutions that are more efficient and cost-effective than if the functions were provided in-house. In addition to providing individual BPO services, we can bundle two or more business functions to provide clients with even greater efficiencies, control and cost savings.
     We offer clients across all industries a variety of function-specific BPO services, including finance and accounting, human resources, learning, procurement and customer contact. Through several acquisitions in fiscal 2006, we enhanced our finance and accounting outsourcing capabilities in the areas of profit recovery and analytics and also expanded the range of back-office BPO capabilities to include those designed specifically for the middle market. We also offer specialized services tailored to clients in specific industries. For instance, we offer life insurers policy administration and management services, including high-volume transaction processing capabilities. We provide utilities companies with facilities and field services, as well as specialized customer care, finance and accounting, human resources, supply chain and information technology services. In addition, through our Navitaire subsidiary, we offer airlines a range of services, including reservations, direct ticket distribution, revenue protection, decision support, passenger revenue accounting and revenue management.

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  •  Application Outsourcing. Accenture takes a holistic approach to application outsourcing that goes beyond traditional cost-cutting measures, helping clients improve the total performance of application development and maintenance. We provide a wide array of application outsourcing services under flexible arrangements, managing custom or packaged software applications—including enterprise-wide applications such as SAP, PeopleSoft, Oracle and Siebel—over their complete development and maintenance life-cycles. The scope of services ranges from standardized, discrete application outsourcing services, including application testing, application management of enterprise-wide software programs (SAP, Oracle, PeopleSoft, etc.) and application outsourcing capacity services, to large-scale application enhancement and development for individual or multiple applications, as well as application portfolio rationalization and consolidation. We can also take end-to-end responsibility for all of a client’s information technology (“IT”) function, including infrastructure and operations, leveraging our shared services delivery groups and our application and infrastructure transformation consulting expertise to deliver significant gains in client productivity.
     By transferring to Accenture the responsibility for managing one or more of their applications, clients can leverage our assets, scale and global resources as well as our secure, global infrastructure delivery capabilities. This allows clients to maintain and control the overall performance of their IT capabilities while reducing the complexity and costs associated with managing third parties and increasing the flexibility, scalability, predictability and security of their IT infrastructures.
  •  Infrastructure Outsourcing. We deliver an integrated set of managed infrastructure services encompassing all infrastructure functions— from network access and desktop management to remote technology support. Services can be delivered as discrete, standalone solutions or bundled with Accenture application outsourcing and BPO services. Our infrastructure outsourcing services include:
  •  IT spend management— Asset management, as well as managed procurement and technology spend, to reduce overall IT non-salary spending;
 
  •  Data center services— Hosting to support development and production environments, storage services, database management and messaging services;
 
  •  Service desk— Single point of contact for support and online portal services to resolve front-line issues;
 
  •  Security services— Identity management, intrusion and firewall protection, end-user device and messaging security, and policy and awareness;
 
  •  Communications services— Data and voice network management, optimization and converged services; and
 
  •  Workplace services— Lifecycle management for desktops, field services and mobile devices, and file and print services.
Global Delivery Model
      A key Accenture differentiator is our strategic global delivery model, which allows us to draw on the benefits of resources from around the world—including specialized business process and technology skills, foreign-language fluency, proximity to clients and time-zone advantages—to deliver high-quality solutions under demanding time-frames. Emphasizing quality, reduced risk, speed to

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market and predictability, our global delivery model enables us to provide clients with price-competitive services and solutions that drive higher levels of performance.
      A critical component of this capability is our Global Delivery Network, which comprises local Accenture professionals working at client sites around the world as well as more than 40 delivery centers—facilities where teams of Accenture technology and business-process professionals use proven assets to create business and technology solutions for clients. Our delivery centers improve the efficiency of our engagement teams through the reuse of processes, solution designs, infrastructure and software and by leveraging the experience of delivery center professionals.
      Professionals in our Global Delivery Network apply a systematic approach to delivering systems integration, application outsourcing and business processing outsourcing solutions and services delivery to create and capture proven, repeatable processes, methodologies, tools and architectures. This ability to build seamless global teams leveraging the right professionals with the right skills for each task enables Accenture to provide a complete end-to-end capability, with consistent Accenture processes around the globe. Client teams leverage our Global Delivery Network to deliver comprehensive, large-scale and customized solutions in less time than would be required for our clients to develop them independently.
      We continue to expand and enhance our Global Delivery Network, which we believe is a competitive differentiator for us. In fiscal 2006 we further expanded our Global Delivery Network by, among other things, increasing our activities in the application outsourcing and business process outsourcing areas and recruiting actively in key locations of our network, including in Eastern Europe, India, China and the Philippines. As of August 31, 2006, we had more than 48,000 people in our network globally, a net increase of approximately 12,000 people since the end of fiscal 2005.
Alliances
      We have sales and delivery alliances with companies whose capabilities complement our own, either by enhancing a service offering, delivering a new technology or helping us extend our services to new geographies. By combining our alliance partners’ products and services with our own capabilities and expertise, we create innovative, high-value business solutions for our clients. Some alliances are specifically aligned with one of our service lines, thereby adding skills, technology and insights that are applicable across many of the industries we serve. Other alliances extend and enhance our offerings specific to a single industry group.
      Almost all of our alliances are non-exclusive. Although individual alliance agreements do not involve direct payments to us that are material to our business, we generate significant revenues from services to implement our alliance partners’ products.
Research and Innovation
      We are committed to developing leading-edge ideas, as we believe that both research and innovation have been major factors in our success and will help us continue to grow in the future. We use our investment in research and development—on which we spent $298 million, $243 million and $272 million in fiscal years 2006, 2005 and 2004, respectively— to help create, commercialize and disseminate innovative business strategies and technology.
      Our research and innovation program is designed to generate early insights into how knowledge can be harnessed to create innovative business solutions for our clients and to develop business strategies with significant value. A key component of this is our research and development organization, Accenture Technology Labs, which identifies and develops new technologies that we

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believe will be the drivers of our clients’ growth and enable them to be first to market with unique capabilities. We also promote the creation of knowledge capital and thought leadership through the Accenture Institute for High Performance Business. In addition, we spend a significant portion of our research and development resources directly through our operating groups and our consulting, technology and outsourcing capabilities to develop market-ready solutions for our clients.
Employees
      Our most important asset is our people, and we are deeply committed to the development of our employees. Our professionals receive significant and focused technical and managerial skills development training appropriate for their roles and levels within our company. We seek to reinforce our employees’ commitments to our clients, culture and values through a comprehensive performance review system and a competitive career philosophy that rewards individual performance and teamwork. We strive to maintain a work environment that reinforces our owner-operator culture and the collaboration, motivation, alignment of interests and sense of ownership and reward that this culture has fostered.
      As of August 31, 2006, we had approximately 140,000 employees worldwide.
Competition
      We operate in a highly competitive and rapidly changing global marketplace and compete with a variety of organizations that offer services competitive with those we offer. We compete with a variety of companies with respect to our offerings, including:
  •  Large multinational providers, including the service arms of large global technology providers, that offer some or all of the consulting, systems integration and technology, and outsourcing services that we do;
 
  •  Off-shore service providers in lower-cost locations, particularly Indian providers, which offer a subset of the services we offer;
 
  •  Niche solution or service providers which complete with us in a specific geographic market, industry segment or service area, including companies that provide new or alternative products, services or delivery models; and
 
  •  Accounting firms that are expanding or re-emphasizing their provision of consulting services.
In addition, a client may choose to use its own resources rather than engage an outside firm for the types of services we provide.
      Our revenues are derived primarily from Fortune Global 500 and Fortune 1000 companies, medium-sized companies, governments, government agencies and other large enterprises. We believe that the principal competitive factors in the industries in which we compete include:
  •  skills and capabilities of people;
 
  •  innovative service and product offerings;
 
  •  perceived ability to add value;
 
  •  reputation and client references;
 
  •  price;
 
  •  scope of services;

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  •  service delivery approach;
 
  •  technical and industry expertise;
 
  •  quality of services and solutions;
 
  •  ability to deliver results on a timely basis;
 
  •  availability of appropriate resources; and
 
  •  global reach and scale.
      Our clients typically retain us on a non-exclusive basis.
Intellectual Property
      Our success has resulted in part from our proprietary methodologies, software, reusable knowledge capital, assets and other intellectual property rights. We rely upon a combination of nondisclosure and other contractual arrangements as well as upon trade secret, copyright, patent and trademark laws to protect our intellectual property rights and the rights of third parties from whom we license intellectual property. We have promulgated policies related to confidentiality and ownership and to the use and protection of our intellectual property and that owned by third parties, and we also enter into agreements with our employees as appropriate.
      We recognize the increasing value of intellectual property in the marketplace and vigorously create, harvest and protect our intellectual property. At August 31, 2006, we had 1,368 patent applications pending in the United States and other jurisdictions and had been issued 230 U.S. patents and 125 non-U.S. patents in, among others, the following areas: goal-based educational simulation; virtual call centers; hybrid telecommunications networks; development architecture frameworks; emotion-based voice processing; mobile communications networks; location-based information filtering; and computerized multimedia asset systems. We intend to continue to vigorously identify, create, harvest and protect our intellectual property and to leverage our protected, differentiated assets and methodologies to provide superior value to our clients.
Organizational Structure
      Accenture Ltd is a Bermuda holding company with no material assets other than Class II and Class III common shares in its subsidiary, Accenture SCA, a Luxembourg partnership limited by shares (“Accenture SCA”). Accenture Ltd’s only business is to hold these shares and to act as the sole general partner of Accenture SCA. Accenture Ltd owns a majority voting interest in Accenture SCA. As the general partner of Accenture SCA and as a result of Accenture Ltd’s majority voting interest in Accenture SCA, Accenture Ltd controls Accenture SCA’s management and operations and consolidates Accenture SCA’s results in its financial statements. Accenture operates its business through subsidiaries of Accenture SCA. Accenture SCA generally reimburses Accenture Ltd for its expenses but does not pay Accenture Ltd any fees.
      Prior to our transition to a corporate structure in fiscal 2001, we operated as a series of related partnerships and corporations under the control of our partners. In connection with our transition to a corporate structure, our partners generally exchanged all of their interests in these partnerships and corporations for Accenture Ltd Class A common shares or, in the case of partners in certain countries, Accenture SCA Class I common shares or exchangeable shares issued by Accenture Canada Holdings Inc., an indirect subsidiary of Accenture SCA. Generally, partners who received Accenture SCA Class I common shares or Accenture Canada Holdings Inc. exchangeable shares also

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received a corresponding number of Accenture Ltd Class X common shares, which entitle their holders to vote at Accenture Ltd shareholder meetings but do not carry any economic rights.
      In fiscal 2005, Accenture developed and announced a new, broader career model for its highest-level executives that recognizes the diversity of roles and responsibilities demonstrated by these employees. This new career framework replaces internal use of the “partner” title with the more comprehensive “senior executive” title and applies the “senior executive” title to more than 4,300 of our highest-level employees, including those employees previously referred to as partners. However, for proper context, we continue to use the term “partner” in this report to refer to these persons in certain situations related to our reorganization and the period prior to our incorporation.
Accenture Ltd Class A Common Shares and Class X Common Shares
      Each Class A common share and each Class X common share of Accenture Ltd entitles its holder to one vote on all matters submitted to a vote of shareholders of Accenture Ltd. A holder of a Class X common share is not, however, entitled to receive dividends or to receive payments upon a liquidation of Accenture Ltd.
      Accenture Ltd may redeem, at its option, any Class X common share for a redemption price equal to the par value of the Class X common share, or $0.0000225 per share. Accenture Ltd has separately agreed not to redeem any Class X common share of a holder if the redemption would reduce the number of Class X common shares held by that holder to a number that is less than the number of Accenture SCA Class I common shares or Accenture Canada Holdings Inc. exchangeable shares held by that holder, as the case may be. Accenture Ltd will redeem Class X common shares upon the redemption or exchange of Accenture SCA Class I common shares and Accenture Canada Holdings Inc. exchangeable shares so that the aggregate number of Class X common shares outstanding at any time does not exceed the aggregate number of Accenture SCA Class I common shares and Accenture Canada Holdings Inc. exchangeable shares outstanding. Class X common shares are not transferable without the consent of Accenture Ltd.
Accenture SCA Class I Common Shares
      After June 28, 2005, only our current and former senior executives and their permitted transferees continue to hold Accenture SCA Class I common shares. Each Class I common share entitles its holder to one vote on all matters submitted to the shareholders of Accenture SCA and entitles its holder to dividends and liquidation payments.
      Subject to the transfer restrictions in Accenture SCA’s Articles of Association described below, Accenture SCA is obligated, at the option of the holder, to redeem any outstanding Accenture SCA Class I common share at any time at a redemption price per share generally equal to its current market value as determined in accordance with Accenture SCA’s Articles of Association. Under Accenture SCA’s Articles of Association, the market value of a Class I common share that is not subject to transfer restrictions will be deemed to be equal to (i) the average of the high and low sales prices of an Accenture Ltd Class A common share as reported on the New York Stock Exchange (or on such other designated market on which the Class A common shares trade), net of customary brokerage and similar transaction costs, or (ii) if Accenture Ltd sells its Class A common shares on the date that the redemption price is determined (other than in a transaction with any employee or an affiliate or pursuant to a preexisting obligation), the weighted average sales price of an Accenture Ltd Class A common share on the New York Stock Exchange (or on such other market on which the Class A common shares primarily trade), net of customary brokerage and similar transaction costs. See “—Restrictions on the Transfer of Certain Accenture Shares—Articles of Association of

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Accenture SCA—Covered Person Transfer Restrictions” below for additional information on these transfer restrictions. Accenture SCA may, at its option, pay this redemption price with cash or by delivering Accenture Ltd Class A common shares on a one-for-one basis. This one-for-one redemption price and exchange ratio will be adjusted if Accenture Ltd holds more than a de minimis amount of assets (other than its interest in Accenture SCA and assets it holds only transiently prior to contributing them to Accenture SCA) or incurs more than a de minimis amount of liabilities (other than liabilities for which Accenture SCA has a corresponding liability to Accenture Ltd). We have been advised by our legal advisors in Luxembourg that there is no relevant legal precedent in Luxembourg quantifying or defining the term “de minimis.” In the event that a question arises in this regard, we expect that management will interpret “de minimis” in light of the facts and circumstances existing at the time in question. At this time, Accenture Ltd does not intend to hold any material assets other than its interest in Accenture SCA or to incur any material liabilities such that this one-for-one redemption price and exchange ratio would require adjustment and will disclose any change in its intentions that could affect this ratio. In order to maintain Accenture Ltd’s economic interest in Accenture SCA, Accenture Ltd generally will acquire additional Accenture SCA common shares each time additional Accenture Ltd Class A common shares are issued.
Accenture SCA Class II and Class III Common Shares
      On June 28, 2005, Accenture SCA’s shareholders approved certain amendments to the rights of Accenture SCA Class II common shares held by Accenture Ltd, as well as the creation of a new class of common shares known as “Class III common shares” into which all Class I common shares held by Accenture Ltd and its affiliates were reclassified. Accenture SCA Class II common shares and Class III common shares may not be held by any person other than the general partner of Accenture SCA and its subsidiaries. All Class I common shares that are sold or otherwise transferred to Accenture Ltd or its subsidiaries will be automatically reclassified into Class III common shares.
      The amendments to the Class II common shares, the creation of Class III common shares (and all lettered sub-series of that class) and the reclassification of all Class I common shares held or to be held by Accenture Ltd and its subsidiaries have no effect on the computation of Accenture Ltd’s earnings per share.
      Accenture SCA Class II common shares and Class III common shares (or any lettered sub-series of that class) are not entitled to any cash dividends. If the Board of Directors of Accenture Ltd authorizes the payment of a cash dividend on Accenture Ltd’s Class A common shares, Accenture Ltd, as general partner of the Company, will cause Accenture SCA to redeem Class II common shares and Class III common shares that Accenture Ltd holds to obtain cash needed to pay dividends on its Class A common shares. At any time that Accenture SCA pays a cash dividend on its Class I common shares, new Class II common shares and Class III common shares will be issued to the existing holders of Class II common shares and Class III common shares, in each case having an aggregate value of the amount of any cash dividends that the holders of those Class II or Class III common shares would have received had they ratably participated in the cash dividend paid on the Class I common shares.
      Each Class II common share entitles its holder to receive a liquidation payment equal to 10% of any liquidation payment to which a Class I common share entitles its holder. Each Accenture SCA Class III common share entitles its holder to receive a liquidation payment equal to 100% of any liquidation payment to which an Accenture SCA Class I common share entitles its holder.

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Accenture Canada Holdings Inc. Exchangeable Shares
      Subject to the transfer restrictions contained in Accenture Ltd’s bye-laws described below, holders of Accenture Canada Holdings Inc. exchangeable shares may exchange their shares for Accenture Ltd Class A common shares at any time on a one-for-one basis. Accenture may, at its option, satisfy this exchange with cash at a price per share generally equal to the market price of an Accenture Ltd Class A common share at the time of the exchange. Each exchangeable share of Accenture Canada Holdings Inc. entitles its holder to receive distributions equal to any distributions to which an Accenture Ltd Class A common share entitles its holder.
Restrictions on the Transfer of Certain Accenture Shares
     Accenture Ltd Bye-Laws
      Covered Person Transfer Restrictions. Accenture Ltd’s bye-laws contain transfer restrictions that apply to certain Accenture current and former senior executives who hold Accenture Ltd Class A common shares. We refer to these persons as “covered persons.” The Accenture Ltd shares covered by the transfer restrictions generally include any Accenture Ltd Class A common shares beneficially owned by a senior executive at the time in question and also as of or prior to the initial public offering of the Accenture Ltd Class A common shares in July 2001. We refer to the shares covered by these transfer restrictions as “covered shares.” Covered shares are no longer subject to these transfer restrictions upon their valid transfer by a covered person. Accenture Ltd’s bye-laws provide that each covered person is required, among other things, to:
  •  except as described below, maintain beneficial ownership of his or her covered shares received on or prior to July 24, 2001 for a period of eight years thereafter;
 
  •  maintain beneficial ownership of at least 25% of his or her covered shares received on or prior to July 24, 2001 as long as he or she is an employee of Accenture; and
 
  •  comply with certain additional transfer restrictions imposed by or with the consent of Accenture from time to time, including in connection with offerings of securities by Accenture Ltd.
      Notwithstanding the transfer restrictions described in the immediately preceding paragraph:
  •  Covered persons who continue to be employees of Accenture are permitted to transfer a percentage of the covered shares received by them on or prior to July 24, 2001 and owned by them as follows:
     
Cumulative percentage of shares    
permitted to be transferred   Years after July 24, 2001
     
10%
  1 year
25%
  2 years
35%
  3 years
45%
  4 years
55%
  5 years
65%
  6 years
75%
  7 years
100%
  The later of (a) 8 years or (b) end of employment by Accenture

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  •  Covered persons retiring from Accenture at the age of 50 or above are permitted to transfer covered shares they own on an accelerated basis as follows:
     
    Percentage of remaining
    transfer restricted shares
Age at retirement   permitted to be transferred
     
56 or older
  100%
55
  87.5%
54
  75%
53
  62.5%
52
  50%
51
  37.5%
50
  25%
  •  In addition, a retired senior executive who reaches the age of 56 is permitted to transfer any covered shares he or she owns. Any remaining shares owned by retiring senior executives for which transfer restrictions are not released on an accelerated basis will be eligible to be transferred as if the retiring senior executive continued to be employed by Accenture.
 
  •  Covered persons who became disabled before our transition to a corporate structure are permitted to transfer all of their covered shares. Current and former senior executives who have become disabled since our transition to a corporate structure are subject to the general transfer restrictions applicable to employees or, if disabled after the age of 50, benefit from the accelerated lapses of transfer restrictions applicable to retired senior executives.
      All transfer restrictions applicable to a covered person under Accenture Ltd’s bye-laws terminate upon death.
      If Accenture approves in writing a covered person’s pledge of his covered shares to a lender, foreclosures by the lender on those shares, and any subsequent sales of those shares by the lender, are not restricted, provided that the lender must give Accenture a right of first refusal to buy any shares at the market price before they are sold by the lender.
      Notwithstanding the transfer restrictions described in this summary, Accenture Ltd Class X common shares may not be transferred at any time, except upon the death of a holder of Class X common shares or with the consent of Accenture Ltd.
      Accenture Canada Holdings Inc. exchangeable shares held by covered persons are also subject to the transfer restrictions in Accenture Ltd’s bye-laws.
      Term and Amendment. The transfer restrictions in Accenture Ltd’s bye-laws will not terminate unless they have been previously waived or terminated under the terms of the bye-laws. Amendment of the transfer restrictions in Accenture Ltd’s bye-laws requires the approval of the Board of Directors of Accenture Ltd and a majority vote of Accenture Ltd’s shareholders.
      Waivers and Adjustments. The transfer restrictions and the other provisions of Accenture Ltd’s bye-laws may be waived at any time by the Board of Directors of Accenture Ltd or its designees to permit covered persons to:
  •  participate as sellers in underwritten public offerings of common shares and tender and exchange offers and share purchase programs by Accenture;
 
  •  transfer covered shares in family or charitable transfers;

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  •  transfer covered shares held in employee benefit plans; and
 
  •  transfer covered shares in particular situations (for example, to immediate family members and trusts).
      Subject to the foregoing, from time to time, pursuant to the provisions of Accenture Ltd’s bye-laws, the Board of Directors of Accenture Ltd or its designees may also approve limited relief from the existing share transfer restrictions for specified senior executives or groups of senior executives in connection with particular retirement, employment and severance arrangements that are determined to be in the best interests of the Company.
      Administration and Resolution of Disputes. The terms and provisions of Accenture Ltd’s bye-laws are administered by the Board of Directors of Accenture Ltd. The Board of Directors of Accenture Ltd or its designees have the sole power to enforce the provisions of the bye-laws.
     Articles of Association of Accenture SCA
      General. Except in the case of a redemption of Class I common shares or a transfer of Class I common shares to Accenture Ltd or one of its subsidiaries, Accenture SCA’s Articles of Association provide that Accenture SCA Class I common shares may be transferred only with the consent of Accenture Ltd, as the general partner of Accenture SCA.
      Covered Person Transfer Restrictions. In addition, Accenture SCA’s Articles of Association also contain transfer restrictions that apply to certain Accenture current and former senior executives who hold Accenture SCA Class I common shares and are parties to the Accenture SCA transfer rights agreement, including redemptions by Accenture SCA and purchases by subsidiaries of Accenture Ltd. We refer to these persons as “covered persons.” The shares covered by these transfer restrictions generally include all Class I common shares owned by a covered person. We refer to the shares covered by these transfer restrictions as “covered shares.” Covered shares are no longer subject to these transfer restrictions upon their valid transfer by a covered person. Accenture SCA’s Articles of Association provide that each covered person is required, among other things, to:
  •  except as described below, maintain beneficial ownership of his or her covered shares received on or prior to July 24, 2001 for a period of eight years thereafter;
 
  •  maintain beneficial ownership of at least 25% of his or her covered shares received on or prior to July 24, 2001 as long as he or she is an employee of Accenture; and
 
  •  comply with certain other transfer restrictions when requested to do so by Accenture. See “—Other Restrictions.”

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      Notwithstanding the transfer restrictions described in the immediately preceding paragraph:
  •  Covered persons who continue to be employees of Accenture are permitted to transfer a percentage of the covered shares received by them on or prior to July 24, 2001 and owned by them commencing on July 24, 2002 as follows:
     
Cumulative percentage of shares    
permitted to be transferred   Years after July 24, 2001
     
35%
  3 years
45%
  4 years
55%
  5 years
65%
  6 years
75%
  7 years
100%
  The later of (a) 8 years or (b) end of employment by Accenture
  •  Covered persons retiring at the age of 50 or above or who become disabled are granted accelerations of these provisions on terms identical to those applicable to Accenture Ltd Class A common shares held by covered persons and described under “—Accenture Ltd Bye-laws—Covered Person Transfer Restrictions” above.
      All transfer restrictions applicable to a covered person under Accenture SCA’s Articles of Association terminate upon death.
      Term and Amendment. The transfer restrictions contained in Accenture SCA’s Articles of Association will not terminate unless they have been previously waived or terminated under the terms of the Articles of Association. Amendment of the transfer restrictions in Accenture SCA’s Articles of Association requires the consent of Accenture SCA’s general partner and the approval at a general meeting of shareholders.
      Other Restrictions. In addition to the foregoing, all holders of Class I common shares are precluded from having their shares redeemed by Accenture SCA or transferred to Accenture SCA, Accenture Ltd or a subsidiary of Accenture Ltd at any time or during any period when Accenture SCA determines, based on the advice of counsel, that there is material non-public information that may affect the average price per share of Accenture Ltd Class A common shares, if the redemption would be prohibited by applicable law, during an underwritten offering due to an underwriters lock-up or during the period from the announcement of a tender offer by Accenture SCA or its affiliates for Accenture SCA Class I common shares until the expiration of ten business days after the termination of the tender offer (other than to tender the holder’s Accenture SCA Class I common shares in the tender offer).
      Administration and Resolution of Disputes. The terms and provisions of Accenture SCA’s Articles of Association are administered by the supervisory board of Accenture SCA, which consists of at least three members, each elected by a simple majority vote of each general meeting of shareholders of Accenture SCA.
Expiration of the Share Management Plan
      In April 2002 we introduced our Share Management Plan for current and former senior executives. Coupled with the transfer restrictions imposed in connection with our transition to a corporate structure, our Share Management Plan transactions and programs have been effective in increasing our public float and broadening the ownership of Accenture Ltd Class A common shares, while providing for the orderly entry of our shares held by our current and former senior executives

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and their permitted transferees into the market. On July 24, 2005, certain restrictions contained in Accenture Ltd’s bye-laws and Accenture SCA’s Articles of Association that provided the basis for our Share Management Plan expired. For more historical information about the Share Management Plan, see the “Certain Transactions and Relationships” section in our Annual Report on Form 10-K for the fiscal year ended August 31, 2004 filed with the SEC on November 5, 2004.
Accenture Senior Executive Trading Policy
      In July 2005, we implemented a Senior Executive Trading Policy applicable to our senior executives which provides, among other things, that all covered shares still held by actively employed senior executives but which are no longer restricted by transfer restrictions will be subject to company-imposed quarterly trading guidelines. These currently limit the total number of shares redeemed, sold or otherwise transferred in any calendar quarter to no more than a composite average weekly volume of trading in Accenture Ltd Class A common shares. The Senior Executive Trading Policy also prohibits senior executives from trading in any Accenture equity during any company-designated black-out period. We expect to rigorously enforce this policy. However, sanctions under this policy may be prospective in nature and there can be no guarantee that we can prohibit all individual transfers that may be attempted in breach of this policy. The Senior Executive Trading Policy was implemented, in part, due to the expiration of the Share Management Plan. Since July 24, 2005, holders of covered shares have been able to individually execute sales, redemptions or dispositions of those shares that are no longer subject to these charter provisions and, in the case of our senior executives, in compliance with the quarterly trading guidelines contained in the Senior Executive Trading Policy.
ITEM 1A. RISK FACTORS
      In addition to the other information set forth in this report, you should carefully consider the following factors which could materially affect our business, financial condition or future results. The risks described below are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.
Risks That Relate to Our Business
Our results of operations could be negatively affected if we cannot expand and develop our services and solutions in response to changes in technology and client demand.
      Our success depends on our ability to develop and implement consulting, systems integration and technology, and outsourcing services and solutions that anticipate and respond to rapid and continuing changes in technology, industry developments and client needs. We may not be successful in anticipating or responding to these developments on a timely basis, and our offerings may not be successful in the marketplace. Also, services, solutions and technologies offered by current or future competitors may make our service or solution offerings uncompetitive or obsolete. Any one of these circumstances could have a material adverse effect on our ability to obtain and successfully deliver client work.

