UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

____________________ 

FORM 10-Q

☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended	November 30, 2019

OR

☐	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: 001-34448

Accenture plc

(Exact name of registrant as specified in its charter)

Ireland	98-0627530
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

1 Grand Canal Square,

Grand Canal Harbour,

Dublin 2, Ireland

(Address of principal executive offices)

(353) (1) 646-2000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A ordinary shares, par value $0.0000225 per share	ACN	New York Stock Exchange

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 ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☑	Accelerated filer	☐	Non-accelerated filer	☐
Smaller reporting company	☐	Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No þ

The number of shares of the registrant’s Class A ordinary shares, par value $0.0000225 per share, outstanding as of December 2, 2019 was 656,946,050 (which number includes 21,902,507 issued shares held by the registrant). The number of shares of the registrant’s Class X ordinary shares, par value $0.0000225 per share, outstanding as of December 2, 2019 was 593,689.

ACCENTURE PLC

INDEX

	Page
Part I. Financial Information	3
Item 1. Financial Statements	3
Consolidated Balance Sheets as of November 30, 2019 (Unaudited) and August 31, 2019	3
Consolidated Income Statements (Unaudited) for the three months ended November 30, 2019 and 2018	4
Consolidated Statements of Comprehensive Income (Unaudited) for the three months ended November 30, 2019 and 2018	5
Consolidated Shareholders’ Equity Statement (Unaudited) for the three months ended November 30, 2019 and 2018	6
Consolidated Cash Flows Statements (Unaudited) for the three months ended November 30, 2019 and 2018	8
Notes to Consolidated Financial Statements (Unaudited)	9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3. Quantitative and Qualitative Disclosures About Market Risk	29
Item 4. Controls and Procedures	30
Part II. Other Information	31
Item 1. Legal Proceedings	31
Item 1A. Risk Factors	31
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	31
Item 3. Defaults Upon Senior Securities	32
Item 4. Mine Safety Disclosures	32
Item 5. Other Information	32
Item 6. Exhibits	32
Signatures	33

2

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ACCENTURE PLC

CONSOLIDATED BALANCE SHEETS

November 30, 2019 and August 31, 2019

(In thousands of U.S. dollars, except share and per share amounts)

	November 30, 2019			August 31, 2019
	(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	5,810,537		$	6,126,853
Short-term investments	3,303			3,313
Receivables and contract assets	8,577,386			8,095,071
Other current assets	1,214,878			1,225,364
Total current assets	15,606,104			15,450,601
NON-CURRENT ASSETS:
Contract assets	58,071			71,002
Investments	278,765			240,313
Property and equipment, net	1,386,440			1,391,166
Lease assets	3,154,501			—
Goodwill	6,300,004			6,205,550
Deferred contract costs	691,727			681,492
Deferred tax assets	4,300,909			4,349,464
Other non-current assets	1,394,191			1,400,292
Total non-current assets	17,564,608			14,339,279
TOTAL ASSETS	$	33,170,712		$	29,789,880
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt and bank borrowings	$	3,698		$	6,411
Accounts payable	1,581,112			1,646,641
Deferred revenues	2,986,524			3,188,835
Accrued payroll and related benefits	4,652,038			4,890,542
Income taxes payable	448,010			378,017
Lease liabilities	710,787			—
Other accrued liabilities	817,239			951,450
Total current liabilities	11,199,408			11,061,896
NON-CURRENT LIABILITIES:
Long-term debt	15,935			16,247
Deferred revenues	585,301			565,224
Retirement obligation	1,784,347			1,765,914
Deferred tax liabilities	144,659			133,232
Income taxes payable	905,952			892,688
Lease liabilities	2,651