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The consulting, systems integration and technology, and outsourcing markets are highly competitive, and we might not be able to compete effectively.
      The consulting, systems integration and technology, and outsourcing markets are highly competitive. We compete with a variety of companies with respect to our offerings, including:
  •  Large multinational providers, including the service arms of large global technology providers, that offer some or all of the consulting, systems integration and technology, and outsourcing services that we do;
 
  •  Off-shore service providers in lower-cost locations, particularly Indian providers, which offer a subset of the services we offer;
 
  •  Niche solution or service providers which compete with us in a specific geographic market, industry segment or service area, including companies that provide new or alternative products, services or delivery models; and
 
  •  Accounting firms that are expanding or re-emphasizing their provision of consulting services.
In addition, a client may choose to use its own resources rather than engage an outside firm for the types of services we provide.
      Some of our competitors may have larger customer bases and/or greater financial, marketing or other resources than we do. Larger and better-capitalized competitors may have enhanced abilities to compete for clients and skilled professionals. Additionally, some of our competitors, particularly those located in regions with lower costs of doing business, may be able to provide services and solutions at lower cost than we can, particularly in the more commoditized aspects of the outsourcing and systems integration markets. There is a risk that increased competition, particularly in the outsourcing market, could put downward pressure on the prices we can charge for our services and on our operating margins. Similarly, if our competitors develop and implement methodologies that yield greater efficiency and productivity, they may be able to offer services similar to ours at lower prices without adversely affecting their profit margins. If we are unable to provide our clients with superior services and solutions at competitive prices, our results of operations may suffer.
      In addition, we may face greater competition from companies that have increased in size or scope as the result of strategic mergers. In particular, we continue to see consolidation activity among hardware manufacturers, software developers and vendors, and service providers. This vertical integration may result in greater convergence among previously separate technology functions or reduced access to products, and may adversely affect our competitive position.
Our results of operations could be affected by economic and political conditions and the effects of these conditions on our clients’ businesses and levels of business activity.
      Global economic and political conditions affect our clients’ businesses and the markets they serve. A significant or prolonged economic downturn or a negative or uncertain political climate could adversely affect our clients’ financial condition and the levels of business activity of our clients and the industries we serve. This may reduce our clients’ demand for our services or depress pricing of those services and have a material adverse effect on our results of operations. Changes in global economic conditions could also shift demand to services for which we do not have competitive advantages, and this could negatively affect the amount of business that we are able to obtain.

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Our work with government clients exposes us to additional risks inherent in the government contracting process.
      Our clients include national, provincial, state and local governmental entities. Our government work carries various risks inherent in the government contracting process. These risks include, but are not limited to, the following:
  •  Government entities typically fund projects through appropriated monies. While these projects are often planned and executed as multi-year projects, the government entities usually reserve the right to change the scope of or terminate these projects for lack of approved funding and at their convenience. Changes in government or political developments could result in charges in scope or in termination of our projects.
 
  •  Government entities often reserve the right to audit our contract costs, including allocated indirect costs, and conduct inquiries and investigations of our business practices with respect to our government contracts. If the client finds that the costs are not reimbursable, then we will not be allowed to bill for them, or the cost must be refunded to the client if it has already been paid to us. Findings from an audit also may result in our being required to prospectively adjust previously agreed rates for our work and may affect our future margins.
 
  •  If a government client discovers improper or illegal activities in the course of audits or investigations, we may become subject to various civil and criminal penalties and administrative sanctions, which may include termination of contracts, forfeiture of profits, suspension of payments, fines and suspensions or debarment from doing business with other agencies of that government. The inherent limitations of internal controls may not prevent or detect all improper or illegal activities, regardless of their adequacy.
 
  •  Government contracts, and the proceedings surrounding them, are often subject to more extensive scrutiny and publicity than contracts with commercial clients. Negative publicity related to our government contracts, regardless of its accuracy, may further damage our business by affecting our ability to compete for new contracts.
 
  •  Political and economic factors such as pending elections, revisions to governmental tax policies and reduced tax revenues can affect the number and terms of new government contracts signed.
 
  •  Terms and conditions of government contracts tend to be more onerous and are often more difficult to negotiate than those for commercial contracts.
      The occurrences or conditions described above could affect not only our business with the particular government agency involved, but also our business with other agencies of the same or other governmental entities. Additionally, because of their visibility and political nature, government projects may present a heightened risk to our reputation. Either of these could have a material adverse effect on our business or our results of operations.
Our business could be adversely affected if our clients are not satisfied with our services.
      Our business model depends in large part on our ability to attract new work from our base of existing clients, at times on a sole source basis. If a client is not satisfied with our services or solutions, including those of subcontractors we employ, the profitability of that work might be impaired and the client’s dissatisfaction with our services could damage our ability to obtain additional work from that client. In particular, clients that are not satisfied might seek to terminate

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existing contracts prior to their scheduled expiration date and could direct future business to our competitors. In addition, negative publicity related to our client relationships, regardless of its accuracy, may further damage our business by affecting our ability to compete for new contracts with current and prospective clients.
Our business could be negatively affected if we incur legal liability in connection with providing our solutions and services.
      If we fail to meet our contractual obligations, fail to disclose our financial or other arrangements with our alliance partners or otherwise breach obligations to clients, or if our subcontractors dispute the terms of our agreements with them, we could be subject to legal liability. We may enter into non-standard agreements because we perceive an important economic opportunity or because our personnel did not adequately adhere to our guidelines. We may find ourselves committed to providing services that we are unable to deliver or whose delivery will cause us financial loss. If we cannot or do not perform our obligations we could face legal liability and our contracts might not always protect us adequately through limitations on the scope of our potential liability. If we cannot meet our contractual obligations to provide solutions and services, and if our exposure is not adequately limited through the terms of our agreements, then we might face significant legal liability and our business could be adversely affected.
Our results of operations could be adversely affected if our clients terminate their contracts with us on short notice.
      Our clients typically retain us on a non-exclusive, project-by-project basis. Although we do not centrally track the termination provisions of our contracts, we estimate that the majority of our contracts can be terminated by our clients with short notice. A majority of our consulting contracts are less than 12 months in duration, and these shorter-duration contracts typically permit a client to terminate the agreement with as little as 30 days notice and without significant penalty. Longer-term, larger and more complex contracts, such as the majority of our outsourcing contracts, generally require a longer notice period for termination and often include an early termination charge to be paid to us, but this charge might not be sufficient to cover our costs or make up for anticipated profits lost upon termination of the contract. Additionally, large client projects often involve multiple contracts or stages, and a client could choose not to retain us for additional stages of a project, try to renegotiate the terms of its contract or cancel or delay additional planned work.
      Terminations, cancellations or delays could result from factors that are beyond our control and unrelated to our work product or the progress of the project, including the business or financial conditions of the client, changes in client strategies or the economy generally. When contracts are terminated, we lose the anticipated revenues and might not be able to eliminate associated costs in a timely manner. Consequently, our profit margins in subsequent periods could be lower than expected.
Outsourcing services are a significant part of our business and subject us to operational and financial risk.
      We earned approximately 40% of our revenues before reimbursements in fiscal 2006 from our outsourcing services. This portion of our business presents potential operational and financial risks that are different from those of our consulting, technology and systems integration services. In many cases, we take over the operation of certain portions of our clients’ businesses, and client personnel and contracts are sometimes transferred to us. In some cases, this could mean that we assume responsibility for portions of our clients’ personnel, staffing, overhead and similar needs but might not have full ability to control the work and efforts of client personnel or their subcontractors. In addition,

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we could incur liability for failure to comply with laws or regulations related to the portions of our clients’ businesses that are transferred to us.
      This type of work also presents financial risks to us. Outsourcing contracts typically have longer terms than consulting contracts and generally have lower gross margins than consulting contracts, particularly in the first year. This could exert downward pressure on our overall gross margins, particularly during the early stages of new outsourcing contracts, which might not be offset by improved performance on older outsourcing contracts in our portfolio. In addition, we face considerable competition for outsourcing work and our clients are increasingly using intensive contracting processes and aggressive contracting techniques, sometimes assisted by third-party advisors.
We could be subject to liabilities if our subcontractors or the third parties with whom we partner cannot deliver their project contributions on time or at all.
      Increasingly large and complex arrangements often require that we utilize subcontractors or that our services and solutions incorporate or coordinate with the software, systems or infrastructure requirements of other vendors and service providers. Our ability to serve our clients and deliver and implement our solutions in a timely manner depends on the ability of these subcontractors, vendors and service providers to meet their project obligations in a timely manner. The quality of our services and solutions could suffer if our subcontractors or the third parties with whom we partner do not deliver their products and services in accordance with project requirements. In addition, certain work requires the use of unique and complex structures and alliances. Some of these structures require us to assume responsibility to the client for the performance of third parties whom we do not control. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations— Off-Balance Sheet Arrangements.” If our subcontractors or these third parties fail to deliver their contributions on time or at all, if their contributions do not meet project requirements, or if we are unable to obtain reimbursement for liabilities of third parties that we have assumed, our ability to perform could be adversely affected or we might be subject to additional liabilities, which could have a material adverse effect on our business, revenues, profitability or cash flow.
Our results of operations may be affected by the rate of growth in the use of technology in business and the type and level of technology spending by our clients.
      Our business depends in part upon continued growth in the use of technology in business by our clients and prospective clients and their customers and suppliers. In challenging economic environments, our clients may reduce or defer their spending on new technologies in order to focus on other priorities. At the same time, many companies have already invested substantial resources in their current means of conducting commerce and exchanging information, and they may be reluctant or slow to adopt new approaches that could disrupt existing personnel, processes and infrastructures. If the growth of use of technology in business or our clients’ spending on technology in business declines, or if we cannot convince our clients or potential clients to embrace new technology solutions, our results of operations could be adversely affected.
Our profitability could suffer if we are not able to maintain favorable pricing rates.
      Our profit margin, and therefore our profitability, is dependent on the rates we are able to recover for our services. If we are not able to maintain favorable pricing for our services, our profit

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margin and our profitability could suffer. The rates we are able to recover for our services are affected by a number of factors, including:
  •  our clients’ perceptions of our ability to add value through our services;
 
  •  competition;
 
  •  introduction of new services or products by us or our competitors;
 
  •  our competitors’ pricing policies;
 
  •  our ability to accurately estimate, attain and sustain contract revenues, margins and cash flows over increasingly longer contract periods;
 
  •  bid practices of clients and their use of third-party advisors;
 
  •  the use by our competitors and our clients of off-shore resources to provide lower-cost service delivery capabilities; and
 
  •  general economic and political conditions.
Our profitability could suffer if we are not able to maintain favorable utilization rates.
      The cost of providing our services, including the utilization rate of our professionals, affects our profitability. If we are not able to maintain an appropriate utilization rate for our professionals, our profit margin and our profitability may suffer. Our utilization rates are affected by a number of factors, including:
  •  our ability to transition employees from completed projects to new assignments and to hire and assimilate new employees;
 
  •  our ability to forecast demand for our services and thereby maintain an appropriate headcount in each of our geographies and workforces;
 
  •  our ability to manage attrition; and
 
  •  our need to devote time and resources to training, professional development and other non-chargeable activities.
If our pricing structures do not accurately anticipate the cost and complexity of performing our work, then our contracts could be unprofitable.
      We negotiate pricing terms with our clients utilizing a range of pricing structures and conditions. Depending on the particular contract, these include time-and-materials pricing, fixed-price pricing, and contracts with features of both of these pricing models. Our pricing is highly dependent on our internal forecasts and predictions about our projects and the marketplace, which might be based on limited data and could turn out to be inaccurate or used ineffectively. If we do not accurately estimate the costs and timing for completing projects, our contracts could prove unprofitable for us or yield lower profit margins than anticipated. We could face greater risk when pricing our outsourcing contracts, as many of our outsourcing projects entail the coordination of operations and workforces in multiple locations, utilizing workforces with different skillsets and competencies and geographically distributed service centers. Furthermore, on outsourcing work we occasionally hire employees from our clients and assume responsibility for one or more of our clients’ business processes. Our pricing, cost and profit margin estimates on outsourcing work frequently include anticipated long-term cost savings from transformational and other initiatives that we expect to achieve and sustain over the life of the outsourcing contract. There is a risk that we will underprice our contracts or fail to accurately

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estimate the costs of performing the work. In particular, any increased or unexpected costs, delays or failures to achieve anticipated cost savings in connection with the performance of this work, including delays caused by factors outside our control, could make these contracts less profitable or unprofitable, which would have an adverse effect on our profit margin.
Many of our contracts utilize performance pricing that links some of our fees to the attainment of various performance or business targets. This could increase the variability of our revenues and margins.
      We have an increasing number of contracts, many of which are outsourcing contracts, that include incentives related to factors such as costs incurred, benefits produced, goals attained and adherence to schedule. Many of our contracts, including business transformation outsourcing contracts, provide that payment of all or a portion of our fees is contingent upon our clients meeting revenue-enhancement, cost-saving or other contractually defined goals that are complex and often dependent in some measure on our clients’ actual levels of business activity. These provisions could increase the variability in revenues and margins earned on those contracts. We estimate that a majority of our contracts include pricing terms that condition some or all of our fees on the achievement of contractually defined goals.
Our alliance relationships may not be successful.
      We have alliances with companies whose capabilities complement our own. See “Business— Alliances.” As most of our alliance relationships are non-exclusive, our alliance partners are not prohibited from forming closer or preferred arrangements with our competitors. Loss of or limitations on our relationships with them could adversely affect our financial condition and results of operations.
Our global operations are subject to complex risks, some of which might be beyond our control.
      We have offices and operations in 49 countries around the world and provide services to clients in more than 75 countries. In fiscal 2006, approximately 46% of our revenues before reimbursements were attributable, based upon where client services are supervised, to our activities in our Americas region, 46% were attributable to our activities in our Europe, Middle East and Africa region (“EMEA”), and 8% were attributable to our activities in our Asia Pacific region. In addition, our Global Delivery Network comprises local Accenture professionals working at client sites around the world in tandem with professionals resident in other countries located in more than 40 delivery centers. If we are unable to manage the risks of our global operations, including fluctuations in foreign exchange and inflation rates, international hostilities, terrorism, natural disasters, security breaches, failure to maintain compliance with our clients control requirements and multiple legal and regulatory systems, our results of operations could be adversely affected.
      Our operating results may be adversely affected by fluctuations in foreign currency exchange rates. Although we report our operating results in U.S. dollars, a significant percentage of our revenues before reimbursements is denominated in currencies other than the U.S. dollar. Fluctuations in foreign currency exchange rates can have a number of adverse effects on us. Because our consolidated financial statements are presented in U.S. dollars, we must translate revenues, expenses and income, as well as assets and liabilities, into U.S. dollars at exchange rates in effect during or at the end of each reporting period. Therefore, changes in the value of the U.S. dollar against other major currencies will affect our revenues before reimbursements, operating income and the value of balance-sheet items originally denominated in other currencies. Declines in the value of other currencies against the U.S. dollar could cause our consolidated earnings stated in U.S. dollars to be lower than

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our consolidated earnings in local currency terms and could decrease the profitability of our contracts that are denominated in those currencies. There is no guarantee that our financial results will not be adversely affected by currency exchange rate fluctuations or that any efforts by us to engage in currency hedging activities would be effective. In addition, in some countries we could be subject to strict restrictions on the movement of cash and the exchange of foreign currencies, which could limit our ability to use this cash across our global operations. Finally, as we continue to leverage our global delivery model, more of our expenses are incurred in currencies other than those in which we bill for the related services. An increase in the value of certain currencies, such as the Indian rupee, against the U.S. dollar could increase costs for delivery of services at off-shore sites by increasing labor and other costs that are denominated in local currency.
      International hostilities, terrorist activities, natural disasters and infrastructure disruptions could prevent us from effectively serving our clients and thus adversely affect our operating results. Acts of terrorist violence — such as those of recent years in the United States, Spain and England — armed regional and international hostilities and international responses to these hostilities, natural disasters, global health risks or pandemics or the threat of or perceived potential for these events, could have a negative impact on us. These events could adversely affect our clients’ levels of business activity and precipitate sudden significant changes in regional and global economic conditions and cycles. These events also pose significant risks to our people and to physical facilities and operations around the world, whether the facilities are ours or those of our alliance partners or clients. By disrupting communications and travel and increasing the difficulty of obtaining and retaining highly skilled and qualified personnel, these events could make it difficult or impossible for us to deliver services to our clients. Extended disruptions of electricity, other public utilities or network services at our facilities, as well as system failures at, or security breaches in, our facilities or systems, could also adversely affect our ability to serve our clients. While we plan and prepare to defend against each of these occurrences, we might be unable to protect our people, facilities and systems against all such occurrences. We generally do not have insurance for losses and interruptions caused by terrorist attacks, conflicts and wars. If these disruptions prevent us from effectively serving our clients, our operating results could be adversely affected.
      We could have liability or our reputation could be damaged if we do not protect client data or information systems or if our information systems are breached. We are dependent on information technology networks and systems to process, transmit and store electronic information and to communicate among our locations around the world and with our alliance partners and clients. Security breaches of this infrastructure could lead to shutdowns or disruptions of our systems and potential unauthorized disclosure of confidential information. We are also required at times to manage, utilize and store sensitive or confidential client or employee data. As a result, we are subject to numerous U.S. and foreign jurisdiction laws and regulations designed to protect this information, such as the European Union Directive on Data Protection and various U.S. federal and state laws governing the protection of health or other individually identifiable information. If any person, including any of our employees, negligently disregards or intentionally breaches our established controls with respect to such data or otherwise mismanages or misappropriates that data, we could be subject to monetary damages, fines and/or criminal prosecution. Unauthorized disclosure of sensitive or confidential client or employee data, whether through systems failure, employee negligence, fraud or misappropriation, could damage our reputation and cause us to lose clients. Similarly, unauthorized access to or through our information systems or those we develop for our clients, whether by our employees or third parties, could result in negative publicity, legal liability and damage to our reputation.
      We could incur liability or our reputation could be damaged if our provision of services and solutions to our clients contributes to our clients’ internal control deficiencies. Our clients may request

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that we provide an audit of control activities we perform for them when we host or process data belonging to them. Our ability to acquire new clients and retain existing clients may be adversely affected and our reputation could be harmed if we receive a qualified opinion, or if we cannot obtain an unqualified opinion in a timely manner. Additionally, we could incur liability if a process we manage for a client were to result in internal controls failures or impair our client’s ability to comply with its own internal control requirements.
      Our global operations expose us to numerous and sometimes conflicting legal and regulatory requirements, and violation of these regulations could harm our business. Because we provide services to clients in more than 75 countries, we are subject to numerous, and sometimes conflicting, legal regimes on matters as diverse as import/export controls, content requirements, trade restrictions, tariffs, taxation, sanctions, government affairs, internal and disclosure control obligations, data privacy and labor relations. Violations of these regulations in the conduct of our business could result in fines, criminal sanctions against us or our officers, prohibitions on doing business and damage to our reputation. Violations of these regulations in connection with the performance of our obligations to our clients also could result in liability for monetary damages, fines and/or criminal prosecution, unfavorable publicity, restrictions on our ability to process information and allegations by our clients that we have not performed our contractual obligations. Due to the varying degrees of development of the legal systems of the countries in which we operate, local laws might be insufficient to protect our rights.
      Legislation related to certain non-U.S. corporations has been enacted in various jurisdictions in the United States, none of which adversely affects Accenture. However, additional legislative proposals remain under consideration in various legislatures which, if enacted, could limit or even prohibit our eligibility to be awarded state or Federal government contracts in the United States in the future. Changes in laws and regulations applicable to foreign corporations could also mandate significant and costly changes to the way we implement our services and solutions, such as preventing us from using off-shore resources to provide our services, or could impose additional taxes on the provision of our services and solutions. These changes could threaten our ability to continue to serve certain markets.
      In many parts of the world, including countries in which we operate, practices in the local business community might not conform to international business standards and could violate anticorruption regulations, including the U.S. Foreign Corrupt Practices Act, which prohibits giving anything of value intended to influence the awarding of government contracts. Although we have policies and procedures to ensure legal and regulatory compliance, our employees, subcontractors and agents could take actions that violate these requirements. Violations of these regulations could subject us to criminal or civil enforcement actions, including fines and suspension or disqualification from U.S. federal procurement contracting, any of which could have a material adverse effect on our business.
Our profitability could suffer if we are not able to control our costs.
      Our ability to control our costs and improve our efficiency affects our profitability. As the continuation of pricing pressures could result in permanent changes in pricing policies and delivery capabilities, we must continuously improve our management of costs. Our short-term cost reduction initiatives, which focus primarily on reducing variable costs, might not be sufficient to deal with all pressures on our pricing. Our long-term cost-reduction initiatives, which focus on global reductions in infrastructure and other costs, rely upon our successful introduction and coordination of multiple geographic and competency workforces and a growing number of geographically distributed delivery centers. As we increase the number of our professionals and execute our strategies for growth, we

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might not be able to manage significantly larger and more diverse workforces, control our costs or improve our efficiency. Despite increased cost savings, we could experience erosion of operating income as a percentage of revenues before reimbursements if current pricing pressures accelerate.
If we are unable to attract, retain and motivate employees or efficiently utilize their skills, we might not be able to compete effectively and will not be able to grow our business.
      Our success and ability to grow are dependent, in part, on our ability to hire, retain and motivate sufficient numbers of talented people with the increasingly diverse skills needed to serve clients and grow our business. Competition for skilled personnel in consulting, systems integration and technology, and outsourcing is intense at all levels of experience and seniority. We are particularly dependent on the skills of our senior executives, and if we are not able to successfully retain and motivate our senior executives and experienced managers, our ability to develop new business and effectively lead our current projects could be jeopardized. At the same time, the profitability of our business model depends on our ability to effectively utilize personnel with the right mix of skills and experience to support our projects and global delivery centers. The process of recruiting, training and retaining employees places significant demands on our resources. There is a risk that at certain points in time and in certain geographical regions, we will find it difficult to hire and retain a sufficient number of employees with the skills or backgrounds we require, or that it will prove difficult to retain them in a competitive labor market. If we are unable to hire and retain sufficient numbers of talented people, we might need to rely on subcontractors to fill certain of our labor needs, and costs for hiring subcontractors may be greater than those for our permanent employees. If we are not successful at retaining and motivating our senior executives, attracting and retaining other qualified employees in sufficient numbers to meet the demands of our business, or utilizing our people effectively, then our ability to compete for and successfully complete work for our clients could be adversely affected.
If we are unable to collect our receivables or amounts extended to our clients as financing, our results of operations could be adversely affected.
      Our business depends on our ability to successfully obtain payment from our clients on the amounts they owe us for work performed. We evaluate the financial condition of our clients and usually bill and collect on relatively short cycles. We also maintain reserves for uncollectible receivables. However, actual default rates on receivables could differ from those that we currently anticipate and as a result we might need to adjust our reserves for uncollectible receivables. In limited circumstances, we also extend financing to our clients, which we could fail to collect. At August 31, 2006, we had $263 million of client financing outstanding. A client must meet established criteria to receive financing from us and any significant extension of credit requires approval by senior levels of our management. However, there is no guarantee that we will accurately assess the creditworthiness of our clients. In addition, recovery of client financing depends on our ability to complete our contractual commitments and bill and collect our contracted revenues. If we are unable to meet our contractual requirements, client financing balances may be uncollectible.
Tax legislation and negative publicity related to Bermuda companies could lead to an increase in our tax burden or affect our relationships with our clients.
      In 2004, the United States Congress enacted legislation relating to the tax treatment of U.S. companies that have undertaken certain types of expatriation transactions. We do not believe this legislation applies to Accenture. However, we are not able to predict with certainty whether the U.S. Internal Revenue Service will challenge our interpretation of the legislation, nor are we able to

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predict with certainty the impact of regulations or other interpretations that might be issued related to this legislation. Future developments or the finalization of regulations or interpretations could materially increase our tax expense.
      In addition, there have been, from time to time, negative comments in the media regarding companies incorporated in Bermuda. This negative publicity could harm our reputation and impair our ability to generate new business if companies or government agencies decline to do business with us as a result of a negative public image of Bermuda companies or the possibility of our clients receiving negative media attention from doing business with us.
Our services or solutions could infringe upon the intellectual property rights of others or we might lose our ability to utilize the intellectual property of others.
      We cannot be sure that our services and solutions, or the solutions of others that we offer to our clients, do not infringe on the intellectual property rights of third parties, and we could have infringement claims asserted against us or against our clients. These claims could harm our reputation, cost us money and prevent us from offering some services or solutions. Historically in a number of our contracts, we have agreed to indemnify our clients for any expenses or liabilities resulting from claimed infringements of the intellectual property rights of third parties. In some instances, the amount of these indemnities could be greater than the revenues we receive from the client. Any claims or litigation in this area, whether we ultimately win or lose, could be time-consuming and costly, injure our reputation or require us to enter into royalty or licensing arrangements. We might not be able to enter into these royalty or licensing arrangements on acceptable terms. If a claim of infringement were successful against us or our clients, an injunction might be ordered against our client or our own services or operations, causing further damages.
      We could lose our ability to utilize the intellectual property of others. Third-party suppliers of software, hardware or other intellectual assets could be acquired or sued, and this could disrupt use of their products or services by Accenture and our clients. If our ability to provide services and solutions to our clients is impaired, our operating results could be adversely affected.
We have only a limited ability to protect our intellectual property rights, which are important to our success.
      Our success depends, in part, upon our ability to protect our proprietary methodologies and other intellectual property. Existing laws of some countries in which we provide services or solutions might offer only limited protection of our intellectual property rights. We rely upon a combination of trade secrets, confidentiality policies, nondisclosure and other contractual arrangements, and patent, copyright and trademark laws to protect our intellectual property rights. The steps we take in this regard might not be adequate to prevent or deter infringement or other misappropriation of our intellectual property, and we might not be able to detect unauthorized use of, or take appropriate and timely steps to enforce, our intellectual property rights.
      Depending on the circumstances, we could be required to grant a specific client greater rights in intellectual property developed in connection with a contract than we otherwise generally do, in which case we would seek to cross-license the use of the intellectual property. However, in certain situations, we forego rights to the use of intellectual property we help create, which limits our ability to reuse that intellectual property for other clients. Any limitation on our ability to provide a service or solution could cause us to lose revenue-generating opportunities and require us to incur additional expenses to develop new or modified solutions for future projects.

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If we are unable to manage the organizational challenges associated with the size and expansion of our company, we might be unable to achieve our business objectives.
      Since 2001, we have almost doubled the size of our workforce so that we now have approximately 140,000 employees, located in more than 150 cities in 49 countries. Although we have altered our management processes to keep pace with our geographical and workforce expansion, the size of our company presents significant management and organizational challenges and these issues may become more pronounced if we continue our rate of expansion. For example, our plans call for the establishment of multiple global delivery centers and the hiring of numerous new employees in an expansion of our offshore workforce. It might take time for our newer employees to develop the knowledge, skills or experience that our business model requires. Furthermore, if we continue to grow, it could become increasingly difficult to maintain our culture, effectively manage our personnel and operations and effectively communicate to our personnel worldwide our core values, strategies and goals. Similarly, it could become increasingly difficult to maintain common standards across an expanding enterprise or to effectively institutionalize our know-how. Finally, the size and scope of our operations increases the possibility that an employee will engage in unlawful or fraudulent activity, or otherwise expose the company to unacceptable business risks, despite our efforts to maintain internal controls to prevent such instances. If we do not continue to develop and implement the right processes and tools to manage our large and expanding enterprise, our ability to compete successfully and achieve our business objectives could be impaired.
We might acquire other businesses or technologies, and there is a risk that we might not successfully integrate them with our business or might otherwise fail to achieve our strategic objectives.
      Although we have completed a number of relatively small acquisitions to date, our experience with acquisitions of other businesses is limited. If we continue to acquire other businesses, we might need to dedicate additional management and other resources to complete the transactions, which could divert our attention from other business operations. Our organizational structure and limited experience integrating acquired businesses could also make it difficult for us to efficiently consummate these transactions or integrate acquired businesses or technologies into our ongoing operations. Some of the challenges we could face integrating acquired businesses or technologies include combining service delivery operations, consolidating IT and administrative infrastructure, assimilating employees and minimizing diversion of management attention. Accordingly, we might fail to realize the expected benefits or strategic objectives of any acquisition we undertake, which could have an adverse effect on our revenues and profit margin or our ability to grow our business.
Risks That Relate to Ownership of Our Class A Common Shares
The share price of Accenture Ltd Class A common shares could be adversely affected from time to time by sales, or the anticipation of future sales, of Class A common shares held by our employees and former employees.
      Our employees and former employees continue to hold significant numbers of Accenture Ltd Class A common shares, restricted share units and options, as well as other classes of stock of our subsidiaries that are exchangeable or redeemable for Accenture Ltd Class A common shares.
A large number of shares will become freely tradable on July 24, 2009
  •  At the time of our transition to a corporate structure in 2001, many of our senior executives received a substantial number of Class A common shares and/or securities that may be

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  exercisable, redeemable or exchangeable for Class A common shares or pursuant to which Class A common shares may be delivered to such senior executives. Those shares generally remain subject to transfer restrictions that lapse with the passage of time on an annual basis through July 24, 2009. See “Business—Organizational Structure—Restrictions on Transfer of Certain Accenture Shares.” As of October 12, 2006, the following number of additional shares still held by our current and former senior executives and their permitted transferees are scheduled to have transfer restrictions lapse on the dates set forth below:

                 
    Number of additional   Number of additional Accenture
    Accenture Ltd   SCA Class I common shares and
    Class A common shares that   Accenture Canada Holdings Inc.
    are scheduled to become   exchangeable shares that will
    available for transfer on   become available for transfer
Anniversary Date   anniversary date   on anniversary date
         
July 24, 2007
    10,597,041       28,825,937  
July 24, 2008
    10,812,783       32,533,067  
July 24, 2009
    35,959,138       74,327,885  
Later of July 24, 2009 or end of employment with Accenture
    23,370,544       63,307,438  
         If a large number of former senior executives, or their transferees, choose to transfer their shares upon the release of transfer restrictions on July 24, 2009, it could have an adverse impact on the share price of our Class A common shares.
         We have on several occasions conducted transactions, including two discounted tender offers of Accenture SCA shares and targeted repurchases of Accenture Ltd shares, designed to address the potential impact of the build-up of shares having transfer restrictions that would otherwise lapse on July 24, 2009. There is no assurance that these transactions, or any other transactions we might undertake in the future, will have the desired impact of meaningfully reducing the number of shares whose transfer restrictions lapse on a common date.
Our Senior Executive Trading Policy might not be effective at limiting the number of shares sold
  •  In July 2005, we implemented a Senior Executive Trading Policy. It provides, among other things, that all shares covered by the transfer restrictions contained in our various charter documents and still held by actively employed senior executives but which are no longer restricted by the transfer restrictions described above will be subject to company-imposed quarterly trading guidelines. These guidelines currently limit the total number of shares redeemed, sold or otherwise transferred in any calendar quarter to no more than a composite average weekly volume of trading in Accenture Ltd Class A common shares. The policy guidelines are not legal or contractual restrictions, however, and there is a risk that the internal sanctions available to us might not adequately dissuade individual employees from attempting transfers in excess of the amounts permitted under the policy. Additionally, there is a risk that this policy creates an adverse incentive for some senior executives to retire or to terminate their Accenture employment in order to sell unrestricted shares that would otherwise be governed by these quarterly trading guidelines. This could have an adverse effect on our ability to retain talented and experienced senior executives.

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The sale of shares issued under our 2001 Share Incentive Plan could have an adverse effect on our share price
  •  As of October 12, 2006, a total of 48,323,627 of our Class A common shares underlying restricted share units were scheduled to be delivered during the calendar years indicated below:
         
Calendar Year   Number of Shares
     
2006
    304,439  
2007
    8,222,442  
2008
    6,626,615  
2009
    12,508,826  
2010 and after
    20,661,305  
         Although the holders may choose to defer delivery of some of these shares for tax purposes, it is foreseeable that a significant number of these shares could be sold on the open markets following their delivery.
  •  In addition, as of October 12, 2006, a total of 55,037,422 Accenture Ltd Class A common shares were issuable pursuant to options, of which options to purchase an aggregate of 44,198,638 Class A common shares were exercisable and options to purchase an aggregate of 10,838,784 Class A common shares are scheduled to become exercisable during the calendar years indicated below:
         
Calendar Year   Number of Shares
     
2006
    73,894  
2007
    8,088,889  
After 2007
    2,676,001  
         Upon delivery of restricted stock, or exercise of employee stock options, under our 2001 Stock Incentive Plan, our employees or former employees may choose to sell a significant number of our shares in open market transactions. There is a risk that this could put additional downward pressure on the price of our Class A common stock.
Our share price has fluctuated in the past and could continue to fluctuate, including in response to variability in revenues, operating results and profitability, and as a result our share price could be difficult to predict.
      Our share price has fluctuated in the past and could continue to fluctuate in the future in response to various factors. These factors include:
  •  announcements by us or our competitors about developments in our business or prospects;
 
  •  projections or speculation about our business or that of our competitors by the media or investment analysts;
 
  •  changes in macroeconomic or political factors unrelated to our business;
 
  •  general or industry-specific market conditions or changes in financial markets; and
 
  •  changes in our revenues, operating results and profitability.

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      Our revenues, operating results and profitability have varied in the past and are likely to vary significantly from quarter to quarter in the future, making them difficult to predict. Some of the factors that could cause our revenues, operating results and profitability to vary include:
  •  seasonality, including number of workdays and holiday and summer vacations;
 
  •  the business decisions of our clients regarding the use of our services;
 
  •  periodic differences between our clients’ estimated and actual levels of business activity associated with ongoing work;
 
  •  the stage of completion of existing projects and/or their termination;
 
  •  our ability to transition employees quickly from completed to new projects;
 
  •  the introduction of new products or services by us or our competitors;
 
  •  changes in our pricing policies or those of our competitors;
 
  •  our ability to manage costs, including those for personnel, support services and severance;
 
  •  our ability to maintain an appropriate headcount in each of our workforces;
 
  •  acquisition and integration costs related to possible acquisitions of other businesses;
 
  •  changes in, or the application of changes in, accounting principles or pronouncements under U.S. generally accepted accounting principles, particularly those related to revenue recognition;
 
  •  currency exchange rate fluctuations;
 
  •  changes in estimates, accruals or payments of variable compensation to our employees; and
 
  •  global, regional and local economic and political conditions and related risks, including acts of terrorism.
      As a result of any of these factors, our share price could be difficult to predict and our share price in the past might not be a good indicator of the price of our shares in the future. In addition, if litigation is instituted against us following variability in our share price, we might need to devote substantial time and resources to responding to the litigation, and our share price could be adversely affected.
Our share price could be adversely affected if we are unable to maintain effective internal controls.
      We are required to provide a report from management to our shareholders on our internal control over financial reporting that includes an assessment of the effectiveness of these controls. Internal control over financial reporting has inherent limitations, including human error, the possibility that controls could be circumvented or become inadequate because of changed conditions, and fraud. Because of these inherent limitations, internal control over financial reporting might not prevent or detect all misstatements or fraud. If we cannot maintain and execute adequate internal control over financial reporting or implement required new or improved controls that provide reasonable assurance of the reliability of the financial reporting and preparation of our financial statements for external use, we could suffer harm to our reputation, fail to meet our public reporting requirements on a timely basis, or be unable to properly report on our business and the results of our operations and the market price of our securities could be materially adversely affected.

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We are registered in Bermuda and a significant portion of our assets are located outside the United States. As a result, it might not be possible for shareholders to enforce civil liability provisions of the Federal or state securities laws of the United States.
      We are organized under the laws of Bermuda, and a significant portion of our assets are located outside the United States. It might not be possible to enforce court judgments obtained in the United States against us in Bermuda or in countries other than in the United States where we have assets based on the civil liability provisions of the Federal or state securities laws of the United States. In addition, there is some doubt as to whether the courts of Bermuda and other countries would recognize or enforce judgments of U.S. courts obtained against us or our directors or officers based on the civil liabilities provisions of the Federal or state securities laws of the United States or would hear actions against us or those persons based on those laws. We have been advised by our legal advisors in Bermuda that the United States and Bermuda do not currently have a treaty providing for the reciprocal recognition and enforcement of judgments in civil and commercial matters. Therefore, a final judgment for the payment of money rendered by any Federal or state court in the United States based on civil liability, whether or not based solely on U.S. Federal or state securities laws, would not automatically be enforceable in Bermuda. Similarly, those judgments might not be enforceable in countries other than in the United States where we have assets.
Bermuda law differs from the laws in effect in the United States and might afford less protection to shareholders.
      Our shareholders could have more difficulty protecting their interests than would shareholders of a corporation incorporated in a jurisdiction of the United States. As a Bermuda company, we are governed by the Companies Act 1981 of Bermuda. The Companies Act differs in some material respects from laws generally applicable to U.S. corporations and shareholders, including the provisions relating to interested directors, mergers and acquisitions, takeovers, shareholder lawsuits and indemnification of directors.
      Under Bermuda law, the duties of directors and officers of a company are generally owed to the company only. Shareholders of Bermuda companies do not generally have rights to take action against directors or officers of the company, and may only do so in limited circumstances. Officers of a Bermuda company must, in exercising their powers and performing their duties, act honestly and in good faith with a view to the best interests of the company and must exercise the care and skill that a reasonably prudent person would exercise in comparable circumstances. Directors have a duty not to put themselves in a position in which their duties to the company and their personal interests might conflict and also are under a duty to disclose any personal interest in any contract or arrangement with the company or any of its subsidiaries. If a director or officer of a Bermuda company is found to have breached his duties to that company, he could be held personally liable to the company in respect of that breach of duty. A director may be liable jointly and severally with other directors if it is shown that the director knowingly engaged in fraud or dishonesty. In cases not involving fraud or dishonesty, the liability of the director will be determined by the Bermuda courts on the basis of their estimation of the percentage of responsibility of the director for the matter in question, in light of the nature of the conduct of the director and the extent of the causal relationship between his conduct and the loss suffered.

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We might be unable to access additional capital on favorable terms or at all. If we raise equity capital, it may dilute our shareholders’ ownership interest in us.
      We might need to raise additional funds through public or private debt or equity financings in order to:
  •  take advantage of opportunities, including more rapid expansion;
 
  •  acquire complementary businesses or technologies;
 
  •  develop new services and solutions; or
 
  •  respond to competitive pressures.
      Any additional capital raised through the sale of equity could dilute shareholders’ ownership percentage in us. Furthermore, any additional financing we need might not be available on terms favorable to us, or at all.
ITEM 1B. UNRESOLVED STAFF COMMENTS
      None.
ITEM 2. PROPERTIES
      We have major offices in the world’s leading business centers, including New York, London, Frankfurt, Paris, Madrid, Chicago, Milan, Tokyo, Sao Paolo, Rome, Bangalore, San Francisco, Sydney, Manila and Boston, among others. In total, we have offices and operations in more than 150 cities in 49 countries around the world. We do not own any material real property. Substantially all of our office space is leased under long-term leases with varying expiration dates. We believe that our facilities are adequate to meet our needs in the near future.
ITEM 3. LEGAL PROCEEDINGS
      We are involved in a number of judicial and arbitration proceedings concerning matters arising in the ordinary course of our business. We do not expect that any of these matters, individually or in the aggregate, will have a material impact on our results of operations or financial condition.
      As previously reported in July 2003, we became aware of an incident of possible noncompliance with the Foreign Corrupt Practices Act and/or with Accenture’s internal controls in connection with certain of our operations in the Middle East. In 2003, we voluntarily reported the incident to the appropriate authorities in the United States promptly after its discovery. Shortly thereafter, the SEC advised us it would be undertaking an informal investigation of this incident, and the U.S. Department of Justice indicated it would also conduct a review. Since that time, there have been no further developments. We do not believe that this incident will have any material impact on our results of operations or financial condition.
      We currently maintain the types and amounts of insurance customary in the industries and countries in which we operate, including coverage for professional liability, general liability and management liability. We consider our insurance coverage to be adequate both as to the risks and amounts for the businesses we conduct.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
      No matters were submitted to a vote of security holders of Accenture Ltd or Accenture SCA during the fourth quarter of fiscal 2006.

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Executive Officers of the Registrant
      Our executive officers and persons chosen to become executive officers as of the date hereof are as follows:
      Kevin Campbell, 46, became our group chief executive—Outsourcing in September 2006, after serving as our senior managing director—Business Process Outsourcing beginning in February 2005. Previously, he served as the vice president of global sales at Hewitt Associates from September 2004 to February 2005, and as president and chief operating officer of Exult Inc. from May 2000 to September 2004, when Exult merged with Hewitt. Mr. Campbell was previously employed by Accenture from 1982 until 1999.
      Gianfranco Casati, 47, became our group chief executive—Products operating group in September 2006. From April 2002 to September 2006, Mr. Casati was managing director of the Products operating group’s Europe operating unit. He also served as Accenture’s country managing director for Italy and as chairman of our geographic council in its IGEM (Italy, Greece, emerging markets) region, supervising Accenture offices in Italy, Greece and several Eastern European countries. Mr. Casati has been with Accenture for 22 years.
      Martin I. Cole, 50, became our group chief executive—Communications & High Tech operating group in September 2006, after serving as our group chief executive—Government operating group from September 2004 to September 2006. From September 2000 to August 2004, he served in leadership roles in our outsourcing group, including serving as global managing partner of our Outsourcing & Infrastructure Delivery group. Mr. Cole has been with Accenture for 26 years.
      Anthony G. Coughlan, 49, has been our principal accounting officer since September 2004 and our controller since September 2001. Mr. Coughlan has been with Accenture for 28 years.
      Pamela J. Craig, 49, is currently our senior vice president—Finance, a position which she has held since March 2004. She will become our chief financial officer on October 31, 2006. Previously, Ms. Craig was our group director—Business Operations & Services from March 2003 to March 2004, and was our managing partner—Global Business Operations from June 2001 to March 2003. Ms. Craig has served as a director of Avanade Inc. since February 2006, and is a member of its Audit Committee. Ms. Craig has been with Accenture for 24 years.
      Karl-Heinz Flöther, 54, has been our group chief executive—Systems Integration, Technology & Delivery since May 2005. From December 1999 to May 2005 he was our group chief executive—Financial Services operating group. In addition, Mr. Flöther served as one of our directors from June 2001 to February 2003, and is currently a director of Avanade Inc. Mr. Flöther has been with Accenture for 27 years.
      Mark Foster, 46, became our group chief executive—Business Consulting & Integrated Markets in September 2006. Prior to that, Mr. Foster served as our group chief executive—Products operating group from March 2002 to September 2006. From September 2000 to March 2002, he was managing partner of our Products operating group in Europe. Mr. Foster has been with Accenture for 22 years.
      Robert N. Frerichs, 54, has been our chief quality & risk officer since September 2004. From November 2003 to September 2004, he was chief operating officer of our Communication & High Tech operating group. From August 2001 to November 2003, he led the market maker team for our Communications & High Tech operating group. Prior to these roles, Mr. Frerichs held numerous leadership positions within our Communications & High Tech operating group. He currently serves on the Board of Directors of Avanade Inc., and is chairman of its Audit Committee. Mr. Frerichs has been with Accenture for 30 years.

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      William D. Green, 53, became chairman of the Board of Directors on August 31, 2006, and has been our chief executive officer since September 2004 and a director since June 2001. From March 2003 to August 2004 he was our chief operating officer— Client Services, and from August 2000 to August 2004 he was our country managing director, United States. Mr. Green has been with Accenture for 28 years.
      Adrian Lajtha, 49, has been our group chief executive—Financial Services operating group since May 2005. From February 2000 to May 2005 he was managing partner of our Financial Services operating group in the United Kingdom and Ireland. Mr. Lajtha has been with Accenture for 27 years.
      Lisa M. Mascolo, 46, became our group chief executive— Government operating group in September 2006. She has served in leadership roles in our Government operating group since 2001, including serving as managing director of our USA Government operating unit and managing partner of Accenture’s US Federal Government business. Ms. Mascolo has been with Accenture for 24 years.
      Michael G. McGrath, 60, has been our chief financial officer since July 2004. From November 2001 to July 2004 he was our chief risk officer. He was our treasurer from June 2001 to November 2001. From September 1997 to June 2001, Mr. McGrath was our chief financial officer. Mr. McGrath will assume the role of international chairman of Accenture on October 31, 2006. Effective as of that date, he will be succeeded as chief financial officer by Pamela J. Craig. Mr. McGrath has been with Accenture for 33 years.
      Stephen J. Rohleder, 49, has been our chief operating officer since September 2004. From March 2003 to September 2004, he was our group chief executive—Government operating group. From March 2000 to March 2003, he was managing partner of our Government operating group in the United States. Mr. Rohleder has been with Accenture for 25 years.
      Douglas G. Scrivner, 55, has been our general counsel and secretary since January 1996 and our compliance officer since September 2001. Mr. Scrivner has been with Accenture for 26 years.
      Alexander M. van’t Noordende, 43, became our group chief executive—Resources operating group in September 2006. Prior to assuming that role, he led our Resources operating group in Southern Europe, Africa, the Middle East and Latin America, and has served as managing partner of the Resources operating group in France, Belgium and the Netherlands. From 2001 until September 2006, Mr. van ’t Noordende served as our country managing director for the Netherlands. Mr. van’t Noordende has been with Accenture for 19 years.

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PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Price Range of Accenture Ltd Class A Common Shares
      Accenture Ltd Class A common shares are traded on the New York Stock Exchange under the symbol “ACN.” The New York Stock Exchange is the principal United States market for these shares.
      The following table sets forth, on a per share basis for the periods indicated, the high and low sale prices for the Class A common shares as reported by the New York Stock Exchange.
                 
    Price Range
     
    High   Low
         
Fiscal 2005
               
First Quarter
  $ 27.58     $ 22.61  
Second Quarter
  $ 27.60     $ 24.39  
Third Quarter
  $ 25.97     $ 21.00  
Fourth Quarter
  $ 25.70     $ 22.20  
Fiscal 2006
               
First Quarter
  $ 28.63     $ 24.45  
Second Quarter
  $ 33.05     $ 28.02  
Third Quarter
  $ 32.94     $ 26.17  
Fourth Quarter
  $ 29.66     $ 25.68  
Fiscal 2007
               
First Quarter (through October 12, 2006)
  $ 33.15     $ 28.28  
      The closing sale price of the Accenture Ltd Class A common shares as reported by the New York Stock Exchange consolidated tape as of October 12, 2006 was $31.70. As of October 12, 2006, there were 1,642 holders of record of the Class A common shares.
      There is no trading market for the Accenture Ltd Class X common shares. As of October 12, 2006, there were 1,339 holders of record of the Class X common shares.
Dividend Policy
      From our incorporation in 2001 through the end of fiscal 2005, neither Accenture Ltd nor Accenture SCA declared or paid any cash dividends on any class of equity.
      On November 15, 2005, Accenture Ltd paid a cash dividend of $0.30 per share on its Class A common shares to shareholders of record at the close of business on October 17, 2005, and Accenture SCA paid a cash dividend of $0.30 per share on its Class I common shares to shareholders of record at the close of business on October 12, 2005.
      On September 25, 2006, Accenture Ltd declared a cash dividend of $0.35 per share on its Class A common shares for shareholders of record at the close of business on October 13, 2006. Accenture Ltd will cause Accenture SCA to declare a cash dividend of $0.35 per share on its Class I common shares for shareholders of record at the close of business on October 5, 2006. Both dividends are payable on November 15, 2006.
      Future dividends on the Accenture Ltd Class A common shares, if any, will be at the discretion of the Board of Directors of Accenture Ltd and will depend on, among other things, our results of

39


 

operations, cash requirements and surplus, financial condition, contractual restrictions and other factors that the Board of Directors may deem relevant, as well as our ability to pay dividends in compliance with the Bermuda Companies Act.
Recent Sales of Unregistered Securities
      None.
Securities Authorized for Issuance under Equity Compensation Plans
      The following table sets forth, as of August 31, 2006, certain information related to our compensation plans under which Accenture Ltd Class A common shares may be issued.
                           
            Number of Shares
        Weighted Average   Remaining Available
    Number of Shares to be   Exercise Price of   for Future Issuance
    Issued Upon Exercise   Outstanding   (Excluding Securities
    of Outstanding Options,   Options, Warrants   Reflected in 1st
Plan Category   Warrants and Rights   and Rights   Column)
             
Equity compensation plans approved by shareholders:
                       
 
2001 Share Incentive Plan
    104,249,367 (1)   $ 10.40       165,164,681  
 
2001 Employee Share Purchase Plan
          N/A       32,371,514  
Equity compensation plans not approved by shareholders
          N/A        
                   
Total
    104,249,367               197,536,195  
                   
 
(1)  Consists of 57,582,271 stock options with a weighted average exercise price of $18.84 per share and 46,667,096 restricted share units.
Purchases of Common Shares
      The following table provides information relating to the Company’s purchases of Accenture Ltd Class A common shares and redemptions of Accenture Ltd Class X common shares for the fourth quarter of fiscal 2006. For year-to-date information on all share purchases, redemptions and exchanges by the Company and further discussion of the Company’s share purchase activity, see

40


 

“Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Share Purchases and Redemptions.”
                                   
                Approximate Dollar
                Value of Shares
            Total Number of   that May Yet Be
            Shares Purchased as   Purchased Under
        Average   Part of Publicly   Publicly
    Total Number of   Price Paid   Announced Plans or   Announced Plans
Period   Shares Purchased   per Share   Programs(1)   or Programs
                 
                (In millions)
June 1, 2006—June 30, 2006
                               
 
Class A common shares
    6,842     $ 27.43           $ 978  
 
Class X common shares
                       
July 1, 2006—July 31, 2006
                               
 
Class A common shares
    487,582     $ 28.46           $ 978  
 
Class X common shares
    14,848,926     $ 0.0000225              
August 1, 2006—August 31, 2006
                               
 
Class A common shares
                    $ 978  
 
Class X common shares
    1,990,955     $ 0.0000225              
Total
                               
 
Class A common shares(1)(2)
    494,424     $ 28.45                
 
Class X common shares(3)
    16,839,881     $ 0.0000225                
 
(1)  Since August 2001, the Board of Directors of Accenture has authorized and periodically confirmed a publicly announced open-market share purchase program for acquiring Accenture Ltd Class A common shares. During the fourth quarter of fiscal 2006, we did not purchase any Accenture Ltd Class A common shares under this program. To date, the Board of Directors of Accenture has authorized an aggregate of $2.4 billion for use in these open-market share purchases. At August 31, 2006, an aggregate of $978 million remained available for these open-market share purchases. The open-market purchase program does not have an expiration date.
(2)  During the fourth quarter of fiscal 2006, Accenture purchased 494,424 Accenture Ltd Class A common shares in transactions unrelated to publicly announced share plans or programs. These transactions consisted of acquisitions of Accenture Ltd Class A common shares via share withholding for payroll tax obligations due from employees and former employees in connection with the delivery of Accenture Ltd Class A common shares under the Company’s various employee equity share plans.
(3)  During the fourth quarter of fiscal 2006, the Company redeemed 16,839,881 Accenture Ltd Class X common shares pursuant to its bye-laws. Accenture Ltd Class X common shares are redeemable at their par value of $0.0000225 per share.

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Purchases and redemptions of shares of Accenture subsidiaries
      The following table provides additional information relating to purchases and redemptions by Accenture of Accenture SCA Class I common shares and Accenture Canada Holdings Inc. exchangeable shares during the fourth quarter of fiscal 2006. The Company’s management believes the following table and footnotes provide useful information regarding the share purchase and redemption activity of the Company. Generally, purchases and redemptions of Accenture SCA Class I common shares and Accenture Canada Holdings Inc. exchangeable shares reduce shares outstanding for purposes of computing earnings per share.
                                   
                Approximate Dollar
                Value of Shares
            Total Number of   that May Yet Be
            Shares Purchased as   Purchased Under
        Average   Part of Publicly   Publicly
    Total Number of   Price Paid   Announced Plans or   Announced Plans
Period   Shares Purchased(1)   per Share   Programs   or Programs
                 
Accenture SCA
                               
June 1, 2006—June 30, 2006
                               
 
Class I common shares
                       
July 1, 2006—July 31, 2006
                               
 
Class I common shares
    6,250,637     $ 28.28              
August 1, 2006—August 31, 2006
                               
 
Class I common shares
    2,352,530     $ 28.39              
Total
                               
 
Class I common shares(2)
    8,603,167     $ 28.31              
Accenture Canada Holdings Inc.
                               
June 1, 2006—June 30, 2006
                               
 
Exchangeable shares
                       
July 1, 2006—July 31, 2006
                               
 
Exchangeable shares
    44,970     $ 28.05              
August 1, 2006—August 31, 2006
                               
 
Exchangeable shares
    36,037     $ 28.54              
Total
                               
 
Exchangeable shares(2)
    81,007     $ 28.27              
 
(1)  To date, the Board of Directors of Accenture has authorized an aggregate of $4.2 billion for purchases and redemptions of shares from our current and former senior executives and their permitted transferees under our Senior Executive Trading Policy and our prior Share Management Plan. At August 31, 2006, an aggregate of $942 million remained available for these purchases and redemptions.
(2)  During the fourth quarter of fiscal 2006, Accenture redeemed and purchased a total of 8,603,167 Accenture SCA Class I common shares and 81,007 Accenture Canada Holdings Inc. exchangeable shares from current and former senior executives and their permitted transferees.
Purchases and redemptions of Accenture SCA Class II and Class III common shares
      During the fourth quarter of fiscal 2006, Accenture SCA redeemed 11,703,375 Accenture SCA Class III common shares from Accenture. These redemptions were made in transactions unrelated to publicly announced share plans or programs. Transactions involving Accenture SCA Class II and Class III common shares consist exclusively of inter-company transactions undertaken to facilitate other corporate purposes. These inter-company transactions do not reduce shares outstanding for purposes of computing earnings per share reflected in the Company’s Consolidated Financial Statements under “Financial Statements and Supplementary Data.”

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ITEM 6. SELECTED FINANCIAL DATA
      The data as of August 31, 2006 and 2005 and for the years ended August 31, 2006, 2005 and 2004 are derived from the audited Consolidated Financial Statements and related Notes that are included elsewhere in this report. The data as of August 31, 2004, 2003 and 2002 and for the years ended August 31, 2003 and 2002 are derived from audited Consolidated Financial Statements and related Notes that are not included in this report. The selected financial data should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our Consolidated Financial Statements and related Notes included elsewhere in this report.
                                             
    Year Ended August 31,
     
    2006(1)(2)(3)   2005(3)   2004(3)   2003(3)   2002(3)
                     
    (in millions, except share and per share amounts)
Income Statement Data:
                                       
Revenues:
                                       
 
Revenues before reimbursements
  $ 16,646     $ 15,547     $ 13,673     $ 11,818     $ 11,574  
 
Reimbursements
    1,582       1,547       1,440       1,579       1,531  
                               
   
Revenues
    18,228       17,094       15,113       13,397       13,105  
Operating expenses:
                                       
 
Cost of services:
                                       
   
Cost of services before reimbursable expenses
    11,652       10,455       9,057       7,508       6,897  
   
Reimbursable expenses
    1,582       1,547       1,440       1,579       1,531  
                               
   
Cost of services
    13,234       12,002       10,497       9,087       8,428  
 
Sales and marketing
    1,708       1,558       1,488       1,459       1,566  
 
General and administrative costs
    1,493       1,512       1,340       1,319       1,616  
 
Reorganization and restructuring (benefits) costs
    (48 )     (89 )     29       (19 )     111  
                               
   
Total operating expenses
    16,387       14,983       13,355       11,846       11,720  
                               
Operating income
    1,841       2,111       1,759       1,551       1,385  
Gain (loss) on investments, net
    2       21       3       10       (321 )
Interest income
    130       108       60       41       46  
Interest expense
    (21 )     (24 )     (22 )     (21 )     (49 )
Other (expense) income
    (28 )     (11 )           32       15  
Equity in losses of affiliates
                (2 )           (9 )
                               
Income before income taxes
    1,924       2,206       1,799       1,613       1,068  
Provision for income taxes
    491       697       576       566       491  
                               
Income before minority interest
    1,433       1,509       1,223       1,047       576  
Minority interest
    (460 )     (568 )     (532 )     (549 )     (332 )
                               
   
Net income
  $ 973     $ 940     $ 691     $ 498     $ 245  
                               
 
(1)  Includes the financial impact of the resolution of the NHS matter recorded during fiscal 2006. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—The NHS Contracts.”
(2)  Includes the impact of Statement of Financial Accounting Standards No. 123R, “Share-Based Payment.” For additional information, refer to Footnote 11 (Share-Based Compensation) to our Consolidated Financial Statements under “Financial Statements and Supplementary Data.”
(3)  May not total due to rounding.

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    Year Ended August 31,
     
    2006   2005   2004   2003   2002
                     
    (in millions, except share and per share amounts)
Weighted Average Class A Common Shares:
                                       
Basic
    589,099,824       588,505,335       553,298,104       468,592,110       425,941,809  
Diluted
    893,810,585       960,853,814       1,003,081,228       996,982,549       1,023,950,170  
Earnings Per Class A Common Share:
                                       
Basic
  $ 1.65     $ 1.60     $ 1.25     $ 1.06     $ 0.57  
Diluted
  $ 1.59     $ 1.56     $ 1.22     $ 1.05     $ 0.56  
Dividends per common share
  $ 0.30     $     $     $     $  
                                         
    As of August 31,
     
    2006   2005   2004   2003   2002
                     
    (in millions)
Balance Sheet Data:
                                       
Cash and cash equivalents
  $ 3,067     $ 2,484     $ 2,553     $ 2,332     $ 1,317  
Working capital
    1,537       1,754       1,745       1,729       723  
Total assets
    9,418       8,957       8,013       6,459       5,479  
Long-term debt, net of current portion
    27       44       32       14       3  
Shareholders’ equity
    1,894       1,697       1,472       832       475  
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
      The following discussion and analysis should be read in conjunction with our Consolidated Financial Statements and related Notes included elsewhere in this Annual Report on Form 10-K. This discussion and analysis also contains forward-looking statements and should also be read in conjunction with the disclosures and information contained in “Disclosure Regarding Forward-Looking Statements” and “Risk Factors” in this Annual Report on Form 10-K.
      We use the terms “Accenture,” “we,” “our Company,” “our” and “us” in this report to refer to Accenture Ltd and its subsidiaries. All references to years, unless otherwise noted, refer to our fiscal year, which ends on August 31. For example, a reference to “fiscal 2006” or “fiscal year 2006” means the 12-month period that ended on August 31, 2006. All references to quarters, unless otherwise noted, refer to the quarters of our fiscal year.
Overview
      Revenues are driven by the ability of our executives to secure new contracts and to deliver solutions and services that add value to our clients. Our ability to add value to clients and therefore drive revenues depends in part on our ability to deliver market-leading service offerings and to deploy skilled teams of professionals quickly and on a global basis.
      Our results of operations are also affected by the economic conditions, levels of business activity and rates of change in the industries we serve, as well as by the pace of technological change and the type and level of technology spending by our clients. The ability to identify and capitalize on these market and technological changes early in their cycles is a key driver of our performance. The current economic environment continues to stimulate the technology spending of many companies. We are also continuing to see an increase in the number of opportunities from companies seeking revenue-generating initiatives in the global economy in addition to cost-cutting initiatives. We expect that

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revenue growth rates across our segments may vary from quarter to quarter during fiscal 2007 as economic conditions vary in different industries and geographic markets.
      Revenues before reimbursements for fiscal 2006 were $16.65 billion, compared with $15.55 billion for fiscal 2005, an increase of 7% in U.S. dollars and 9% in local currency. Revenues before reimbursements for the fourth quarter of fiscal 2006 were $3.97 billion, compared with $3.92 billion for the fourth quarter of fiscal 2005, an increase of 1% in U.S. dollars and remained flat in local currency.
      Consulting revenues before reimbursements for fiscal 2006 were $9.89 billion, compared with $9.56 billion for fiscal 2005, an increase of 3% in U.S. dollars and 6% in local currency. For the fourth quarter of fiscal 2006, consulting revenues before reimbursements were $2.19 billion, compared with $2.38 billion for the fourth quarter of fiscal 2005, a decrease of 8% in U.S. dollars and 9% in local currency.
      Outsourcing revenues before reimbursements for fiscal 2006 were $6.75 billion, compared with $5.99 billion for fiscal 2005, an increase of 13% in U.S. dollars and 14% in local currency. Outsourcing revenues before reimbursements for the fourth quarter of fiscal 2006 were $1.77 billion, compared with $1.55 billion for the fourth quarter of fiscal 2005, an increase of 14% in U.S. dollars and 12% in local currency. Outsourcing contracts typically have longer terms than consulting contracts and generally have lower gross margins than consulting contracts, particularly in the first year. Long-term relationships with many of our clients continue to contribute to our success in growing our outsourcing business. Long-term, complex outsourcing contracts, including their consulting components, require ongoing review of their terms and scope of work, in light of our clients’ evolving business needs and our performance expectations. Should the size or number of modifications to these arrangements increase, as our business continues to grow and these contracts evolve, we may experience increased variability in expected cash flows, revenues and profitability.
      We previously entered into certain large, long-term contracts (the “NHS Contracts”) under which we were engaged by the National Health Service in England (the “NHS”) to design, develop and deploy new patient administration, assessment and care systems (the “Systems”) for local healthcare providers and, subsequently, to provide ongoing operational services (the “Operational Services”) once these systems were deployed. During the second quarter of fiscal 2006, there were several developments that significantly increased the risks and uncertainties associated with these contracts and materially impacted our estimates of the contract revenues and costs we expected to record in connection with the NHS Contracts. To reflect our revised estimates with respect to design, development and deployment, we recorded a $450 million loss provision in the second quarter of fiscal 2006. On September 28, 2006, we entered into a tripartite agreement (the “NHS Transfer Agreement”) with the NHS and Computer Sciences Corporation (“CSC”), an unrelated third party, under which we agreed to transfer to CSC all of our rights and obligations under the NHS Contracts, except those relating to the Picture Archiving Communication System (“PACS”). This resulted in a $339 million reduction in revenues before reimbursements in the fourth quarter of fiscal 2006, as we reversed revenues before reimbursements related to our design, development and deployment activities previously recorded under the percentage-of-completion method of accounting under the assumption that these amounts would be recovered from billings for deployment of the Systems. The impact of the $339 million reduction in revenues before reimbursements was offset by a decrease in Cost of services, including a reversal of $396 million of the loss provision recorded in the second quarter of fiscal 2006, partially offset by impairment write downs on Operational Services assets totaling $57 million. In connection with the Operational Services, we expect losses of approximately $125 million during the first half of fiscal 2007 associated with the transition and wind-down of work

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related to the NHS Transfer Agreement. We expect to complete the transfer during the second quarter of fiscal 2007. Our remaining obligations under the NHS Contracts are immaterial. See “— The NHS Contracts.”
      As we are a global company, our revenues are denominated in multiple currencies and may be significantly affected by currency exchange-rate fluctuations. During the majority of fiscal 2006, the weakening of various currencies versus the U.S. dollar resulted in an unfavorable currency translation and decreased our reported revenues, operating expenses and operating income. In the fourth quarter of fiscal 2006, the U.S. dollar weakened against other currencies, resulting in favorable currency translation and greater reported U.S. dollar revenues, operating expenses and operating income. If this trend continues in fiscal 2007, our U.S. dollar revenue growth may be higher than our growth in local currency terms. If the U.S. dollar strengthens against other currencies in fiscal 2007, our U.S. dollar revenue growth may be lower than our growth in local currency.
      The primary categories of operating expenses include cost of services, sales and marketing and general and administrative costs. Cost of services is primarily driven by the cost of client-service personnel, which consists mainly of compensation, sub-contractor and other personnel costs, and non-payroll outsourcing costs. Cost of services as a percentage of revenues is driven by the prices we obtain for our solutions and services, the utilization of our client-service workforces and the level of non-payroll costs associated with the growth of new outsourcing contracts. Utilization represents the percentage of our professionals’ time spent on billable work. Sales and marketing expense is driven primarily by business-development activities, the development of new service offerings, the level of concentration of clients in a particular industry or market and client-targeting, image-development and brand-recognition activities. General and administrative costs primarily include costs for non-client-facing personnel, information systems and office space, which we seek to manage at levels consistent with changes in activity levels in our business. Operating expenses also include reorganization benefits and costs, which may vary substantially from year to year.
      Effective September 1, 2005, we adopted Statement of Financial Accounting Standards (“SFAS”) No. 123R, Share-Based Payment (“SFAS No. 123R”), resulting in a change in our method of recognizing share-based compensation expense. Specifically, we now record compensation expense for employee stock options and for our employee share purchase plan. Had we expensed employee stock options and employee share purchase rights for the three months ended and the year ended August 31, 2005, we estimate that share-based compensation expense would have increased by $69 million and $218 million, respectively. For additional information, see Footnote 11 (Share-based Compensation) to our Consolidated Financial Statements under “Financial Statements and Supplementary Data.”
      Gross margins (revenues before reimbursements less cost of services before reimbursable expenses) as a percentage of revenues before reimbursements for the year and three months ended August 31, 2006 were 30.0% and 34.1%, respectively, compared with 32.8% and 33.0%, respectively, for the same periods in fiscal 2005. The decrease in the annual gross margin as a percentage of revenues before reimbursements was principally due to the net impact of the NHS Transfer Agreement and the second-quarter NHS adjustments. See “—The NHS Contracts.”
      Our cost-management strategy is to anticipate changes in demand for our services and to identify cost-management initiatives. A primary element of this strategy is to aggressively plan and manage our payroll costs to meet the anticipated demand for our services, given that payroll costs are the most significant portion of our operating expenses.
      Our headcount increased to approximately 140,000 at August 31, 2006 from approximately 123,000 at August 31, 2005. Annualized attrition for the year and three months ended August 31,

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2006 was 18%, excluding involuntary terminations, consistent with the year and three months ended August 31, 2005. We continue to add substantial numbers of new employees and will continue to actively recruit new employees to balance our mix of skills and resources to meet current and projected future demands, replace departing employees and expand our global sourcing approach, which includes our network of delivery centers and other capabilities around the world. We have adjusted and may need to continue to adjust compensation during fiscal 2007 in certain industry segments, skill sets and geographies in order to attract and retain appropriate numbers of qualified employees. Our margins and ability to grow our business could be adversely affected if we do not continue to manage attrition and if we do not effectively utilize and assimilate substantial numbers of new employees into our workforces.
      Sales and marketing and general and administrative costs as a percentage of revenues before reimbursements were 19% for fiscal 2006, compared with 20% for fiscal 2005. The decreases in these costs as a percentage of revenues before reimbursements were primarily due to lower spending in geographic facilities and technology costs, partially offset by an increase in market- and business-development activities.
      Operating income as a percentage of revenues before reimbursements decreased to 11.1% for the year ended August 31, 2006 from 13.6% for the year ended August 31, 2005. Operating income as a percentage of revenues before reimbursements decreased to 12.6% for the three months ended August 31, 2006 from 13.0% for the three months ended August 31, 2005. Had we expensed employee stock options and employee share purchase rights for the three months and year ended August 31, 2005, we estimate that operating income as a percentage of revenues before reimbursements for the three months and year ended August 31, 2005 would have decreased by 1.8 and 1.4 percentage points, respectively. The decrease in operating income as a percentage of revenues before reimbursements for the year ended August 31, 2006 was principally due to the net impact of the NHS Transfer Agreement and the second-quarter NHS adjustments and higher share-based compensation expense as a result of the adoption of SFAS No. 123R. See “—The NHS Contracts.”
      From time to time we purchase Accenture shares through our open-market purchase program and also purchase, redeem and exchange Accenture shares held by our current and former senior executives and their permitted transferees. In fiscal 2006, Accenture purchased $2,057 million of its shares. This comprised $352 million for purchases of 15 million Accenture Ltd Class A common shares and $1,704 million for redemptions and purchases of 67.8 million Accenture SCA Class I common shares and Accenture Canada Holdings Inc. exchangeable shares held by our current and former senior executives and their permitted transferees. During the fourth quarter of fiscal 2006, Accenture redeemed and repurchased 8.7 million Accenture SCA Class I common shares and Accenture Canada Holdings Inc. exchangeable shares held by our current and former senior executives and their permitted transferees for $246 million. On September 11, 2006, Accenture SCA and one of its subsidiaries made a tender offer to Accenture SCA Class I common shareholders that resulted in the redemption and purchase, effective as of October 11, 2006 of an aggregate of 7.5 million Accenture SCA Class I common shares at a price of $24.75 per share. The total cash outlay for these transactions was approximately $187 million.
The NHS Contracts
      We previously entered into the NHS Contracts under which we were engaged by the NHS to design, develop and deploy the Systems for local healthcare providers and, subsequently, to provide the Operational Services once these Systems were deployed. For the purposes of our financial reporting, we separated these components of the NHS Contracts into two units of accounting. The

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revenues and costs from the NHS Contracts are apportioned equally between our Government and Products operating groups.
Design, Development and Deployment of the Systems
      We recognize revenues in connection with the design, development and deployment of the Systems on the percentage-of-completion method of accounting under American Institute of Certified Public Accountants Statement of Position 81-1, “Accounting for Performance of Construction-Type and Certain Production-Type Contracts.” Percentage-of-completion accounting involves calculating the percentage of services provided during the reporting period compared with the total estimated services to be provided over the duration of the contract. Estimates of total contract revenues and costs are continuously monitored during the term of the contract, and recorded revenues and costs are subject to revision as the contract progresses. Such revisions may result in increases or decreases to revenues and income and are reflected in the periods in which they are first identified. If our estimates at any point indicate that costs will exceed revenues, a loss provision for the full anticipated loss is recorded in the period it is first identified.
      Our estimates of contract revenues and costs in connection with the design, development and deployment of the Systems are subject to underlying estimates and assumptions, including, among others, those relating to our ability to design, develop and deploy the Systems on a timely basis; the ability of our subcontractors and others involved in the program to perform adequately and on a timely basis; the level and timing of demand for the Systems from local healthcare providers; and the NHS’ ability to agree on detailed implementation plans and other terms of the NHS Contracts.
      During the second quarter of fiscal 2006, there were several developments that significantly increased the risks and uncertainties associated with the NHS Contracts and materially impacted our estimates of the contract revenues and costs that we expected to record in connection with the design, development and deployment of the Systems. These developments included, among other things, subcontractor performance issues, modification of our planned deployment approach, expectations of increased costs based upon current experience, and increased uncertainty as to timing and level of deployment demand. Due to these developments, in the second quarter of fiscal 2006 we recorded a $450 million aggregate loss provision that was reflected in Cost of services of our Government and Products operating groups.
      On September 28, 2006, we entered into the NHS Transfer Agreement with the NHS and CSC under which we agreed to transfer to CSC all of our rights and obligations under the NHS Contracts, except those relating to PACS. We expect to complete the transfer during the second quarter of fiscal 2007.
      The NHS Transfer Agreement resulted in a $339 million reduction in revenues before reimbursements in the fourth quarter of fiscal 2006, as we reversed revenues before reimbursements related to our design, development and deployment activities previously recorded under the percentage-of-completion method of accounting under the assumption that these amounts would be recovered from billings for deployment of the Systems. The impact of the $339 million reduction in revenues before reimbursements was offset by a decrease in Cost of services, including a reversal of $396 million of the loss provision recorded in the second quarter of fiscal 2006.
Operational Services
      We record costs as they are incurred and record revenues as the services are performed and amounts are earned in connection with the Operational Services. Under the terms of the NHS Transfer Agreement, we will transition the Operational Services to CSC during the first half of fiscal 2007. In

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addition, during the fourth quarter of fiscal 2006 we recorded impairment write downs on Operational Services assets totaling $57 million. In connection with the Operational Services, we expect losses of approximately $125 million during the first half of fiscal 2007 associated with the transition and wind-down of work related to the NHS Transfer Agreement. We expect to complete the transfer during the second quarter of fiscal 2007.
Impact on Liquidity
      In addition to the transition and wind-down costs related to the Operational Services, during 2007 we will repay approximately $120 million to the NHS, representing the difference between the deployment and services billings that we received under the NHS Contracts during their terms and the amounts we are entitled to retain by agreement under the NHS Transfer Agreement. On October 4, 2006, we also remitted approximately $50 million in settlement of liabilities in connection with the NHS Transfer Agreement. These amounts are recorded in Other accrued liabilities in the Consolidated Balance Sheet as of August 31, 2006.
Bookings and Backlog
      New contract bookings for the year ended August 31, 2006 were $20,362 million, an increase of 13% from the year ended August 31, 2005, with consulting bookings increasing 9%, to $10,608 million, and outsourcing bookings increasing 18%, to $9,754 million. The increase in new contract bookings during fiscal 2006 was attributable to strong contract signings across both types of work, without particular dominance by one geographic region. New contract bookings for the three months ended August 31, 2006 were $4,924 million, a decrease of $235 million, or 5%, from new bookings of $5,159 million for the three months ended August 31, 2005, with consulting bookings increasing 5%, to $2,542 million, and outsourcing bookings decreasing 13%, to $2,382 million.
      We provide information regarding our new contract bookings because we believe doing so provides useful trend information regarding changes in the volume of our new business over time. However, the timing of large new contract bookings can significantly affect the level of bookings in a particular quarter. Information regarding our new bookings is not comparable to, nor should it be substituted for, an analysis of our revenues over time. There are no third-party standards or requirements governing the calculation of bookings. New contract bookings involve estimates and judgments regarding new contracts as well as renewals, extensions and additions to existing contracts. Subsequent cancellations, extensions and other matters may affect the amount of bookings previously reported. New contract bookings are recorded using then existing currency exchange rates and are not subsequently adjusted for currency fluctuations.
      The majority of our contracts are terminable by the client on short notice or without notice. Accordingly, we do not believe it is appropriate to characterize bookings attributable to these contracts as backlog. Normally, if a client terminates a project, the client remains obligated to pay for commitments we have made to third parties in connection with the project, services performed and reimbursable expenses incurred by us through the date of termination.
Critical Accounting Policies and Estimates
      The preparation of our Consolidated Financial Statements in conformity with U.S. generally accepted accounting principles requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Consolidated Financial Statements and the reported amounts of revenues and expenses. We continually evaluate our estimates, judgments and assumptions based on available information and

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experience. Because the use of estimates is inherent in the financial reporting process, actual results could differ from those estimates. Certain of our accounting policies require higher degrees of judgment than others in their application. These include certain aspects of accounting for revenue recognition, income taxes, variable compensation and defined benefit pension plans.
Revenue Recognition
      Our contracts have different terms based on the scope, deliverables and complexity of the engagement, the terms of which frequently require Accenture to make judgments and estimates in recognizing revenues. We have many types of contracts, including time-and-materials contracts, fixed-price contracts and contracts with features of both of these contract types. In addition, some contracts include incentives related to costs incurred, benefits produced or adherence to schedule that may increase the variability in revenues and margins earned on such contracts. We conduct rigorous reviews prior to signing such contracts to evaluate whether these incentives are reasonably achievable.
      We recognize revenues from technology integration consulting contracts using the percentage-of-completion method pursuant to the American Institute of Certified Public Accountants Statement of Position 81-1, “Accounting for Performance of Construction Type and Certain Production-Type Contracts” (“SOP 81-1”). Percentage-of-completion accounting involves calculating the percentage of services provided during the reporting period compared with the total estimated services to be provided over the duration of the contract. Estimated revenues for applying the percentage-of-completion method include estimated incentives for which achievement of defined goals is deemed probable. This method is followed where reasonably dependable estimates of revenues and costs can be made. Estimates of total contract revenues and costs are continuously monitored during the term of the contract, and recorded revenues and costs are subject to revision as the contract progresses. Such revisions may result in increases or decreases to revenues and income and are reflected in the Consolidated Financial Statements in the periods in which they are first identified. If our estimates indicate that a contract loss will occur, a loss provision is recorded in the period in which the loss first becomes probable and reasonably estimable. Contract losses are determined to be the amount by which the estimated direct and indirect costs of the contract exceed the estimated total revenues that will be generated by the contract and are included in Cost of services and classified in Other accrued liabilities in the Consolidated Balance Sheet. Contract loss provisions recorded as of August, 31, 2006 and 2005 are immaterial.
      Revenues from contracts for non-technology integration consulting services with fees based on time and materials or cost-plus are recognized as the services are performed and amounts are earned in accordance with SEC Staff Accounting Bulletin (“SAB”) No. 101, “Revenue Recognition in Financial Statements” (“SAB 101”), as amended by SAB No. 104, “Revenue Recognition” (“SAB 104”). We consider amounts to be earned once evidence of an arrangement has been obtained, services are delivered, fees are fixed or determinable, and collectibility is reasonably assured. In such contracts, our efforts, measured by time incurred, typically represent the contractual milestones or output measure, which is the contractual earnings pattern. For non-technology integration consulting contracts with fixed fees, we recognize revenues as amounts become billable in accordance with contract terms, provided the billable amounts are not contingent, are consistent with the services delivered, and are earned. Contingent or incentive revenues relating to non-technology integration consulting contracts are recognized when the contingency is satisfied and we conclude the amounts are earned.
      Outsourcing contracts typically span several years and involve complex delivery, often through multiple workforces in different countries. In a number of these arrangements, we hire client employees and become responsible for certain client obligations. Revenues are recognized on

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outsourcing contracts as amounts become billable in accordance with contract terms, unless the amounts are billed in advance of performance of services in which case revenues are recognized when the services are performed and amounts are earned in accordance with SAB 101, as amended by SAB 104. Revenues from time-and-materials or cost-plus contracts are recognized as the services are performed. In such contracts, our effort, measured by time incurred, represents the contractual milestones or output measure, which is the contractual earnings pattern. Revenues from unit-priced contracts are recognized as transactions are processed based on objective measures of output. Revenues from fixed-price contracts are recognized on a straight-line basis, unless revenues are earned and obligations are fulfilled in a different pattern. Outsourcing contracts can also include incentive payments for benefits delivered to clients. Revenues relating to such incentive payments are recorded when the contingency is satisfied and we conclude the amounts are earned. We continuously review and reassess our estimates of contract profitability. Circumstances that potentially affect profitability over the life of the contract include decreases in volumes of transactions or other inputs/outputs on which we are paid, failure to deliver agreed benefits, variances from planned internal/external costs to deliver our services, and other factors affecting revenues and costs.
      Costs related to delivering outsourcing services are expensed as incurred with the exception of certain transition costs related to the set-up of processes, personnel and systems, which are deferred during the transition period and expensed evenly over the period outsourcing services are provided. The deferred costs are specific internal costs or incremental external costs directly related to transition or set-up activities necessary to enable the outsourced services. Deferred amounts are protected in the event of early termination of the contract and are monitored regularly for impairment. Impairment losses are recorded when projected undiscounted operating cash flows of the related contract are not sufficient to recover the carrying amount of contract assets. Amounts billable to the client for transition or set-up activities are deferred and recognized as revenue evenly over the period outsourcing services are provided.
      Revenues for contracts with multiple elements are allocated pursuant to Emerging Issues Task Force Issue 00-21, “Accounting for Revenue Arrangements with Multiple Deliverables,” based on the lesser of the element’s relative fair value or the amount that is not contingent on future delivery of another element. If the amount of non-contingent revenues allocated to a delivered element is less than the costs to deliver such services, then such costs are deferred and recognized in future periods when the revenues become non-contingent. Fair value is determined based on the prices charged when each element is sold separately. Revenues are recognized in accordance with our accounting policies for the separate elements when the services have value on a stand-alone basis, fair value of the separate elements exists and, in arrangements that include a general right of refund relative to the delivered element, performance of the undelivered element is considered probable and substantially in our control. While determining fair value and identifying separate elements require judgment, generally fair value and the separate elements are readily identifiable as we also sell those elements unaccompanied by other elements.
      Revenues recognized in excess of billings are recorded as Unbilled services. Billings in excess of revenues recognized are recorded as Deferred revenues until revenue recognition criteria are met. Client prepayments (even if nonrefundable) are deferred (i.e., classified as a liability) and recognized over future periods as services are delivered or performed.
      Our consulting revenues are affected by the number of work days in the fiscal quarter, which in turn is affected by the level of vacation days and holidays. Consequently, since we typically have approximately 5 to 10 percent more work days in our first and third quarters than in our second and

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fourth quarters, our revenues are typically higher in our first and third quarters than in our second and fourth quarters.
      Revenues before reimbursements include the margin earned on computer hardware and software resale contracts, as well as revenues from alliance agreements, neither of which is material to us. Reimbursements, including those relating to travel and out-of-pocket expenses, and other similar third-party costs, such as the cost of hardware and software resales, are included in Revenues, and an equivalent amount of reimbursable expenses is included in Cost of services.
Income Taxes
      Determining the consolidated provision for income tax expense, income tax liabilities and deferred tax assets and liabilities involves judgment. As a global company, we calculate and provide for income taxes in each of the tax jurisdictions in which we operate. This involves estimating current tax exposures in each jurisdiction as well as making judgments regarding the recoverability of deferred tax assets. Tax exposures can involve complex issues and may require an extended period to resolve. Changes in the geographic mix or estimated level of annual income before taxes can affect the overall effective tax rate.
      We apply an estimated annual effective tax rate to our quarterly operating results to determine the provision for income tax expense. In the event there is a significant unusual or infrequent item recognized in our quarterly operating results, the tax attributable to that item is recorded in the interim period in which it occurs. Our effective tax rate for fiscal 2006 was 25.5%, compared with 31.6% for fiscal 2005.
      No taxes have been provided on undistributed foreign earnings that are planned to be indefinitely reinvested. If future events, including material changes in estimates of cash, working capital and long-term investment requirements, necessitate that these earnings be distributed, an additional provision for withholding taxes may apply, which could materially affect our future effective tax rate.
      As a matter of course, the Company is regularly audited by various taxing authorities, and sometimes these audits result in proposed assessments where the ultimate resolution may result in the Company owing additional taxes. We establish reserves when, despite our belief that our tax return positions are appropriate and supportable under local tax law, we believe certain positions are likely to be challenged and we may not succeed in realizing the tax benefit. We evaluate these reserves each quarter and adjust the reserves and the related interest in light of changing facts and circumstances regarding the probability of realizing tax benefits, such as the progress of a tax audit or the expiration of a statute of limitations. We believe the estimates and assumptions used to support our evaluation of tax benefit realization are reasonable. However, final determinations of prior-year tax liabilities, either by settlement with tax authorities or expiration of statutes of limitations, could be materially different than estimates reflected in assets and liabilities and historical income tax provisions. The outcome of these final determinations could have a material effect on our income tax provision, net income, or cash flows in the period in which that determination is made. The Company believes its tax positions comply with applicable tax law and that it has adequately provided for any known tax contingencies.
Defined Benefit Pension Plans
      In the United States and certain other countries, Accenture maintains and administers defined benefit pension plans. The annual cost of these plans can be significantly affected by changes in assumptions and differences between expected and actual experience. Accenture utilizes actuarial methods required by SFAS No. 87, “Employers’ Accounting for Pensions,” (“SFAS No. 87”) to account for defined benefit pension plans. The actuarial methods require numerous assumptions to calculate

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the net periodic pension benefit expense and the related projected benefit obligation for our defined benefit pension plans. Two of the most significant assumptions are the discount rates and expected long-term rate of return on plan assets. In making these assumptions, we are required to consider current market conditions, including changes in interest rates. Changes in the related net periodic pension costs may occur in the future due to changes in these and other assumptions. Our assumptions reflect our historical experience and management’s best judgment regarding future expectations. The assumptions, assets and liabilities used to measure our annual pension expense are determined as of June 30 or August 31 for our U.S. and non-U.S. benefit plans.
      Key assumptions used to determine annual pension expense are as follows:
                                                 
    Pension Benefits
     
    2007   2006   2005
             
        Non-U.S.       Non-U.S.       Non-U.S.
    U.S. Plans   Plans   U.S. Plans   Plans   U.S. Plans   Plans
                         
Discount rate
    6.50 %     4.68 %     5.25 %     4.28 %     6.25 %     4.93 %
Expected return on plan assets
    7.50 %     5.67 %     7.50 %     5.57 %     7.50 %     5.19 %
Rate of increase in future compensation
    4.50 %     3.45 %     4.50 %     3.27 %     4.50 %     3.16 %
Discount Rate
      An assumed discount rate is required to be used in each pension plan actuarial valuation. The discount rate is a significant assumption. Our methodology for selecting the discount rate for our U.S. Plans is to match the plans’ cash flows to that of a yield curve that provides the equivalent yields on zero-coupon corporate bonds for each maturity. The discount rate assumption for our Non-U.S. Plans reflects the market rate for high-quality, fixed-income debt instruments. Both discount rate assumptions are based on the expected duration of the benefit payments for each of the Company’s pension plans as of the annual measurement date and is subject to change each year. Our estimated U.S. pension expense for fiscal 2007 reflects a 125 basis point increase in our discount rate, while our non-U.S. estimated pension expense for fiscal 2007 reflects a 40 basis point increase in our discount rate. These changes in discount rate will decrease estimated pension expense in fiscal 2007 by approximately $45.6 million.
      A 25 basis point increase in the discount rate would decrease our annual pension expense by $7.7 million. A 25 basis point decrease in the discount rate would increase our annual pension expense by $8.2 million.
Expected Return on Plan Assets
      The expected long-term rate of return on plan assets should, over time, approximate the actual long-term returns on pension plan assets. The expected return on plan assets assumption is based on historical returns and the future expectations for returns for each asset class, as well as the target asset allocation of the asset portfolio. A 7.50% expected return on plan assets assumption was used for both fiscal 2007 and 2006 for the U.S. plans, while the expected return on plan assets assumptions for the non-U.S. plans were 5.67% and 5.57% in fiscal 2007 and 2006, respectively.
      A 25 basis point increase in our return on plan assets would decrease our annual pension expense by $3.1 million. A 25 basis point decrease in our return on plan assets would increase our annual pension expense by $3.1 million.
      U.S. generally accepted accounting principles include mechanisms that serve to limit the volatility in our earnings which otherwise would result from recording changes in the value of plan assets and benefit obligations in our Consolidated Financial Statements in the periods in which those

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changes occur. For example, while the expected long-term rate of return on plan assets should, over time, approximate the actual long-term returns, differences between the expected and actual returns could occur in any given year. These differences contribute to the deferred actuarial gains or losses, which are then amortized over time. For Accenture, positive market returns occurred for fiscal 2006 and 2005, causing actual pension plan asset returns to exceed our expected returns.
General
      Our U.S. pension plans include plans covering certain U.S. employees and former employees, as well as a frozen plan related to basic retirement benefits for former pre-incorporation partners. At August 31, 2006, our U.S. employee plans had a projected benefit obligation of $718 million and assets of $802 million, after taking into account $25 million in contributions made in fiscal 2006. No fiscal 2007 contributions will be required for the U.S. employee pension plans. We have not determined whether we will make additional voluntary contributions for U.S. employee pension plans in fiscal 2007. The frozen plan for former partners is unfunded and had a projected benefit obligation of $122 million at August 31, 2006.
      Non-U.S. pension plan obligations totaled $616 million at August 31, 2006, while non-U.S. pension assets totaled $458 million. We contributed $61 million to non-U.S. plans in fiscal 2006 and expect to contribute $45 million in fiscal 2007.
      Pension expense was $151 million and $114 million for fiscal 2006 and 2005, respectively. Pension expense for fiscal 2007 is estimated to be approximately $104 million. The fiscal 2007 pension expense estimate incorporates the 2007 assumptions described above, as well as the impact of increased pension plan assets resulting from our U.S. pension plan discretionary contributions of $25 million made in fiscal 2006.
      SFAS No. 87 requires us to recognize a minimum pension liability if the fair value of pension assets is less than the accumulated benefit obligation. For additional information, refer to Footnote 10 (Retirement and Profit Sharing Plans) to our Consolidated Financial Statements under “Financial Statements and Supplementary Data.” Additional charges to equity may be required in the future, depending on future contributions made to our pension plans, returns on pension plan assets and interest rates.
Revenues by Segment/ Operating Group
      Our five reportable operating segments are our operating groups, which are Communications & High Tech, Financial Services, Government, Products and Resources. Operating groups are managed on the basis of revenues before reimbursements because our management believes revenues before reimbursements are a better indicator of operating group performance than revenues. From time to time, our operating groups work together to sell and implement certain contracts. The resulting revenues and costs from these contracts may be apportioned among the participating operating groups. Generally, operating expenses for each operating group have similar characteristics and are subject to the same factors, pressures and challenges. However, the economic environment and its effects on the industries served by our operating groups affect revenues and operating expenses within our operating groups to differing degrees. Decisions relating to staffing levels are not made uniformly across our operating segments, due in part to the needs of our operating groups to tailor their workforces to meet the specific needs of their businesses. The shift in mix toward outsourcing contracts is not uniform among our operating groups and, consequently, neither is the impact on operating group results caused by this shift. Local currency fluctuations also tend to affect our operating groups differently, depending on the geographic concentrations and locations of their businesses.

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      Revenues for each of our operating groups, geographic regions and types of work were as follows:
                                                     
                    Percent of Total
                    Revenues
                    Before
                    Reimbursements
                for the Year
    Year Ended   Percent   Percent   Ended
    August 31,   Increase   Increase   August 31,
        (Decrease)   Local    
    2006   2005   US$   Currency   2006   2005
                         
    (in millions)                
OPERATING GROUPS
                                               
 
Communications & High Tech
  $ 4,177     $ 4,001       4 %     6 %     25 %     26 %
 
Financial Services
    3,558       3,408       4       7       22       22  
 
Government
    2,221       2,172       2       4       13       14  
 
Products
    4,011       3,570       12       15       24       23  
 
Resources
    2,666       2,389       12       12       16       15  
 
Other
    13       7       n/m       n/m              
                                     
TOTAL Revenues Before Reimbursements
    16,646       15,547       7 %     9 %     100 %     100 %
                                     
   
Reimbursements
    1,582       1,547       2                          
                                     
   
TOTAL REVENUES
  $ 18,228     $ 17,094       7 %                        
                                     
GEOGRAPHY
                                               
 
Americas
  $ 7,741     $ 6,730       15 %     14 %     46 %     43 %
 
EMEA(1)
    7,644       7,735       (1 )     3       46       50  
 
Asia Pacific
    1,261       1,082       17       20       8       7  
                                     
TOTAL Revenues Before Reimbursements
  $ 16,646     $ 15,547       7 %     9 %     100 %     100 %
                                     
TYPE OF WORK
                                               
 
Consulting
  $ 9,892     $ 9,559       3 %     6 %     59 %     61 %
 
Outsourcing
    6,754       5,988       13       14       41       39  
                                     
TOTAL Revenues Before Reimbursements
  $ 16,646     $ 15,547       7 %     9 %     100 %     100 %
                                     
 
n/m = not meaningful
(1)  EMEA includes Europe, the Middle East and Africa.
     The Company conducts business in the following countries that individually comprised more than 10% of consolidated revenues before reimbursements within the last three years:
                         
    August 31,
     
    2006   2005   2004
             
United States
    39 %     37 %     39 %
United Kingdom
    13       17       16  
Year Ended August 31, 2006 Compared to Year Ended August 31, 2005
Revenues
      Our Communications & High Tech operating group achieved revenues before reimbursements of $4,177 million in fiscal 2006, compared with $4,001 million in fiscal 2005, an increase of 4% in U.S. dollars and 6% in local currency terms. The increase was primarily due to revenue growth in our

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Electronics & High Tech industry group across all geographic regions, consulting growth in our Americas and Asia Pacific regions and outsourcing growth in our EMEA and Asia Pacific regions.
      Our Financial Services operating group achieved revenues before reimbursements of $3,558 million in fiscal 2006, compared with $3,408 million in fiscal 2005, an increase of 4% in U.S. dollars and 7% in local currency terms. The increase was driven by revenue growth in our Banking industry group across all regions and in our Insurance industry group in our Americas and Asia Pacific regions. This revenue growth was partially offset by revenue declines in our Capital Markets industry group in the Americas and EMEA regions and in our Insurance industry group in the EMEA region.
      Our Government operating group achieved revenues before reimbursements of $2,221 million in fiscal 2006, compared with $2,172 million in fiscal 2005, an increase of 2% in U.S. dollars and 4% in local currency terms. The increase was due to strong outsourcing revenue growth across all geographic regions, partially offset by a $169 million reduction in consulting revenues associated with the resolution of the NHS matter recorded during the fourth quarter of fiscal 2006. See “—The NHS Contracts.”
      Our Products operating group achieved revenues before reimbursements of $4,011 million in fiscal 2006, compared with $3,570 million in fiscal 2005, an increase of 12% in U.S. dollars and 15% in local currency terms, with both consulting and outsourcing contributing to the growth in revenues. The increase was primarily driven by strong revenue growth in our Americas region, particularly in our Health & Life Sciences, Retail, Consumer Goods & Services and Industrial Equipment industry groups. Our Consumer Goods & Services and Industrial Equipment industry groups also had strong growth in our EMEA region. In addition, Products revenues were positively affected by revenues recognized in connection with a contract termination in our Retail industry group in our EMEA region during the third quarter of fiscal 2006. These increases were partially offset by a $169 million reduction in consulting revenues associated with the resolution of the NHS matter recorded during the fourth quarter of fiscal 2006. See “—The NHS Contracts.”
      Our Resources operating group achieved revenues before reimbursements of $2,666 million in fiscal 2006, compared with $2,389 million in fiscal 2005, an increase of 12% in both U.S. dollars and local currency terms, with both consulting and outsourcing contributing to the growth in revenues. We experienced strong revenue growth in our Energy, Chemicals and Natural Resources industry groups across all geographic regions. In our Utilities industry group, we had strong growth in our Americas region, offset by revenue declines in our EMEA and Asia Pacific regions.
      Our Americas region achieved revenues before reimbursements of $7,741 million in fiscal 2006, compared with $6,730 million for fiscal 2005, an increase of 15% in U.S. dollars and 14% in local currency terms. Growth was primarily due to our business in the United States, Canada and Brazil.
      Our EMEA region recorded revenues before reimbursements of $7,644 million for fiscal 2006, compared with $7,735 million for fiscal 2005, a decrease of 1% in U.S. dollars and an increase of 3% in local currency terms. The decrease was primarily due to a decline in our business in the United Kingdom, including the impact of a $339 million reduction in consulting revenues associated with the resolution of the NHS matter recorded during the fourth quarter of fiscal 2006. See “—The NHS Contracts.” This decline was partially offset by growth in our business in Italy, Ireland, France, Belgium, the Netherlands, Germany and Spain.
      Our Asia Pacific region achieved revenues before reimbursements of $1,261 million in fiscal 2006, compared with $1,082 million for fiscal 2005, an increase of 17% in U.S. dollars and 20% in

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local currency terms. The increase in revenues was primarily driven by our business in Australia, China and Japan.
Operating Expenses
      Operating expenses were $16,387 million in fiscal 2006, an increase of $1,404 million, or 9%, over fiscal 2005 and increased as a percentage of revenues to 90% in fiscal 2006 from 88% in fiscal 2005. As a percentage of revenues before reimbursements, operating expenses before reimbursable expenses were 89% and 86% in fiscal 2006 and 2005, respectively. Operating expenses for fiscal 2006 included share-based compensation expense of $271 million, or 2% of revenues before reimbursements, compared with share-based compensation expense of $88 million, or 1% of revenues before reimbursements, for fiscal 2005. Had we expensed employee stock options and employee share purchase rights during fiscal 2005, we estimate that operating expenses would have included $306 million in total share-based compensation expense, or 2% of revenues before reimbursements.
Cost of Services
      Cost of services was $13,234 million in fiscal 2006, an increase of $1,232 million, or 10%, over fiscal 2005 and an increase as a percentage of revenues to 73% in fiscal 2006 from 70% in fiscal 2005. Cost of services before reimbursable expenses was $11,652 million in fiscal 2006, an increase of $1,198 million, or 11%, from fiscal 2005. Cost of services before reimbursable expenses increased as a percentage of revenues before reimbursements to 70% in fiscal 2006 from 67% in fiscal 2005. Gross margins (revenues before reimbursements less cost of services before reimbursements) decreased to 30.0% of revenues before reimbursements in fiscal 2006 from 32.8% in fiscal 2005.
      The increase in Cost of services and the decrease in gross margins as a percentage of revenues before reimbursements were due primarily to operating losses associated with the net impact of the NHS Transfer Agreement and the second-quarter NHS adjustments. See “—The NHS Contracts.”
Sales and Marketing
      Sales and marketing expense was $1,708 million in fiscal 2006, an increase of $150 million, or 10%, over fiscal 2005 and remained flat as a percentage of revenues before reimbursements at 10% in fiscal 2006 compared with fiscal 2005.
General and Administrative Costs
      General and administrative costs were $1,493 million in fiscal 2006, a decrease of $19 million, or 1%, from fiscal 2005 and decreased as a percentage of revenues before reimbursements to 9% in fiscal 2006 from 10% in fiscal 2005. The decrease was primarily due to lower spending in geographic facilities and technology costs.
Reorganization Benefits
      We recorded net reorganization benefits of $48 million during fiscal 2006, which included a $72 million reduction in reorganization liabilities offset by $24 million of interest expense associated with carrying these liabilities. At August 31, 2006, the remaining liability for reorganization costs was $351 million, of which $267 million was classified as current liabilities because expirations of statutes of limitations could occur within 12 months. During fiscal 2005, we recorded net reorganization benefits of $89 million, which included a $115 million reduction in reorganization liabilities offset by $26 million of interest expense associated with carrying these liabilities. In both periods, the reduction in liabilities was primarily due to final determinations of certain reorganization

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liabilities established in connection with our transition to a corporate structure in 2001. For additional information, refer to Footnote 3 (Restructuring and Reorganization (Benefits) Costs) to our Consolidated Financial Statements under “Financial Statements and Supplementary Data.” We anticipate that reorganization liabilities will be substantially diminished by the end of fiscal 2008 because the final statutes of limitations will have expired in a number of tax jurisdictions by the end of that year. However, tax audits or litigation may delay final settlements. Final settlement will result in a payment on a final settlement and/or recording a reorganization benefit or cost in our Consolidated Income Statement.
Operating Income
      Operating income was $1,841 million in fiscal 2006, a decrease of $270 million, or 13%, from fiscal 2005. Operating income as a percentage of revenues before reimbursements was 11.1% and 13.6% in fiscal 2006 and 2005, respectively. Excluding the effects of Reorganization benefits during fiscal 2006, Operating income as a percentage of revenues before reimbursements would have decreased by 0.5 percentage points. Had we expensed employee stock options and employee share purchase rights during fiscal 2005 and adjusted for Reorganization benefits, operating income as a percentage of revenues before reimbursements for fiscal 2005 would have decreased by 2.2 percentage points. The decreases in operating income and operating income as a percentage of revenues before reimbursements were principally due to operating losses associated with the net impact of the NHS Transfer Agreement and the second-quarter NHS adjustments, partially offset by lower general and administrative costs as a percentage of revenues before reimbursements. See “—The NHS Contracts.”
      Operating income for each of the operating groups was as follows:
                                                 
    Year Ended August 31,
     
        Effect of    
        Reorganization   Net Increase
    2006   2005   Decrease   Adjustments(1)   Benefits(2)   (Decrease)
                         
    (in millions)
Communications & High Tech
  $ 631     $ 673     $ (42 )   $ 52     $ 11     $ 21  
Financial Services
    388       500       (112 )     52       11       (49 )
Government
    83       169       (86 )     27       6       (53 )
Products
    400       413       (13 )     52       9       48  
Resources
    339       356       (17 )     35       6       24  
                                     
Total
  $ 1,841     $ 2,111     $ (270 )   $ 218     $ 43     $ (9 )
                                     
 
(1)  Adjustments represent the estimated amounts that would have been incurred had we expensed employee stock options and employee share purchase rights for fiscal year ended August 31, 2005.
(2)  Reorganization benefits recorded during the period were allocated to the reportable operating groups as follows:
                         
    Year Ended August 31,
     
    2006   2005   Change
             
    (in millions)
Communications & High Tech
  $ (17 )   $ (28 )   $ 11  
Financial Services
    (15 )     (26 )     11  
Government
    (11 )     (17 )     6  
Products
    (18 )     (27 )     9  
Resources
    (11 )     (17 )     6  
                   
Total
  $ (72 )   $ (115 )   $ 43  
                   

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      The following commentary includes the effect on Operating income had we expensed employee stock options and employee share purchase rights in fiscal 2005 and adjusting for reorganization benefits recorded during fiscal 2006 and 2005:
  •  Communications & High Tech operating income increased due to revenue growth, principally in our Electronics & High Tech industry group across all geographic regions and improved gross margins, primarily in our EMEA and Asia Pacific regions.
 
  •  Financial Services operating income decreased due to lower gross margins from increased payroll costs earlier in the year and delivery inefficiencies on a small number of contracts, partially offset by revenue growth in our Banking industry group across all regions and in our Insurance industry group in our Americas and Asia Pacific regions.
 
  •  Government operating income decreased principally due to the NHS Contracts’ operating losses of $225 million associated with the net impact of the NHS Transfer Agreement and the second-quarter NHS adjustments, partially offset by strong gross margins in outsourcing and increased profitability on certain consulting contracts. See “—The NHS Contracts.”
 
  •  Products operating income increased due to strong revenue growth, principally in our Americas region, improved gross margins, and lower combined sales and marketing and general and administrative costs as a percentage of revenues before reimbursements. In addition, Products operating income was positively affected by revenues recognized in connection with a contract termination in our Retail industry group in our EMEA region during the third quarter of fiscal 2006. These increases were partially offset by the NHS Contracts’ operating losses of $225 million associated with the net impact of the NHS Transfer Agreement and the second-quarter NHS adjustments. See “—The NHS Contracts.”
 
  •  Resources operating income increased due to strong revenue growth in our Energy, Chemicals and Natural Resources industry groups across all geographic regions and lower sales and marketing costs.
Gain on Investments, Net
      Gain on investments, net was $2 million in fiscal 2006, a decrease of $19 million from fiscal 2005. The fiscal 2005 gain on investments, net reflects gains on our retained interests in our venture and investment portfolio, which we sold in fiscal 2003.
Interest Income
      Interest income was $130 million in fiscal 2006, an increase of $21 million, or 20%, over fiscal 2005. The increase resulted primarily from an increase in interest rates.
Other Expense
      Other expense was $28 million in fiscal 2006, an increase of $17 million over fiscal 2005. The increase resulted primarily from an increase in net foreign currency exchange losses.
Provision for Income Taxes
      The effective tax rates for fiscal 2006 and 2005 were 25.5% and 31.6%, respectively. The effective tax rate decreased in 2006 primarily as a result of benefits related to final determinations of prior-year tax liabilities and a 3.8 percentage point benefit related to updated estimates of the probable future benefit of certain deferred tax assets. Final determinations of prior year tax liabilities,

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including final agreements with tax authorities and expirations of statutes of limitations, reduced the annual effective tax rate in 2006 and 2005 by 10.8 and 6.4 percentage points, respectively. The decrease in reorganization liabilities in fiscal 2006 and 2005 reduced the annual effective tax rate by 0.9 and 1.4 percentage points, respectively. These reductions in the 2006 tax rate were partially offset by increases in the tax rate of 1.6 percentage points related to changes in our geographic mix of income, including decreases in UK income resulting from NHS contract losses and increases in other nondeductible items.
Minority Interest
      Minority interest eliminates the income earned or expense incurred attributable to the equity interest that some of our current and former senior executives and their permitted transferees have in our Accenture SCA and Accenture Canada Holdings Inc. subsidiaries. See “Business—Organizational Structure.” The resulting net income of Accenture Ltd represents the income attributable to the shareholders of Accenture Ltd. Since January 2002, minority interest has also included immaterial amounts primarily attributable to minority shareholders in our Avanade Inc. subsidiary.
      Minority interest was $460 million in fiscal 2006, a decrease of $109 million, or 19%, from fiscal 2005. The decrease was primarily due to lower Net income and a reduction in the Accenture SCA Class I common shares and Accenture Canada Holdings Inc. exchangeable shares average ownership interests to 32% for the year ended August 31, 2006 from 37% for the year ended August 31, 2005.
Earnings Per Share
      Diluted earnings per share were $1.59 in fiscal 2006, compared with $1.56 in fiscal 2005. For fiscal 2005, had we expensed employee stock options and employee share purchase rights, our reported diluted earnings per share would have been $1.40. For information regarding our earnings per share calculation, see Footnote 2 (Earnings Per Share) to our Consolidated Financial Statements under “Financial Statements and Supplementary Data.”

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Year Ended August 31, 2005 Compared to Year Ended August 31, 2004
      Revenues for each of our operating groups, geographic regions and types of work were as follows:
                                                     
                    Percent of Total
                    Revenues
                    Before
                    Reimbursements
                for the
    Year Ended       Percent   Year Ended
    August 31,   Percent   Increase   August 31,
        Increase   Local    
    2005   2004   US$   Currency   2005   2004
                         
    (in millions)                
OPERATING GROUPS
                                               
 
Communications & High Tech
  $ 4,001     $ 3,741       7 %     4 %     26 %     27 %
 
Financial Services
    3,408       2,771       23       18       22       20  
 
Government
    2,172       1,995       9       6       14       15  
 
Products
    3,570       2,979       20       16       23       22  
 
Resources
    2,389       2,178       10       5       15       16  
 
Other
    7       9       n/m       n/m              
                                     
TOTAL Revenues Before Reimbursements
    15,547       13,673       14 %     10 %     100 %     100 %
                                     
   
Reimbursements
    1,547       1,440       7                          
                                     
   
TOTAL REVENUES
  $ 17,094     $ 15,113       13 %                        
                                     
GEOGRAPHY
                                               
 
Americas
  $ 6,730     $ 6,133       10 %     9 %     43 %     45 %
 
EMEA(1)
    7,735       6,572       18       11       50       48  
 
Asia Pacific
    1,082       968       12       8       7       7  
                                     
TOTAL Revenues Before Reimbursements
  $ 15,547     $ 13,673       14 %     10 %     100 %     100 %
                                     
TYPE OF WORK
                                               
 
Consulting
  $ 9,559     $ 8,589       11 %     7 %     61 %     63 %
 
Outsourcing
    5,988       5,084       18       14       39       37  
                                     
TOTAL Revenues Before Reimbursements
  $ 15,547     $ 13,673       14 %     10 %     100 %     100 %
                                     
 
n/m = not meaningful
(1)  EMEA includes Europe, the Middle East and Africa.
Revenues
      Our Communications & High Tech operating group achieved revenues before reimbursements of $4,001 million in fiscal 2005, compared with $3,741 million in fiscal 2004, an increase of 7% in U.S. dollars and 4% in local currency terms. The increase was primarily due to growth in consulting revenues, particularly in our Americas and EMEA regions and our Electronics & High Tech industry group. Outsourcing revenue growth, particularly in our EMEA and Asia Pacific regions, was offset by the substantial reduction in late fiscal 2004 of the scope of our work with a major North American telecommunications client as a result of that client’s changing business strategies.
      Our Financial Services operating group achieved revenues before reimbursements of $3,408 million in fiscal 2005, compared with $2,771 million in fiscal 2004, an increase of 23% in U.S. dollars and 18% in local currency terms, with both consulting and outsourcing contributing to the growth in

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revenues. This growth was driven by the strength of our business in both the Americas and EMEA regions, particularly in the United Kingdom, and in our Banking and Insurance industry groups.
      Our Government operating group achieved revenues before reimbursements of $2,172 million in fiscal 2005, compared with $1,995 million in fiscal 2004, an increase of 9% in U.S. dollars and 6% in local currency terms, with both consulting and outsourcing contributing to the growth in revenues. Results were driven by strong growth in our EMEA and Asia Pacific regions, which was partially offset by a decrease in consulting revenues from clients in the Americas, particularly in the United States.
      Our Products operating group achieved revenues before reimbursements of $3,570 million in fiscal 2005, compared with $2,979 million in fiscal 2004, an increase of 20% in U.S. dollars and 16% in local currency terms. These increases were attributable to strong growth in both consulting and outsourcing in all industry groups.
      Our Resources operating group achieved revenues before reimbursements of $2,389 million in fiscal 2005, compared with $2,178 million in fiscal 2004, an increase of 10% in U.S. dollars and 5% in local currency terms, with both consulting and outsourcing contributing to the growth in revenues. We experienced strong overall growth in our Energy and Natural Resources industry groups, as well as in our EMEA region. In our Utilities industry group, growth in outsourcing revenues before reimbursements offset a decline in consulting revenues before reimbursements.
      Our Americas region achieved revenues before reimbursements of $6,730 million in fiscal 2005, compared with $6,133 million for fiscal 2004, an increase of 10% in U.S. dollars and 9% in local currency terms. Contributing to this growth was our business in the United States and Brazil, partially offset by a decline in local currency revenues before reimbursements in Canada.
      Our EMEA region achieved revenues before reimbursements of $7,735 million for fiscal 2005, compared with $6,572 million for fiscal 2004, an increase of 18% in U.S. dollars and 11% in local currency terms. A key contributor to this growth was our business in the United Kingdom, where revenues before reimbursements for fiscal 2005 increased 19% in U.S. dollars and 13% in local currency terms over fiscal 2004, primarily due to revenues from several exceptionally large contracts sold during fiscal 2004 that began making significant contributions to revenues in fiscal 2005. Also contributing to the strong growth in EMEA for fiscal 2005 was our business in Germany, Italy, the Netherlands and Spain. Revenue growth in the United Kingdom for the fourth quarter of fiscal 2005 was affected by lower than expected revenues on the NHS Contracts.
      Our Asia Pacific region achieved revenues before reimbursements of $1,082 million in fiscal 2005, compared with $968 million for fiscal 2004, an increase of 12% in U.S. dollars and 8% in local currency terms. Our business in Australia and in India contributed to the increase in revenues, partially offset by a decline in our business in Japan.
Operating Expenses
      Operating expenses were $14,983 million in fiscal 2005, an increase of $1,628 million, or 12%, over fiscal 2004 and remained flat at 88% of revenues in both fiscal 2005 and 2004. As a percentage of revenues before reimbursements, operating expenses before reimbursable expenses were 86% and 87% in fiscal years 2005 and 2004, respectively. Excluding the effects of restructuring and reorganization, operating expenses before reimbursements as a percentage of revenues before reimbursements would have increased by 0.1 percentage points for fiscal 2005, compared with fiscal 2004.

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      The strengthening of various currencies against the U.S. dollar increased our reported operating expenses in fiscal 2005, compared to fiscal 2004 and partially offset corresponding increases in reported revenues.
Cost of Services
      Cost of services was $12,002 million in fiscal 2005, an increase of $1,505 million, or 14%, over fiscal 2004 and an increase as a percentage of revenues to 70% in fiscal 2005 from 69% in fiscal 2004. Cost of services before reimbursable expenses was $10,455 million in fiscal 2005, an increase of $1,398 million, or 15%, over fiscal 2004. Cost of services before reimbursable expenses increased as a percentage of revenues before reimbursements to 67% in fiscal 2005 from 66% in fiscal 2004. Gross margins (revenues before reimbursements less cost of services before reimbursements) decreased to 32.8% of revenues before reimbursements in fiscal 2005 from 33.8% in fiscal 2004.
      The increase in cost of services and the decrease in gross margins as a percentage of revenues before reimbursements were due primarily to the lower-than-expected margins attributable to delays under the NHS Contracts, a small number of delivery inefficiencies in certain operating groups, and incurred and expected cost overruns associated with the development of reusable assets in connection with certain client contracts, partially offset by lower variable compensation expense.
Sales and Marketing
      Sales and marketing expense was $1,558 million in fiscal 2005, an increase of $70 million, or 5%, over fiscal 2004 and decreased as a percentage of revenues before reimbursements to 10% in fiscal 2005 from 11% in fiscal 2004. A key driver of the increase in sales and marketing expense was a $100 million increase in market- and business-development activities, partially offset by a decrease in variable compensation expense.
General and Administrative Costs
      General and administrative costs were $1,512 million in fiscal 2005, an increase of $171 million, or 13%, over fiscal 2004 and remained flat as a percentage of revenues before reimbursements at 10% in both fiscal 2005 and 2004.
Reorganization and Restructuring (Benefits) Costs
      We recorded net reorganization benefits of $89 million in fiscal 2005, which included a $115 million reduction in reorganization liabilities offset by $26 million of interest expense associated with carrying these liabilities. At August 31, 2005, the remaining liability for reorganization costs was $381 million, of which $64 million was classified as current liabilities because expirations of statutes of limitations could occur within 12 months. In fiscal 2004, we recorded net reorganization benefits of $78 million, which included a $105 million reduction in reorganization liabilities offset by $27 million of interest expense associated with carrying these liabilities. In both fiscal 2005 and 2004, the reduction in liabilities was primarily due to final determinations of certain reorganization liabilities established in connection with our transition to a corporate structure in 2001. For additional information, refer to Footnote 3 (Restructuring and Reorganization (Benefits) Costs) to our Consolidated Financial Statements under “Financial Statements and Supplementary Data.”
      During fiscal 2004, we recorded restructuring costs of $107 million relating to our global consolidation of office space, primarily in the United States and the United Kingdom. These costs included losses on operating leases and write-downs of related assets such as leasehold improvements resulting from abandoned office space. No restructuring costs were recorded during fiscal 2005.

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Operating Income
      Operating income was $2,111 million in fiscal 2005, an increase of $352 million, or 20%, over fiscal 2004. Operating income as a percentage of revenues before reimbursements was 13.6% and 12.9% in fiscal 2005 and 2004, respectively. Excluding the effects of restructuring and reorganization, operating income as a percentage of revenues before reimbursements would have decreased by 0.1 percentage points for fiscal 2005 compared with fiscal 2004.
      Operating income for each of the operating groups was as follows:
                                         
    Year Ended August 31,
     
        Effect of    
        Reorganization    
        Benefits and    
        Increase   Restructuring   Net Increase
    2005   2004   (Decrease)   Costs(1)   (Decrease)
                     
    (in millions)
Communications & High Tech
  $ 673     $ 404     $ 269     $ 28     $ 241  
Financial Services
    500       354       146       27       119  
Government
    169       311       (142 )     18       (160 )
Products
    413       415       (2 )     27       (29 )
Resources
    356       275       81       18       63  
                               
Total
  $ 2,111     $ 1,759     $ 352     $ 118     $ 234  
                               
 
(1)  Reorganization benefits and restructuring costs recorded during the period were allocated to the reportable operating groups as follows:
                         
    Year Ended August 31,
     
    2005   2004   Change
             
    (in millions)
Communications & High Tech
  $ 21     $ (7 )   $ 28  
Financial Services
    20       (7 )     27  
Government
    14       (4 )     18  
Products
    21       (6 )     27  
Resources
    13       (5 )     18  
                   
Total
  $ 89     $ (29 )   $ 118  
                   
      Excluding the effects of reorganization and restructuring, operating income in fiscal 2005 increased by $234 million from fiscal 2004, reflecting increases in Communications & High Tech, Financial Services and Resources, which were partially offset by decreases in Government and Products. The following commentary excludes the effects of reorganization and restructuring:
  •  Communications & High Tech operating income increased primarily due to higher gross margins in fiscal 2005, reflecting strong consulting revenue growth in North America and EMEA, as well as the impact of lower-than-expected margins on three contracts in fiscal 2004.
 
  •  The increase in Financial Services operating income reflected a 23% increase in revenues before reimbursements and improved margins.
 
  •  Government operating income decreased partly due to lower-than-expected margins attributable to temporary delays under the NHS Contracts, cost overruns associated with the development of reusable assets in connection with certain client contracts, delivery inefficiencies on a small number of other contracts and a favorable contract settlement in fiscal 2004.

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  •  Products operating income decreased slightly, due to lower-than-expected margins attributable to temporary delays under the NHS Contracts and delivery inefficiencies on a small number of other contracts, partially offset by a 20% increase in revenues.
 
  •  The increase in Resources operating income was driven by increased revenues, reduced delivery costs and improved quality.
Gain on Investments, Net
      Gain on investments, net was $21 million in fiscal 2005, an increase of $18 million from fiscal 2004. This reflects gains on our retained interests in our venture and investment portfolio, which we sold in fiscal 2003.
Interest Income
      Interest income was $108 million in fiscal 2005, an increase of $48 million, or 81%, from fiscal 2004. The increase resulted primarily from the increase in interest rates and an increase in average client financing balances during fiscal 2005, compared with the average balances for fiscal 2004.
Other (Expense) Income
      Other expense was $11 million in fiscal 2005, compared with other income of less than $1 million in fiscal 2004. The fiscal 2005 expense was primarily due to net foreign currency exchange losses in fiscal 2005, compared with net foreign currency exchange gains in fiscal 2004.
Provision for Income Taxes
      The effective tax rates for fiscal years 2005 and 2004 were 31.6% and 32.0%, respectively. The effective tax rate decreased in 2005 as a result of changes in our geographic distribution of income and benefits related to final determinations of prior-year tax liabilities. This was partially offset by increases related to net nondeductible items and updated estimates of current and prior-year income tax exposures. Final determinations of prior year tax liabilities in 2005 and 2004 reduced the annual effective tax rate by 6.4 and 2.2 percentage points, respectively. The decrease in reorganization liabilities in fiscal years 2005 and 2004 reduced the annual effective tax rate by 1.4 and 1.5 percentage points, respectively. The decrease in reorganization liabilities had the effect of increasing pre-tax income without a corresponding increase in the provision for income taxes. Final determinations could also occur in fiscal 2006 which could generate income tax benefits.
Minority Interest
      Minority interest eliminates the income earned or expense incurred attributable to the equity interest that some of our current and former senior executives and their permitted transferees have in our Accenture SCA and Accenture Canada Holdings Inc. subsidiaries. See “Business—Accenture Organizational Structure.” The resulting net income of Accenture Ltd represents the income attributable to the shareholders of Accenture Ltd. Since January 2002, minority interest has also included immaterial amounts primarily attributable to minority shareholders in our Avanade Inc. subsidiary.
      Minority interest was $568 million in fiscal 2005, an increase of $36 million, or 7%, over fiscal 2004, primarily due to an increase in income before minority interest of $286 million, partially offset by a reduction in the Accenture SCA Class I common shares and Accenture Canada Holdings Inc.

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exchangeable shares average ownership interests to 37% for the year ended August 31, 2005 from 43% for the year ended August 31, 2004.
Earnings Per Share
      Diluted earnings per share were $1.56 in fiscal 2005, compared with $1.22 in fiscal 2004. The fiscal 2005 net reorganization benefits had the effect of increasing diluted earnings per share by $0.09. The fiscal 2004 restructuring costs relating to our global consolidation of office space had the effect of reducing diluted earnings per share by $0.07, and the fiscal 2004 net reorganization benefits had the effect of increasing diluted earnings per share by $0.08. Refer to Footnote 3 (Restructuring and Reorganization (Benefits) Costs) to our Consolidated Financial Statements under “Financial Statements and Supplementary Data.”
Liquidity and Capital Resources
      Our primary sources of liquidity are cash flows from operations, debt capacity available under various credit facilities and available cash reserves. We may also be able to raise additional funds through public or private debt or equity financings in order to:
  •  take advantage of opportunities, including more rapid expansion;
 
  •  acquire complementary businesses or technologies;
 
  •  develop new services and solutions;
 
  •  respond to competitive pressures; or
 
  •  facilitate purchases, redemptions and exchanges of Accenture shares.
      At August 31, 2006, cash and cash equivalents of $3,067 million combined with $463 million of liquid fixed-income securities that are classified as investments in our Consolidated Balance Sheet totaled $3,530 million, compared with $3,185 million at August 31, 2005, an increase of $345 million.
      Cash flows from operating, investing and financing activities, as reflected in our Consolidated Cash Flow Statement, are summarized in the following table:
                                   
    Year Ended August 31,
     
        2006 to 2005
    2006   2005   2004   Change
                 
    (in millions)
Net cash provided by (used in):
                               
 
Operating activities
  $ 2,668     $ 1,887     $ 1,756     $ 781  
 
Investing activities
    (253 )     (575 )     (897 )     322  
 
Financing activities
    (1,934 )     (1,377 )     (688 )     (557 )
Effect of exchange rate changes on cash and cash equivalents
    102       (4 )     49       106  
                         
Net increase (decrease) in cash and cash equivalents
  $ 583     $ (69 )   $ 220     $ 652  
                         
      Operating activities: The $781 million increase in cash provided in fiscal 2006 compared with fiscal 2005 was primarily due to increases in revenues and the related collections of billings during fiscal 2006, compared with fiscal 2005. The $131 million increase in cash provided in fiscal 2005, compared with fiscal 2004 was primarily due to an increase in net income, an increase in accounts payable, and $50 million in discretionary contributions to our U.S. employees’ pension plans in fiscal 2005, compared with $230 million in fiscal 2004.

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      Investing activities: The $322 million decrease in cash used was primarily due to a decrease in the purchases of marketable securities, partially offset by a decrease in net proceeds from marketable securities. The $322 million decrease in cash used in fiscal 2005, compared with fiscal 2004 was primarily due to a decrease in net purchases of marketable securities, partially offset by the acquisition of the net assets of Capgemini’s North American Health practice for $179 million in cash (including $4 million of acquisition expenses). During fiscal 2006, 2005 and 2004, we invested $306 million, $318 million and $282 million, respectively, in capital expenditures, primarily for technology assets, furniture and equipment and leasehold improvements to support our operations. We expect that our capital expenditures will be approximately $335 million in fiscal 2007.
      Financing activities: The $557 million increase in cash used was primarily driven by an increase in purchases of common shares and the payment of $268 million in cash dividends, partially offset by a $138 million increase in cash received for Accenture Ltd Class A common shares issued under Accenture’s employee share programs. For additional information, see Footnote 13 (Material Transactions Affecting Shareholders’ Equity) to our Consolidated Financial Statements under “Financial Statements and Supplementary Data.” The $689 million increase in cash used in fiscal 2005, compared with fiscal 2004 was primarily driven by an increase of net purchases of common shares in fiscal 2005, partly offset by a net decrease in restricted cash of the predecessor to the Accenture Share Employee Compensation Trust.
      We believe that our available cash balances and the cash flows expected to be generated from operations will be sufficient to satisfy our current and planned working capital and investment needs for the next twelve months. We also believe that our longer-term working capital and other general corporate funding requirements will be satisfied through cash flows from operations and, to the extent necessary, from our borrowing facilities and future financial market activities.
Borrowing Facilities
      At August 31, 2006, we had the following borrowing facilities, including the issuance of letters of credit, to support general working capital purposes:
         
    Facility
    Amount
     
    (in millions)
Syndicated loan facility(1)
  $ 1,200  
Separate bilateral, uncommitted, unsecured multicurrency revolving credit facilities(2)
    350  
Local guaranteed and non-guaranteed lines of credit(3)
    136  
       
Total
  $ 1,686  
       
 
(1)  On July 31, 2006, we replaced our $1.5 billion syndicated loan facility maturing on June 18, 2009 with a $1.2 billion syndicated loan facility maturing on July 31, 2011. This new facility provides unsecured, revolving borrowing capacity for general working capital purposes, including the issuance of letters of credit. Financing is provided under this facility at the prime rate or at the London Interbank Offered Rate plus a spread. This facility requires us to: (1) limit liens placed on our assets to (a) liens incurred in the ordinary course of business (subject to certain qualifications) and (b) other liens securing obligations not to exceed 30% of the Company’s consolidated assets; and (2) maintain a debt-to-cash-flow ratio not exceeding 1.75 to 1.00. We continue to be in compliance with these terms. As of August 31, 2006, we had no borrowings under the facility. The facility is subject to annual commitment fees.
(2)  We maintain three separate bilateral, uncommitted, unsecured multicurrency revolving credit facilities. These facilities provide local-currency financing for the majority of our operations. Interest rate terms on the bilateral revolving facilities are at market rates prevailing in the relevant local markets. Effective August 31, 2006, we amended two of the bilateral credit facilities, which increased total capacity by $100 million to $350 million. As of August 31, 2006 and 2005, we had $2 million and $4 million, respectively, of borrowings under these facilities.
(3)  We also maintain local guaranteed and non-guaranteed lines of credit for those locations that cannot access our global facilities. At August 31, 2006, we had no borrowings under these various facilities.

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     Under the borrowing facilities described above, we had an aggregate of $153 million and $186 million of letters of credit outstanding at August 31, 2006 and 2005, respectively. In addition, we had zero and $9 million of other short-term borrowings at August 31, 2006 and 2005, respectively.
We also had total outstanding debt of $50 million and $62 million at August 31, 2006 and 2005, respectively, which was primarily incurred in conjunction with the purchase of Accenture HR Services.
Client Financing
      In limited circumstances, we agree to extend financing to clients on technology integration consulting contracts. The terms vary by contract, but generally we contractually link payment for services to the achievement of specified performance milestones. We finance these client obligations primarily with existing working capital and bank financing in the country of origin. Imputed interest is recorded at market rates in Interest income in the Consolidated Income Statement. Information pertaining to client financing is as follows:
                 
    August 31,
     
    2006   2005
         
    (in millions, except
    number of clients)
Number of clients
    25       29  
             
Client financing included in Current unbilled services
  $ 158     $ 262  
Client financing included in Non-current unbilled services
    105       472  
             
Total client financing, current and non-current
  $ 263     $ 734  
             
      The decrease in client financing from August 31, 2005 was primarily due to the reversal of client financing balances related to the impact of the NHS Transfer Agreement. See “— The NHS Contracts.”
Share Purchases and Redemptions
      From time to time Accenture purchases Accenture Ltd Class A common shares through the Company’s open-market purchase program and also purchases, redeems and exchanges Accenture shares held by our current and former senior executives and their permitted transferees. In fiscal 2005, the Board of Directors of Accenture granted authority to utilize $3.0 billion for purchases and redemptions of shares held by current and former senior executives and their permitted transferees and open-market share purchases, as well as for the acquisition of certain Accenture Ltd Class A common shares awarded to employees pursuant to restricted share units awarded in connection with our initial public offering. Effective as of March 24, 2006, the Board of Directors of Accenture authorized an additional $1.5 billion for the purchase, redemption and exchange from time to time of Accenture shares, including open-market share purchases.
Open-Market Purchases
      Accenture has conducted a publicly announced, open-market share purchase program for Accenture Ltd Class A common shares. These purchased shares are currently utilized to provide for select employee benefits, such as equity awards to our senior executives. These shares are held by one or more subsidiaries of Accenture Ltd and are treated as treasury shares.

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Senior Executive Trading Policy and Practices
      Under our Share Management Plan, which expired on July 24, 2005, we provided quarterly transactions to give our current and former senior executives and their permitted transferees the opportunity to dispose of shares that were eligible for transfer under the terms of the various transfer restrictions applicable to them. Prior to March 2006, Accenture also purchased certain Accenture Ltd Class A common shares awarded to employees pursuant to restricted share units issued in connection with our initial public offering.
      In July 2005, we implemented a Senior Executive Trading Policy applicable to our senior executives which provides, among other things, that all Accenture Ltd Class A common shares, Accenture SCA Class I common shares, and Accenture Canada Holdings Inc. exchangeable shares covered by the transfer restrictions contained in our various charter documents and still held by actively employed senior executives but which are no longer restricted by transfer restrictions will be subject to company-imposed quarterly trading guidelines. These currently limit the total number of shares redeemed, sold or otherwise transferred in any calendar quarter to no more than a composite average weekly volume of trading in Accenture Ltd Class A common shares. The Senior Executive Trading Policy was implemented, in part, due to the expiration on July 24, 2005 of our Share Management Plan for current and former senior executives and the charter provisions used to facilitate that plan. Since July 24, 2005, holders of shares covered by the transfer restrictions contained in our various charter documents have been able to individually execute sales, redemptions or dispositions of those shares that are no longer subject to these charter provisions and, in the case of our senior executives, in compliance with the quarterly trading guidelines contained in the Senior Executive Trading Policy. We may continue for the time being to redeem or purchase all Accenture SCA Class I common shares and Accenture Canada Holdings Inc. exchangeable shares offered for redemption or purchase for cash.

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      A summary of our share purchase activity in fiscal 2005 and 2006 was as follows:
                                         
    Open-Market Share   Other Share    
    Purchase Program   Purchase Programs    
             
    Shares   Amount   Shares   Amount   Total
                     
        (in millions)       (in millions)
Available authorization as of August 31, 2004
          $ 62             $ 224     $ 286  
Purchases and redemptions(1)
    20,566,470       (481 )     45,147,483       (1,103 )     (1,584 )
Additional authorizations(2)
            1,000               2,000       3,000  
                               
Available authorization as of August 31, 2005
            581               1,121       1,702  
Purchases and redemptions(3)
    3,491,500       (103 )     43,301,787       (1,179 )     (1,282 )
Additional authorizations(4)
            500               1,000       1,500  
                               
Available authorization as of August 31, 2006
          $ 978             $ 942     $ 1,920  
                               
 
(1)  Other Share Purchase Programs include the following purchase activity during fiscal 2005:
  •  44,105,764 Accenture SCA Class I common shares redeemed or purchased for a total cash outlay of $1,078 million and 643,325 Accenture Canada Holdings Inc. exchangeable shares purchased for a total cash outlay of $16 million; and
  •  398,394 shares purchased through the RSU Sell-Back Program for a total cash outlay of $10 million.
(2)  On October 15, 2004, an additional $1 billion was authorized for purchase under the Company’s open-market share purchase program and an additional $2 billion was authorized for redemptions and purchases under the Company’s other share purchase programs.
(3)  Other Share Purchase Programs include the following purchase activity during fiscal 2006:
  •  31,416,894 Accenture SCA Class I common shares redeemed or purchased for a total cash outlay of $918 million and 421,194 Accenture Canada Holdings Inc. exchangeable shares purchased for a total cash outlay of $12 million;
  •  11,231,941 Accenture Ltd Class A common shares purchased for an aggregate purchase price of $243 million; and
  •  231,758 shares purchased through the RSU Sell-Back Program whereby the Company offers to purchase Accenture Ltd Class A common shares awarded to employees pursuant to restricted share units issued in connection with its initial public offering for a total cash outlay of $7 million. The RSU Sell-Back Program was terminated, effective March 1, 2006. All remaining funding authorizations for the RSU Sell-Back Program were reallocated and made available for use in the Company’s other share purchase programs.
(4)  On March 24, 2006, an additional $500 million was authorized for purchase under the Company’s open-market share purchase program and an additional $1 billion was authorized for redemptions and purchases under the Company’s other share purchase programs.
Other Redemptions and Purchases
      On September 14, 2005, Accenture SCA and one of its subsidiaries made a tender offer to Accenture SCA Class I common shareholders that resulted in the redemption and purchase on October 14, 2005 of an aggregate of 35,922,744 Accenture SCA Class I common shares at a price of $21.50 per share. The total cash outlay for this transaction was $775 million and was separately authorized by the Board of Directors of Accenture.
      During the year ended August 31, 2006, as authorized under Accenture’s various employee equity share plans, Accenture acquired 1,095,728 Accenture Ltd Class A common shares via share withholding for payroll tax obligations due from employees and former employees in connection with the delivery of Accenture Ltd Class A common shares under those plans for a total cash outlay of $31 million.
Subsequent Developments
      On September 11, 2006, Accenture SCA and one of its subsidiaries made a tender offer to Accenture SCA Class I common shareholders that resulted in the redemption and purchase, effective as of October 11, 2006 of an aggregate of 7.5 million Accenture SCA Class I common shares at a price of $24.75 per share. The total cash outlay for these transactions was approximately $187 million.
      On September 25, 2006, Accenture Ltd declared a cash dividend of $0.35 per share on its Class A common shares for shareholders of record at the close of business on October 13, 2006.

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Accenture Ltd will cause Accenture SCA to declare a cash dividend of $0.35 per share on its Class I common shares for shareholders of record at the close of business on October 5, 2006. Both dividends are payable on November 15, 2006.
Obligations and Commitments
      As of August 31, 2006, we had the following obligations and commitments to make future payments under contracts, contractual obligations and commercial commitments:
                                         
    Payments due by period
     
Contractual Cash Obligations   Total   Less than 1 year   1-3 years   3-5 years   More than 5 years
                     
    (in millions)
Long-term debt
  $ 50     $ 23     $ 26     $ 1     $  
Operating leases
    2,213       338       517       371       987  
Retirement obligations(1)
    214       44       73       44       53  
Other commitments(2)
    534       363       119       39       13  
                               
Total
  $ 3,011     $ 768     $ 735     $ 455     $ 1,053  
                               
 
(1)  This represents projected payments under our Basic Retirement Benefit and Early Retirement Plans. Because both of these plans are unfunded, we pay these benefits directly. These plans were eliminated for active partners after May 15, 2001.
 
(2)  Other commitments include, among other things, information technology, software support and maintenance obligations, as well as other obligations in the ordinary course of business that we cannot cancel or where we would be required to pay a termination fee in the event of cancellation. Amounts shown do not include recourse that we may have to recover termination fees or penalties from clients.
Off-Balance Sheet Arrangements
      We have various agreements by which we may be obligated to indemnify the other party with respect to certain matters. Generally, these indemnification provisions are included in contracts arising in the normal course of business under which we customarily agree to hold the indemnified party harmless against losses arising from a breach of representations related to such matters as title to assets sold, licensed or certain intellectual property rights and other matters. Payments by us under such indemnification clauses are generally conditioned on the other party making a claim. Such claims are generally subject to challenge by us and dispute resolution procedures specified in the particular contract. Furthermore, our obligations under these arrangements may be limited in terms of time and/or amount and, in some instances, we may have recourse against third parties for certain payments made by us. It is not possible to predict the maximum potential amount of future payments under these indemnification agreements due to the conditional nature of our obligations and the unique facts of each particular agreement. Historically, we have not made any payments under these agreements that have been material individually or in the aggregate. As of August 31, 2006, we were not aware of any obligations under such indemnification agreements that would require material payments.
      From time to time, we enter into contracts with clients whereby we have joint and several liability with other participants and/or third parties providing related services and products to clients. Under these arrangements, we and other parties may assume some responsibility to the client or a third party for the performance of others under the terms and conditions of the contract with or for the benefit of the client or in relation to the performance of certain contractual obligations. To date, we have not been required to make any payments under any of the contracts described in this paragraph. For further discussion of these transactions, see Footnote 15 (Commitments and Contingencies) to our Consolidated Financial Statements under “Financial Statements and Supplementary Data.”

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Newly Issued Accounting Standards
      In July 2006, the Financial Accounting Standards Board (“FASB”) issued Financial Interpretation No. 48, “Accounting for Uncertainty in Income Taxes-an interpretation of FASB Statement No. 109” (“FIN 48”), which is a change in accounting for income taxes. FIN 48 specifies how tax benefits for uncertain tax positions are to be recognized, measured, and derecognized in financial statements; requires certain disclosures of uncertain tax matters; specifies how reserves for uncertain tax positions should be classified in the balance sheet; and provides transition and interim-period guidance, among other provisions. FIN 48 is effective for fiscal years beginning after December 15, 2006 and, as a result, is effective for us beginning September 1, 2007. We are currently evaluating the impact of FIN 48 on our Consolidated Financial Statements.
      In September 2006, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 106, and 132(R)” (“SFAS No. 158”). SFAS No. 158 requires companies to recognize a net liability or asset and an offsetting adjustment to accumulated other comprehensive income to report the funded status of defined benefit pension and other postretirement benefit plans. SFAS No. 158 requires prospective application, recognition and disclosure requirements effective for our fiscal year ending August 31, 2007. Additionally, SFAS No. 158 requires companies to measure plan assets and obligations at their year-end balance sheet date. This requirement is effective for our fiscal year ending August 31, 2009. We are currently evaluating the impact of the adoption of SFAS No. 158; however, we do not expect that it will have a material impact on our Consolidated Financial Statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
      We have no market risk sensitive instruments entered into for trading purposes; therefore, all of our market risk sensitive instruments were entered into for purposes other than trading.
Foreign Currency Risk
      We are exposed to foreign currency risk in the ordinary course of business. We hedge material cash flow exposures when feasible using forward and/or option contracts, with the Euro accounting for a significant portion of the notional amount being hedged. These instruments are generally short-term in nature, with typical maturities of less than one year, and are subject to fluctuations in foreign exchange rates and credit risk. From time to time, we enter into forward or option contracts of a long-term nature. Credit risk is managed through careful selection and ongoing evaluation of the financial institutions utilized as counterparties.
      We use sensitivity analysis to determine the effects that market exchange rate fluctuations may have on the fair value of our hedge portfolio. The sensitivity of the hedge portfolio is computed based on the market value of future cash flows as affected by changes in exchange rates. This sensitivity analysis represents the hypothetical changes in value of the hedge position and does not reflect the offsetting gain or loss on the underlying exposure. As of August 31, 2006, a 10% decrease in the levels of foreign currency exchange rates against the U.S. dollar with all other variables held constant would have resulted in a decrease in the fair value of our hedge instruments of $43 million, while a 10% increase in the levels of foreign currency exchange rates against the U.S. dollar would have resulted in an increase in the fair value of our hedge instruments of $43 million. As of August 31, 2005, a 10% decrease in the levels of foreign currency exchange rates against the U.S. dollar with all other variables held constant would have resulted in a decrease in the fair value of our hedge instruments of $19 million, while a 10% increase in the levels of foreign currency exchange rates

72


 

against the U.S. dollar would have resulted in an increase in the fair value of our hedge instruments of $19 million.
Interest Rate Risk
      The interest rate risk associated with our borrowing and investing activities at August 31, 2006 is not material in relation to our consolidated financial position, results of operations or cash flows. While we may do so in the future, we have not used derivative financial instruments to alter the interest rate characteristics of our investment holdings or debt instruments.
Equity Price Risk
      The equity price risk associated with our marketable equity securities that are subject to market price volatility is not material in relation to our consolidated financial position, results of operations or cash flows.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
      See the index included on page F-1, Index to Consolidated Financial Statements.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
      None.
ITEM 9A. CONTROLS AND PROCEDURES
(a)  Evaluation of Disclosure Controls and Procedures
      Based on their evaluation for the period covered by this Annual Report on Form 10-K, the Chief Executive Officer and the Chief Financial Officer of Accenture Ltd have concluded that, as of the end of this period, Accenture Ltd’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are effective to ensure that information required to be disclosed by Accenture Ltd in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.
(b)  Management’s Annual Report on Internal Control over Financial Reporting
      Accenture’s management is responsible for establishing and maintaining adequate internal control over financial reporting to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Internal control over financial reporting includes those policies and procedures that:
        (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;
 
        (ii) provide reasonable assurance that the transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with the authorization of management and/or our Board of Directors; and

73


 

        (iii) provide reasonable assurance regarding the prevention or timely detection of any unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.
      Due to its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate due to changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
      Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework. Based on its evaluation, our management concluded that our internal control over financial reporting was effective as of the end of the period covered by this Annual Report on Form 10-K.
      KPMG LLP, an independent registered public accounting firm, has audited the Consolidated Financial Statements included in this Annual Report on Form 10-K and, as part of their audit, has issued its reports, included herein, on (1) our management’s assessment of the effectiveness of our internal control over financial reporting and (2) the effectiveness of our internal control over financial reporting. See “Report of Independent Registered Public Accounting Firm” on page F-3.
(c)  Changes in Internal Control over Financial Reporting
      There has been no change in Accenture Ltd’s internal control over financial reporting that occurred during the fourth quarter of fiscal 2006 that has materially affected, or is reasonably likely to materially affect, Accenture Ltd’s internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
      None.

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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
      Information about our directors is incorporated by reference from the discussion under the heading “Board and Corporate Governance Matters—Director Biographies” in the Proxy Statement for our Annual General Meeting of Shareholders to be held February 7, 2007 (the “2007 Proxy Statement”). Information about our executive officers is contained in the discussion entitled “Executive Officers of the Registrant” in Part I of this Form 10-K. Information about compliance with Section 16(a) of the Exchange Act is incorporated by reference from the discussion under the heading “Section 16(a) Beneficial Ownership Reporting Compliance” in our 2007 Proxy Statement. Information about our Audit Committee, including the members of the Committee, and our Audit Committee financial experts, is incorporated by reference from the discussion under the heading “Board and Corporate Governance Matters—Audit Committee” in our 2007 Proxy Statement. Information about our Code of Business Ethics governing our employees, including our chief executive officer, chief financial officer and principal accounting officer, and our directors, where appropriate, is incorporated by reference from the discussion under the heading “Board and Corporate Governance Matters—Board Meetings and Committees” in our 2007 Proxy Statement.
ITEM 11. EXECUTIVE COMPENSATION
      Information about director and executive compensation is incorporated by reference from the discussion under the headings “Compensation of Executive Officers and Directors,” “Reports of the Committees of the Board—Report of the Compensation Committee on Executive Compensation” and “Performance Graph” in our 2007 Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS
      Information about security ownership of certain beneficial owners and management and related shareholder matters is incorporated by reference from the discussion under the headings “Beneficial Ownership of Directors and Executive Officers,” “Beneficial Ownership of More Than Five Percent of Any Class of Voting Securities” and “Equity Compensation Plan Information” in our 2007 Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
      Information about certain relationships and transactions with related parties is incorporated by reference from the discussion under the heading “Certain Relationships and Related Transactions” in our 2007 Proxy Statement.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
      Information about the fees for professional services rendered by our independent auditors in 2006 and 2005 and our Audit Committee’s policy on pre-approval of audit and permissible non-audit services of our independent auditors is incorporated by reference from the discussion under the heading “Principal Accounting Fees and Services” in our 2007 Proxy Statement.

75


 

PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
      (a) List of documents filed as part of this report:
1. Financial Statements as of August 31, 2006 and August 31, 2005 and for the three years ended August 31, 2006—Included in Part II of this Form 10-K:
  Consolidated Balance Sheets
 
  Consolidated Income Statements
 
  Consolidated Shareholders’ Equity and Comprehensive Income Statements
 
  Consolidated Cash Flows Statements
 
  Notes to Consolidated Financial Statements
2. Financial Statement Schedules:
  None
3. Exhibit Index:
         
Exhibit    
Number   Exhibit
     
  3 .1   Memorandum of Continuance of the Registrant, dated February 21, 2001 (incorporated by reference to Exhibit 3.1 to the Registrant’s Registration Statement on Form S-1/ A filed on July 2, 2001 (the “July 2, 2001 Form S-1/ A”)).
  3 .2   Form of Bye-laws of the Registrant, effective as of February 2, 2005 (incorporated by reference to Exhibit 3.1 to the February 28, 2005 10-Q).
  9 .1   Form of Voting Agreement, dated as of April 18, 2001, among the Registrant and the covered persons party thereto as amended and restated as of February 3, 2005 (incorporated by reference to Exhibit 9.1 to the February 28, 2005 10-Q).
  10 .1   Form of Partner Matters Agreement, dated as of April 18, 2001, among the Registrant and the partners party thereto (incorporated by reference to Exhibit 10.1 to the April 19, 2001 Form S-1).
  10 .2   Form of Non-Competition Agreement, dated as of April 18, 2001, among the Registrant and certain employees (incorporated by reference to Exhibit 10.2 to the April 19, 2001 Form S-1).
  10 .3   2001 Share Incentive Plan (incorporated by reference to Exhibit 10.3 to the Registrant’s Registration Statement on Form S-1/ A filed on July 12, 2001).
  10 .4   2001 Employee Share Purchase Plan (incorporated by reference to Exhibit 10.14 to the November 30, 2001 10-Q).
  10 .5   Form of Articles of Association of Accenture SCA, consolidated and updated as of June 28, 2005 (incorporated by reference to Exhibit 10.1 to the May 31, 2005 10-Q).
  10 .6   Form of Accenture SCA Transfer Rights Agreement, dated as of April 18, 2001, among Accenture SCA and the covered persons party thereto as amended and restated as of February 3, 2005 (incorporated by reference to Exhibit 10.2 to the February 28, 2005 10-Q).
  10 .7   Form of Non-Competition Agreement, dated as of April 18, 2001, among Accenture SCA and certain employees (incorporated by reference to Exhibit 10.7 to the April 19, 2001 Form S-1).
  10 .8   Form of Letter Agreement, dated April 18, 2001, between Accenture SCA and certain shareholders of Accenture SCA (incorporated by reference to Exhibit 10.8 to the April 19, 2001 Form S-1).
  10 .9   Form of Support Agreement, dated as of May 23, 2001, between the Registrant and Accenture Canada Holdings Inc. (incorporated by reference to Exhibit 10.9 to the July 2, 2001 Form S-1/ A).

76


 

         
Exhibit    
Number   Exhibit
     
  10 .10   Form of Employment Agreement of Messrs. Campbell, Cole, Coughlan, Frerichs, Green, McGrath, Rohleder and Scrivner and Ms. Mascolo (incorporated by reference to Exhibit 10.10 to the Registrant’s Registration Statement on Form S-1/ A filed on June 8, 2001 (the “June 8, 2001 S-1/ A”)).
  10 .11   Form of Employment Agreement of Karl-Heinz Flöther (incorporated by reference to Exhibit 10.3 to the November 30, 2001 10-Q).
  10 .12   Form of Employment Agreement of Messrs. Foster and Lajtha (incorporated by reference to Exhibit 10.8 to the November 30, 2001 10-Q).
  10 .13   Form of Employment Agreement of Gianfranco Casati (English translation) (filed herewith).
  10 .14   Form of Employment Agreement of Alexander van ’t Noordende (English translation) (filed herewith).
  10 .15   Form of Articles of Association of Accenture Canada Holdings Inc. (incorporated by reference to Exhibit 10.11 to the July 2, 2001 Form S-1/ A).
  10 .16   Form of Exchange Trust Agreement by and between the Registrant and Accenture Canada Holdings Inc. and CIBC Mellon Trust Company, made as of May 23, 2001 (incorporated by reference to Exhibit 10.12 to the July 2, 2001 Form S-1/ A).
  10 .17   Form of Letter Agreement, dated May 21, 2001, between the Registrant and Stichting Naritaweg I (incorporated by reference to Exhibit 10.13 to the July 2, 2001 Form S-1/ A).
  10 .18   Form of Letter Agreement, dated May 21, 2001, between the Registrant and Stichting Naritaweg II (incorporated by reference to Exhibit 10.14 to the July 2, 2001 Form S-1/ A).
  10 .19   Form of Transfer Restriction Agreement dated as of October 1, 2002 among Accenture Ltd and the transferors and transferees signatory thereto (incorporated by reference to Exhibit 9.1 to the November 30, 2002 10-Q).
  10 .20   Form of Transfer Restriction Agreement dated as of October 1, 2002 among Accenture SCA and the transferors and transferees signatory thereto (incorporated by reference to Exhibit 9.1 to Accenture SCA’s November 30, 2002 10-Q).
  10 .21   Form of First Amendment, dated as of May 1, 2003, to Transfer Restriction Agreement dated as of October 1, 2002 among Accenture Ltd and the transferors and transferees signatory thereto (incorporated by reference to Exhibit 99.(d)(13) to Accenture SCA’s and Accenture International SARL’s Schedule TO filed on September 30, 2003).
  10 .22   Form of First Amendment, dated as of May 1, 2003, to Transfer Restriction Agreement dated as of October 1, 2002 among Accenture SCA and the transferors and transferees signatory thereto (incorporated by reference to Exhibit 99.(d)(14) to Accenture SCA’s and Accenture International SARL’s Schedule TO filed on September 30, 2003).
  10 .23   Form of Second Amendment, dated as of October 1, 2003, to Transfer Restriction Agreement dated as of October 1, 2002 among Accenture Ltd and the transferors and transferees signatory thereto (incorporated by reference to Exhibit 99.(d)(15) to Accenture SCA’s and Accenture International SARL’s Schedule TO filed on April 29, 2004).
  10 .24   Form of Second Amendment, dated as of October 1, 2003, to Transfer Restriction Agreement dated as of October 1, 2002 among Accenture SCA and the transferors and transferees signatory thereto (incorporated by reference to Exhibit 99.(d)(16) to Accenture SCA’s and Accenture International SARL’s Schedule TO filed on April 29, 2004).
  10 .25   Form of Ltd Transfer Restriction Agreement for the Accenture Family and Charitable Transfer Program dated as of April 1, 2005 among Accenture Ltd and the transferors and transferees signatory thereto (incorporated by reference to Exhibit 10.3 to the May 31, 2005 10-Q).
  10 .26   Form of SCA Transfer Restriction Agreement for the Accenture Family and Charitable Transfer Program dated as of April 1, 2005 among Accenture SCA and the transferors and transferees signatory thereto (incorporated by reference to Exhibit 10.2 to the May 31, 2005 10-Q).
  10 .27   Form of Transfer Agreement (for transfers of “Unrestricted” Shares of Accenture Ltd) for the Accenture Family and Charitable Transfer Program dated as of April 1, 2005 among Accenture Ltd and the transferors and transferees signatory thereto (incorporated by reference to Exhibit 10.5 to the May 31, 2005 10-Q).

77


 

         
Exhibit    
Number   Exhibit
     
  10 .28   Form of Transfer Agreement (for transfers of “Unrestricted” Shares of Accenture SCA) for the Accenture Family and Charitable Transfer Program dated as of April 1, 2005 among Accenture SCA and the transferors and transferees signatory thereto (incorporated by reference to Exhibit 10.4 to the May 31, 2005 10-Q).
  10 .29   Form of Restricted Share Unit Agreement for senior executives pursuant to the Accenture Ltd 2001 Share Incentive Plan (incorporated by reference to Exhibit 4.1 to the November 30, 2004 10-Q).
  10 .30   Form of Nonqualified Share Option Agreement for senior executives pursuant to the Accenture Ltd 2001 Share Incentive Plan (incorporated by reference to Exhibit 4.2 to the November 30, 2004 10-Q).
  10 .31   Description of Annual Bonus Plan (incorporated by reference to Exhibit 10.1 to the February 28, 2006 10-Q).
  21 .1   Subsidiaries of the Registrant (filed herewith).
  23 .1   Consent of KPMG LLP (filed herewith).
  23 .2   Consent of KPMG LLP related to the Accenture Ltd 2001 Employee Share Purchase Plan (filed herewith).
  24 .1   Power of Attorney (included on the signature page hereto).
  31 .1   Certification of the Chief Executive Officer, pursuant to Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
  31 .2   Certification of the Chief Financial Officer, pursuant to Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
  32 .1   Certification of the Chief Executive Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).
  32 .2   Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).
  99 .1   Accenture Ltd 2001 Employee Share Purchase Plan Financial Statements (filed herewith).

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SIGNATURES
      Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf on October 18, 2006 by the undersigned, thereunto duly authorized.
  Accenture Ltd
  By:  /s/ William D. Green
 
 
  Name: William D. Green
  Title: Chief Executive Officer
POWER OF ATTORNEY
      KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints William D. Green, Pamela J. Craig and Douglas G. Scrivner, and each of them, as his or her true and lawful attorneys-in-fact and agents, with power to act with or without the others and with full power of substitution and resubstitution, to do any and all acts and things and to execute any and all instruments which said attorneys and agents and each of them may deem necessary or desirable to enable the Registrant to comply with the U.S. Securities Exchange Act of 1934, as amended, and any rules, regulations and requirements of the U.S. Securities and Exchange Commission thereunder in connection with the Registrant’s Annual Report on Form 10-K for the fiscal year ended August 31, 2006 (the “Annual Report”), including specifically, but without limiting the generality of the foregoing, power and authority to sign the name of the Registrant and the name of the undersigned, individually and in his or her capacity as a director or officer of the Registrant, to the Annual Report as filed with the U.S. Securities and Exchange Commission, to any and all amendments thereto, and to any and all instruments or documents filed as part thereof or in connection therewith; and each of the undersigned hereby ratifies and confirms all that said attorneys and agents and each of them shall do or cause to be done by virtue hereof.
      Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on October 18, 2006 by the following persons on behalf of the Registrant and in the capacities indicated.
         
Signature   Title
     
 
/s/ William D. Green
 
William D. Green
 
Chief Executive Officer,
Chairman of the Board and Director
(principal executive officer)
 
/s/ Dina Dublon
 
Dina Dublon
 
Director
 
/s/ Dennis F. Hightower
 
Dennis F. Hightower
 
Director
 
/s/ Nobuyuki Idei
 
Nobuyuki Idei
 
Director


 

         
Signature   Title
     
 
/s/ William L. Kimsey
 
William L. Kimsey
 
Director
 
/s/ Robert I. Lipp
 
Robert I. Lipp
 
Director
 
/s/ Marjorie Magner
 
Marjorie Magner
 
Director
 
/s/ Blythe J. Mcgarvie
 
Blythe J. McGarvie
 
Director
 
/s/ Sir Mark Moody Stuart
 
Sir Mark Moody Stuart
 
Director
 
/s/ Wulf Von Schimmelmann
 
Wulf von Schimmelmann
 
Director
 
/s/ Michael G. Mcgrath
 
Michael G. McGrath
 
Chief Financial Officer
(principal financial officer)
 
/s/ Anthony G. Coughlan
 
Anthony G. Coughlan
 
Principal Accounting Officer and Controller
(principal accounting officer)


 

ACCENTURE LTD
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
           
    Page
     
    F-2  
Consolidated Financial Statements as of August 31, 2006 and 2005 and for the three years ended August 31, 2006:
       
      F-4  
      F-5  
      F-6  
      F-8  
    F-9  

F-1


 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders
Accenture Ltd:
      We have audited the accompanying Consolidated Balance Sheets of Accenture Ltd and its subsidiaries as of August 31, 2006 and 2005, and the related Consolidated Statements of Income, Shareholders’ Equity and Comprehensive Income, and Cash Flows for each of the years in the three-year period ended August 31, 2006. These Consolidated Financial Statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these Consolidated Financial Statements based on our audits.
      We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
      In our opinion, the Consolidated Financial Statements referred to above present fairly, in all material respects, the financial position of Accenture Ltd and its subsidiaries as of August 31, 2006 and 2005, and the results of their operations and their cash flows for each of the years in the three-year period ended August 31, 2006, in conformity with U.S. generally accepted accounting principles.
      As disclosed in Note 1 to the Consolidated Financial Statements, the Company, as of September 1, 2005, changed its method of accounting for share-based awards.
      We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Accenture Ltd’s internal control over financial reporting as of August 31, 2006, based on criteria established in the Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated October 18, 2006 expressed an unqualified opinion on management’s assessment of, and the effective operation of, internal control over financial reporting.
/s/ KPMG LLP
Chicago, Illinois
October 18, 2006

F-2


 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders
Accenture Ltd:
      We have audited management’s assessment, included in the accompanying Management’s Report On Internal Control Over Financial Reporting (Item 9A(b)), that Accenture Ltd maintained effective internal control over financial reporting as of August 31, 2006, based on criteria established in the Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Accenture Ltd’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.
      We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
      A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
      Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
      In our opinion, management’s assessment that Accenture Ltd maintained effective internal control over financial reporting as of August 31, 2006, is fairly stated, in all material respects, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Also, in our opinion, Accenture Ltd maintained, in all material respects, effective internal control over financial reporting as of August 31, 2006, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
      We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Consolidated Balance Sheets of Accenture Ltd and its subsidiaries as of August 31, 2006 and 2005, and the related Consolidated Statements of Income, Shareholders’ Equity and Comprehensive Income, and Cash Flows for each of the years in the three-year period ended August 31, 2006, and our report dated October 18, 2006 expressed an unqualified opinion on those Consolidated Financial Statements.
/s/ KPMG LLP
Chicago, Illinois
October 18, 2006

F-3


 

ACCENTURE LTD
CONSOLIDATED BALANCE SHEETS
August 31, 2006 and 2005
(In thousands of U.S. dollars, except share and per share amounts)
                     
    2006   2005
         
ASSETS
CURRENT ASSETS:
               
 
Cash and cash equivalents
  $ 3,066,988     $ 2,483,990  
 
Short-term investments
    352,951       463,460  
 
Receivables from clients, net of allowances of $48,069 and $40,821
    1,916,450       1,752,937  
 
Unbilled services
    1,350,211       1,353,676  
 
Deferred income taxes, net
    187,720       121,386  
 
Other current assets
    479,501       509,818  
             
   
Total current assets
    7,353,821       6,685,267  
             
NON-CURRENT ASSETS:
               
 
Unbilled services
    105,081       472,430  
 
Investments
    125,119       262,873  
 
Property and equipment, net of accumulated depreciation of $1,359,978 and $1,268,658
    727,692       693,710  
 
Goodwill
    527,648       378,488  
 
Deferred income taxes, net
    392,211       291,033  
 
Other non-current assets
    186,508       173,551  
             
   
Total non-current assets
    2,064,259       2,272,085  
             
TOTAL ASSETS
  $ 9,418,080     $ 8,957,352  
             
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
               
 
Short-term bank borrowings
  $ 2,218     $ 13,681  
 
Current portion of long-term debt
    22,574       17,391  
 
Accounts payable
    856,087       807,317  
 
Deferred revenues
    1,511,259       1,284,303  
 
Accrued payroll and related benefits
    1,693,796       1,430,998  
 
Income taxes payable
    722,096       831,399  
 
Deferred income taxes, net
    49,870       42,609  
 
Other accrued liabilities
    958,582       503,435  
             
   
Total current liabilities
    5,816,482       4,931,133  
             
NON-CURRENT LIABILITIES:
               
 
Long-term debt
    27,065       44,116  
 
Retirement obligation
    492,555       753,558  
 
Deferred income taxes, net
    16,880       5,621  
 
Other non-current liabilities
    302,965       545,051  
             
   
Total non-current liabilities
    839,465       1,348,346  
             
COMMITMENTS AND CONTINGENCIES
               
MINORITY INTEREST
    867,878       980,959  
SHAREHOLDERS’ EQUITY:
               
 
Preferred shares, 2,000,000,000 shares authorized, zero shares issued and outstanding
           
 
Class A common shares, par value $0.0000225 per share, 20,000,000,000 shares authorized, 617,565,722 and 602,705,936 shares issued as of August 31, 2006 and August 31, 2005, respectively
    14       13  
 
Class X common shares, par value $0.0000225 per share, 1,000,000,000 shares authorized, 245,006,562 and 321,088,062 shares issued and outstanding as of August 31, 2006 and August 31, 2005, respectively
    6       7  
 
Restricted share units
    482,289       365,708  
 
Additional paid-in capital
    701,006       1,365,013  
 
Treasury shares, at cost, 36,990,533 and 32,265,976 shares as of August 31, 2006 and August 31, 2005, respectively
    (869,957 )     (763,682 )
 
Retained earnings
    1,607,391       962,339  
 
Accumulated other comprehensive loss
    (26,494 )     (232,484 )
             
   
Total shareholders’ equity
    1,894,255       1,696,914  
             
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
  $ 9,418,080     $ 8,957,352  
             
The accompanying Notes are an integral part of these Consolidated Financial Statements.

F-4


 

ACCENTURE LTD
CONSOLIDATED INCOME STATEMENTS
For the Years Ended August 31, 2006, 2005 and 2004
(In thousands of U.S. dollars, except share and per share amounts)
                             
    2006   2005   2004
             
REVENUES:
                       
 
Revenues before reimbursements
  $ 16,646,391     $ 15,547,029     $ 13,673,563  
 
Reimbursements
    1,581,975       1,547,391       1,440,019  
                   
   
Revenues
    18,228,366       17,094,420       15,113,582  
OPERATING EXPENSES:
                       
 
Cost of services:
                       
   
Cost of services before reimbursable expenses
    11,652,352       10,454,830       9,057,246  
   
Reimbursable expenses
    1,581,975       1,547,391       1,440,019  
                   
   
Cost of services
    13,234,327       12,002,221       10,497,265  
 
Sales and marketing
    1,708,256       1,558,266       1,488,333  
 
General and administrative costs
    1,492,690       1,511,952       1,340,467  
 
Reorganization and restructuring (benefits) costs
    (47,966 )     (89,257 )     28,891  
                   
   
Total operating expenses
    16,387,307       14,983,182       13,354,956  
                   
OPERATING INCOME
    1,841,059       2,111,238       1,758,626  
Gain on investments, net
    2,018       21,468       3,397  
Interest income
    129,547       108,236       59,939  
Interest expense
    (21,146 )     (23,973 )     (22,044 )
Other (expense) income
    (27,811 )     (10,967 )     160  
Equity in losses of affiliates
                (1,508 )
                   
INCOME BEFORE INCOME TAXES
    1,923,667       2,206,002       1,798,570  
Provision for income taxes
    490,535       697,097       575,543  
                   
INCOME BEFORE MINORITY INTEREST
    1,433,132       1,508,905       1,223,027  
Minority interest in Accenture SCA and Accenture Canada Holdings Inc. 
    (447,382 )     (556,485 )     (529,672 )
Minority interest—other
    (12,421 )     (11,946 )     (2,527 )
                   
NET INCOME
  $ 973,329     $ 940,474     $ 690,828  
                   
Weighted average Class A common shares:
                       
Basic
    589,099,824       588,505,335       553,298,104  
Diluted
    893,810,585       960,853,814       1,003,081,228  
Earnings per Class A common share:
                       
Basic
  $ 1.65     $ 1.60     $ 1.25  
Diluted
  $ 1.59     $ 1.56     $ 1.22  
Cash dividends per share
  $ 0.30     $     $  
The accompanying Notes are an integral part of these Consolidated Financial Statements.

F-5


 

ACCENTURE LTD
CONSOLIDATED SHAREHOLDERS’ EQUITY AND COMPREHENSIVE INCOME STATEMENTS
For the Years Ended August 31, 2006, 2005 and 2004
(In thousands of U.S. dollars and in thousands of share amounts)
                                                                                                       
        Class A   Class X           Treasury            
        Common Shares   Common Shares           Shares       Accumulated    
                    Additional       Retained   Other    
    Preferred       No.       No.   Restricted   Paid-In       No.   Earnings   Comprehensive    
    Shares   $   Shares   $   Shares   Share Units   Capital   $   Shares   (Deficit)   Income (Loss)   Total
                                                 
Balance as of August 31, 2003
  $     $ 10       458,629     $ 11       508,723     $ 557,609     $ 1,501,136     $ (397,076 )     (23,311 )   $ (641,915 )   $ (188,233 )   $ 831,542  
Comprehensive income:
                                                                                               
 
Net income
                                                                            690,828               690,828  
 
Other comprehensive income:
                                                                                               
     
Unrealized gains on marketable securities, net of reclassification adjustments
                                                                                    1,585       1,585  
     
Foreign currency translation adjustments
                                                                                    44,312       44,312  
     
Minimum pension liability adjustment, net of tax
                                                                            (4,350 )     28,576       24,226  
                                                                         
 
Other comprehensive income
                                                                                    74,473          
                                                                         
Comprehensive income
                                                                                            760,951  
Income tax benefit on:
                                                                                               
 
Share-based compensation plans
                                                    30,235                                       30,235  
 
Contract termination
                                                                            2,073               2,073  
Purchases of Class A common shares
                    (3,157 )                             (79,491 )     (305,236 )     (12,494 )                     (384,727 )
Share-based compensation expense
                                            59,434       1,052                                       60,486  
Purchases/redemptions of Accenture SCA Class I common shares and Accenture Canada Holdings Inc. exchangeable shares
                            (2 )     (143,398 )             (3,089,264 )                                     (3,089,266 )
Issuances of Class A common shares:
                                                                                               
 
Employee share programs
                    23,069                       (292,580 )     325,382       273,105       16,587                       305,907  
 
In September 2003 secondary offering
            2       69,695                               1,421,873                                       1,421,875  
 
In May 2004 secondary offering
            1       43,261                               988,172                                       988,173  
Transaction fees
                                                    25,519                                       25,519  
Minority interest
                                                    519,038                                       519,038  
                                                                         
Balance as of August 31, 2004
  $     $ 13       591,497     $ 9       365,325     $ 324,463     $ 1,643,652     $ (429,207 )     (19,218 )   $ 46,636     $ (113,760 )   $ 1,471,806  
Comprehensive income:
                                                                                               
 
Net income
                                                                            940,474               940,474  
 
Other comprehensive loss:
                                                                                               
   
Unrealized losses on marketable securities, net of reclassification adjustments
                                                                                    (2,743 )     (2,743 )
   
Foreign currency translation adjustments
                                                                                    (20,284 )     (20,284 )

F-6


 

                                                                                                     
        Class A   Class X           Treasury            
        Common Shares   Common Shares           Shares       Accumulated    
                    Additional       Retained   Other    
    Preferred       No.       No.   Restricted   Paid-In       No.   Earnings   Comprehensive    
    Shares   $   Shares   $   Shares   Share Units   Capital   $   Shares   (Deficit)   Income (Loss)   Total
                                                 
   
Minimum pension liability adjustment, net of tax
                                                                                    (95,697 )     (95,697 )
                                                                         
 
Other comprehensive loss
                                                                                    (118,724 )        
                                                                         
Comprehensive income
                                                                                            821,750  
Income tax benefit on:
                                                                                               
 
Share-based compensation plans
                                                    75,532                                       75,532  
 
Costs related to issuance of shares
                                                    8,846                                       8,846  
 
Contract termination
                                                                            134               134  
Purchases of Class A common shares
                    (562 )                             (13,286 )     (503,088 )     (21,497 )                     (516,374 )
Share-based compensation expense
                                            87,640       701                                       88,341  
Purchases/redemptions of Accenture SCA Class I common shares and Accenture Canada Holdings Inc. exchangeable shares
                            (2 )     (44,237 )             (1,095,155 )                                     (1,095,157 )
Issuances of Class A common shares related to employee share programs
                    11,771                       (46,395 )     197,967       168,613       8,449       (24,905 )             295,280  
Transaction fees
                                                    3,427                                       3,427  
Minority interest
                                                    543,329                                       543,329  
                                                                         
Balance as of August 31, 2005
  $     $ 13       602,706     $ 7       321,088     $ 365,708     $ 1,365,013     $ (763,682 )     (32,266 )   $ 962,339     $ (232,484 )   $ 1,696,914  
Comprehensive income:
                                                                                               
 
Net income
                                                                            973,329               973,329  
 
Other comprehensive income:
                                                                                               
   
Unrealized losses on marketable securities, net of reclassification adjustments
                                                                                    (1,260 )     (1,260 )
   
Foreign currency translation adjustments
                                                                                    52,423       52,423  
   
Minimum pension liability adjustment, net of tax
                                                                                    154,827       154,827  
                                                                         
 
Other comprehensive income
                                                                                    205,990          
                                                                         
Comprehensive income
                                                                                            1,179,319  
Income tax benefit on:
                                                                                               
 
Share-based compensation plans
                                                    100,508                                       100,508  
 
Contract termination
                                                                            497               497  
Purchases of Class A common shares
                    (581 )                             (16,192 )     (366,481 )     (15,470 )                     (382,673 )
Share-based compensation expense
                                            152,158       112,952                                       265,110  
Purchases/redemptions of Accenture SCA Class I common shares and Accenture Canada Holdings Inc. exchangeable shares
                            (1 )     (76,081 )             (1,704,353 )                                     (1,704,354 )
Issuances of Class A common shares related to employee share programs
            1       15,441                       (49,141 )     273,089       260,206       10,745       (47,237 )             436,918  
Dividends
                                            13,564                               (281,537 )             (267,973 )
Minority interest
                                                    569,989                                       569,989  
                                                                         
Balance as of August 31, 2006
  $     $ 14       617,566     $ 6       245,007     $ 482,289     $ 701,006     $ (869,957 )     (36,991 )   $ 1,607,391     $ (26,494 )   $ 1,894,255  
                                                                         
The accompanying Notes are an integral part of these Consolidated Financial Statements.

F-7


 

ACCENTURE LTD
CONSOLIDATED CASH FLOWS STATEMENTS
For the Years Ended August 31, 2006, 2005 and 2004
(In thousands of U.S. dollars)
                                 
    2006   2005   2004
             
CASH FLOWS FROM OPERATING ACTIVITIES:
                       
   
Net income
  $ 973,329     $ 940,474     $ 690,828  
 
Adjustments to reconcile Net income to Net cash provided by operating activities—
                       
     
Depreciation and amortization (including amortization of deferred charges)
    320,610       282,073       257,080  
     
Reorganization benefits, net
    (47,966 )     (89,257 )     (78,365 )
     
Gains on investments, net
    (2,018 )     (21,468 )     (3,397 )
     
Losses on disposal of property and equipment, net
    1,201       6,254       8,596  
     
Losses on impairment of property and equipment
    31,337              
     
Share-based compensation expense
    270,884       88,341       60,486  
     
Deferred income taxes, net
    (223,637 )     63,139       92,864  
     
Minority interest
    459,803       568,431       532,199  
     
Other, net
    (346 )     2,104       (121 )
     
Change in assets and liabilities, net of acquisitions—
                       
       
Receivables from clients, net
    (90,458 )     (59,460 )     (182,998 )
       
Other current assets
    35,755       12,399       (208,802 )
       
Unbilled services, current and non-current
    400,142       (596,984 )     (222,428 )
       
Other non-current assets
    (12,655 )     (24,853 )     (84,703 )
       
Accounts payable
    48,157       270,499       (65,486 )
       
Deferred revenues
    130,504       334,121       275,371  
       
Accrued payroll and related benefits
    228,688       (60,147 )     498,293  
       
Income taxes payable
    (68,961 )     115,950       143,229  
       
Other accrued liabilities
    233,961       29,714       162,675  
       
Other non-current liabilities
    (20,341 )     25,751       (119,372 )
                   
       
Net cash provided by operating activities
    2,667,989       1,887,081       1,755,949  
                   
CASH FLOWS FROM INVESTING ACTIVITIES:
                       
   
Proceeds from maturities and sales of available-for-sale investments
    657,629       944,484       421,003  
   
Purchases of available-for-sale investments
    (401,181 )     (1,019,317 )     (1,014,998 )
   
Proceeds from sales of property and equipment
    13,951       6,318       11,026  
   
Purchases of property and equipment
    (306,174 )     (317,772 )     (281,986 )
   
Purchases of businesses and investments, net of cash acquired
    (220,985 )     (188,469 )     (31,662 )
   
Other, net
    4,260              
                   
       
Net cash used in investing activities
    (252,500 )     (574,756 )     (896,617 )
                   
CASH FLOWS FROM FINANCING ACTIVITIES:
                       
   
Payment of retirement benefits to former pre-incorporation partners
    (32,671 )     (38,453 )     (30,606 )
   
Proceeds from issuance of common shares
    436,918       298,707       2,741,474  
   
Purchases of common shares
    (2,087,027 )     (1,625,097 )     (3,459,934 )
   
Proceeds from long-term debt
    29,742       6,061       799  
   
Repayments of long-term debt
    (36,056 )     (9,467 )     (4,058 )
   
Proceeds from short-term borrowings
    40,269       61,834       96,851  
   
Repayments of short-term borrowings
    (52,657 )     (71,043 )     (115,491 )
   
Decrease in restricted cash of Accenture Share Employee Compensation Trust
                83,280  
   
Cash dividends paid
    (267,973 )            
   
Excess tax benefits from share-based payment arrangements
    42,832              
   
Other, net
    (7,844 )            
                   
       
Net cash used in financing activities
    (1,934,467 )     (1,377,458 )     (687,685 )
   
Effect of exchange rate changes on cash and cash equivalents
    101,976       (3,835 )     49,150  
                   
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    582,998       (68,968 )     220,797  
CASH AND CASH EQUIVALENTS, beginning of period
    2,483,990       2,552,958       2,332,161  
                   
CASH AND CASH EQUIVALENTS, end of period
  $ 3,066,988     $ 2,483,990     $ 2,552,958  
                   
Supplemental cash flow information
                       
   
Interest paid
  $ 20,837     $ 23,597     $ 21,970  
   
Income taxes paid
  $ 768,313     $ 573,026     $ 387,450  
The accompanying Notes are an integral part of these Consolidated Financial Statements.

F-8


 

ACCENTURE LTD
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of U.S. Dollars, except share and per share amounts or as otherwise disclosed)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business
      Accenture Ltd is one of the world’s leading management consulting, technology services and outsourcing organizations with approximately 140,000 employees; offices and operations in more than 150 cities in 49 countries; and fiscal 2006 revenues before reimbursements of $16,646,391.
      Accenture Ltd operates globally with one common brand and business model designed to enable it to provide clients around the world with the same high level of service. Drawing on a combination of industry expertise, functional capabilities, alliances, global resources and technology, Accenture Ltd delivers competitively priced, high-value services that help clients measurably improve business performance. Accenture Ltd’s global delivery model enables it to provide a complete end-to-end delivery capability by drawing on Accenture Ltd’s global resources to deliver high-quality, cost-effective solutions to clients under demanding timeframes.
      In fiscal 2005, Accenture Ltd developed and announced a new, broader career model for its highest-level executives that recognizes the diversity of roles and responsibilities demonstrated by these employees. This new career framework replaces internal use of the “partner” title with the more comprehensive “senior executive” title and applies the “senior executive” title to its highest-level employees, including those employees previously referred to as partners. However, for proper context, Accenture Ltd continues to use the term “partner” in these Notes to Consolidated Financial Statements to refer to these persons in certain situations related to our reorganization and the period prior to our incorporation.
Principles of Consolidation
      The Consolidated Financial Statements include the accounts of Accenture Ltd, a Bermuda company, and its controlled subsidiary companies (“the Company”). Accenture Ltd’s only business is to hold Class II and Class III common shares in, and to act as the sole general partner of, its subsidiary, Accenture SCA, a Luxembourg partnership limited by shares. The Company operates its business through Accenture SCA and subsidiaries of Accenture SCA. Accenture Ltd controls Accenture SCA’s management and operations and consolidates Accenture SCA’s results in its financial statements.
      The shares of Accenture SCA and Accenture Canada Holdings Inc. held by persons other than the Company are treated as a minority interest in the Consolidated Financial Statements. The minority interest percentages were 30% and 35% at August 31, 2006 and 2005, respectively. Purchases and/or redemptions of Accenture SCA Class I common shares or Accenture Canada Holdings Inc. exchangeable shares are accounted for at carryover basis.
Revenue Recognition
      Revenues from contracts for technology integration consulting services where we design/redesign, build and implement new or enhanced systems applications and related processes for our clients are recognized on the percentage-of-completion method in accordance with American Institute of Certified Public Accountants Statement of Position 81-1, “Accounting for Performance of Construction-Type and

F-9


 

ACCENTURE LTD
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
(In thousands of U.S. Dollars, except share and per share amounts or as otherwise disclosed)
Certain Production-Type Contracts” (“SOP 81-1”). Percentage-of-completion accounting involves calculating the percentage of services provided during the reporting period compared to the total estimated services to be provided over the duration of the contract. Estimated revenues for applying the percentage-of-completion method include estimated incentives for which achievement of defined goals is deemed probable. This method is followed where reasonably dependable estimates of revenues and costs can be made. Estimates of total contract revenues and costs are continuously monitored during the term of the contract, and recorded revenues and costs are subject to revision as the contract progresses. Such revisions may result in increases or decreases to revenues and income and are reflected in the Consolidated Financial Statements in the periods in which they are first identified. If our estimates indicate that a contract loss will occur, a loss provision is recorded in the period in which the loss first becomes probable and reasonably estimable. Contract losses are determined to be the amount by which the estimated direct and indirect costs of the contract exceed the estimated total revenues that will be generated by the contract and are included in Cost of services and classified in Other accrued liabilities in the Consolidated Balance Sheet. Contract loss provisions recorded as of August, 31, 2006 and 2005 are immaterial.
      Revenues from contracts for non-technology integration consulting services with fees based on time and materials or cost-plus are recognized as the services are performed and amounts are earned in accordance with SEC Staff Accounting Bulletin (“SAB”) No. 101, “Revenue Recognition in Financial Statements” (“SAB 101”), as amended by SAB No. 104, “Revenue Recognition” (“SAB 104”). We consider amounts to be earned once evidence of an arrangement has been obtained, services are delivered, fees are fixed or determinable, and collectibility is reasonably assured. In such contracts, our efforts, measured by time incurred, typically represent the contractual milestones or output measure, which is the contractual earnings pattern. For non-technology integration consulting contracts with fixed fees, we recognize revenues as amounts become billable in accordance with contract terms, provided the billable amounts are not contingent, are consistent with the services delivered, and are earned. Contingent or incentive revenues relating to non-technology integration consulting contracts are recognized when the contingency is satisfied and we conclude the amounts are earned.
      Outsourcing contracts typically span several years and involve complex delivery, often through multiple workforces in different countries. In a number of these arrangements, we hire client employees and become responsible for certain client obligations. Revenues are recognized on outsourcing contracts as amounts become billable in accordance with contract terms, unless the amounts are billed in advance of performance of services in which case revenues are recognized when the services are performed and amounts are earned in accordance with SAB 101, as amended by SAB 104. Revenues from time-and-materials or cost-plus contracts are recognized as the services are performed. In such contracts, our effort, measured by time incurred, represents the contractual milestones or output measure, which is the contractual earnings pattern. Revenues from unit-priced contracts are recognized as transactions are processed based on objective measures of output. Revenues from fixed-price contracts are recognized on a straight-line basis, unless revenues are earned and obligations are fulfilled in a different pattern. Outsourcing contracts can also include incentive payments for benefits delivered to clients. Revenues relating to such incentive payments are recorded when the contingency is satisfied and we conclude the amounts are earned.

F-10


 

ACCENTURE LTD
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
(In thousands of U.S. Dollars, except share and per share amounts or as otherwise disclosed)
      Costs related to delivering outsourcing services are expensed as incurred with the exception of certain transition costs related to the set-up of processes, personnel and systems, which are deferred during the transition period and expensed evenly over the period outsourcing services are provided. The deferred costs are specific internal costs or incremental external costs directly related to transition or set-up activities necessary to enable the outsourced services. Deferred amounts are protected in the event of early termination of the contract and are monitored regularly for impairment. Impairment losses are recorded when projected undiscounted operating cash flows of the related contract are not sufficient to recover the carrying amount of contract assets. Deferred transition costs were $154,131 and $71,102 at August 31, 2006 and 2005, respectively, and are classified in current Unbilled services on the Consolidated Balance Sheet. Amounts billable to the client for transition or set-up activities are deferred and recognized as revenue evenly over the period outsourcing services are provided.
      Revenues for contracts with multiple elements are allocated pursuant to Emerging Issues Task Force Issue 00-21, “Accounting for Revenue Arrangements with Multiple Deliverables,” based on the lesser of the element’s relative fair value or the amount that is not contingent on future delivery of another element. If the amount of non-contingent revenues allocated to a delivered element is less than the costs to deliver such services, then such costs are deferred and recognized in future periods when the revenues become non-contingent. Fair value is determined based on the prices charged when each element is sold separately. Revenues are recognized in accordance with our accounting policies for the separate elements, as described above. Elements qualify for separation when the services have value on a stand-alone basis, fair value of the separate elements exists and, in arrangements that include a general right of refund relative to the delivered element, performance of the undelivered element is considered probable and substantially in our control. While determining fair value and identifying separate elements require judgment, generally fair value and the separate elements are readily identifiable as we also sell those elements unaccompanied by other elements.
      Revenues recognized in excess of billings are recorded as Unbilled services. Billings in excess of revenues recognized are recorded as Deferred revenues until revenue recognition criteria are met.
      Revenues before reimbursements include the margin earned on computer hardware and software, as well as revenues from alliance agreements. Reimbursements, including those relating to travel and other out-of-pocket expenses, and other similar third-party costs, such as the cost of hardware and software resales, are included in Revenues, and an equivalent amount of reimbursable expenses are included in Cost of services.
Operating Expenses
      Selected components of operating expenses were as follows:
                         
    Year Ended August 31,
     
    2006   2005   2004
             
Training costs
  $ 680,662     $ 546,248     $ 401,266  
Research and development costs
    298,354       243,449       271,943  
Advertising costs
    68,810       65,902       61,932  
Provision for (release of) doubtful accounts
    9,389       (3,849 )     (641 )

F-11


 

ACCENTURE LTD
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
(In thousands of U.S. Dollars, except share and per share amounts or as otherwise disclosed)
      Subcontractor costs are included in Cost of services as they are incurred.
Translation of Non-U.S. Currency Amounts
      Assets and liabilities of non-U.S. subsidiaries whose functional currency is not the U.S. dollar are translated into U.S. dollars at fiscal year-end exchange rates. Revenue and expense items are translated at average exchange rates prevailing during the fiscal year. Translation adjustments are included in Accumulated other comprehensive loss. Gains and losses arising from intercompany foreign currency transactions that are of a long-term investment nature are reported in the same manner as translation adjustments.
      Foreign currency transaction (losses)/gains are included in Other (expense) income and totaled $(30,778), $(12,473) and $1,033 in fiscal 2006, 2005 and 2004, respectively.
Cash and Cash Equivalents
      Cash and cash equivalents consist of all cash balances and liquid investments with original maturities of three months or less, including time deposits and certificates of deposit of $1,292,184 and $928,278 as of August 31, 2006 and 2005, respectively. As a result of certain subsidiaries’ cash management systems, checks issued but not presented to the banks for payment may create negative book cash payables. Such negative balances are classified as Short-term bank borrowings.
Client Receivables, Client Financing and Allowance for Doubtful Accounts
      The Company carries its client receivables at their face amounts less an allowance for doubtful accounts. On a periodic basis, the Company evaluates its receivables and establishes an allowance for doubtful accounts based on historical experience and other currently available information. In limited circumstances, the Company agrees to extend financing to clients on technology integration consulting contracts. The terms vary by contract, but generally payment for services is contractually linked to the achievement of specified performance milestones. Imputed interest is recorded at market rates in Interest income in the Consolidated Income Statement. As of August 31, 2006, total client financing was $262,736, of which $157,654 was included in Current unbilled services and $105,082 was included in Non-current unbilled services.
Investments
      All liquid investments with an original maturity greater than 90 days but less than one year are considered to be short-term investments. Investments with an original maturity greater than one year are considered to be long-term investments. Marketable short-term and long-term investments are classified and accounted for as available-for-sale investments. Available-for-sale investments are reported at fair value with changes in unrealized gains and losses recorded as a separate component of Accumulated other comprehensive loss in Shareholders’ equity until realized. Quoted market prices are used to determine the fair values of common equity and debt securities that were issued by publicly traded entities. Interest and amortization of premiums and discounts for debt securities are included in Interest income. Realized gains and losses on securities are determined based on the FIFO method and are included in Gain on investments, net. The Company does not hold these investments for speculative or trading purposes. The equity method of accounting is used for

F-12


 

ACCENTURE LTD
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
(In thousands of U.S. Dollars, except share and per share amounts or as otherwise disclosed)
unconsolidated investments in which the Company exercises significant influence. All other investments are accounted for under the cost method.
Foreign Exchange Instruments
      In the normal course of business, the Company uses derivative financial instruments to manage foreign currency exchange rate risk. The Company hedges material cash flow exposures when feasible using forward and/or option contracts. These instruments are generally short-term in nature, with maturities of less than one year, and are subject to fluctuations in foreign exchange rates. From time to time, the Company enters into forward or option contracts that are of a long-term nature. Credit risk is managed through careful selection and ongoing evaluation of the financial institutions utilized as counterparties. Substantially all of the Company’s financial instruments are recorded at estimated fair value or amounts that approximate fair value. The Company does not have any material derivatives designated as hedges as defined by Statement of Financial Accounting Standards (“SFAS”) No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“SFAS No. 133”). The changes in fair value of substantially all derivatives are recognized in the Consolidated Income Statements and included in Other (expense) income.
Property and Equipment
      Property and equipment is stated at cost, net of accumulated depreciation. Depreciation of property and equipment is computed on a straight-line basis over the following estimated useful lives:
     
Buildings
  20 to 25 years
Computers, related equipment and software
  2 to 7 years
Furniture and fixtures
  5 to 10 years
Leasehold improvements
  Lesser of lease term or 15 years
Long-Lived Assets
      Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or group of assets may not be recoverable. Recoverability of long-lived assets or groups of assets is assessed based on a comparison of the carrying amount to the estimated future net cash flows. If estimated future undiscounted net cash flows are less than the carrying amount, the asset is considered impaired and expense is recorded at an amount required to reduce the carrying amount to fair value. During the fourth quarter of fiscal 2006, the Company recorded a $31,337 impairment loss on property and equipment related to the impact of the National Health Service in England (“NHS”) matter. For information regarding the NHS matter, see Footnote 15 (Commitments and Contingencies) to these Consolidated Financial Statements.
Employee Share-Based Compensation Awards
      On September 1, 2005, the Company adopted the provisions of SFAS No. 123R, “Share-Based Payment” (“SFAS No. 123R”) to record compensation expense for its employee stock options and share purchase rights. This Statement is a revision of SFAS 123, “Accounting for Stock-Based Compensation” (“SFAS No. 123”), and supersedes Accounting Principles Board Opinion (“APB”)

F-13


 

ACCENTURE LTD
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
(In thousands of U.S. Dollars, except share and per share amounts or as otherwise disclosed)
No. 25, “Accounting for Stock Issued to Employees” (“APB No. 25”), and its related implementation guidance. Prior to the adoption of SFAS No. 123R, the Company followed the intrinsic value method in accordance with APB No. 25, in accounting for its employee stock options and share purchase rights. For information regarding share-based compensation, see Footnote 11 (Share-based Compensation) to these Consolidated Financial Statements.
Use of Estimates
      The preparation of the Consolidated Financial Statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect amounts reported in the Consolidated Financial Statements and accompanying disclosures. Although these estimates are based on management’s best knowledge of current events and actions that the Company may undertake in the future, actual results may be different from those estimates.
Reclassifications
      Certain amounts reported in previous years have been reclassified to conform to the fiscal 2006 presentation.
Concentrations of Credit Risk
      The Company’s financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents, foreign exchange instruments and client receivables. The Company places its cash and cash equivalents and foreign exchange instruments with highly-rated financial institutions, limits the amount of credit exposure with any one financial institution and conducts ongoing evaluation of the credit worthiness of the financial institutions with which it does business. Client receivables are dispersed across many different industries and countries; therefore, concentrations of credit risk are limited.
Newly Issued Accounting Standards
      In July 2006, the Financial Accounting Standards Board (“FASB”) issued Financial Interpretation No. 48, “Accounting for Uncertainty in Income Taxes-an interpretation of FASB Statement No. 109” (“FIN 48”), which is a change in accounting for income taxes. FIN 48 specifies how tax benefits for uncertain tax positions are to be recognized, measured, and derecognized in financial statements; requires certain disclosures of uncertain tax matters; specifies how reserves for uncertain tax positions should be classified in the balance sheet; and provides transition and interim-period guidance, among other provisions. FIN 48 is effective for fiscal years beginning after December 15, 2006 and, as a result, is effective for us beginning September 1, 2007. The Company is currently evaluating the impact of FIN 48 on the Consolidated Financial Statements.
      In September 2006, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 106, and 132(R)” (“SFAS No. 158”). SFAS No. 158 requires companies to recognize a net liability or asset and an offsetting adjustment to accumulated other comprehensive income to report the funded status of defined benefit pension and other postretirement benefit plans. SFAS No. 158 requires prospective application, recognition and

F-14


 

ACCENTURE LTD
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
(In thousands of U.S. Dollars, except share and per share amounts or as otherwise disclosed)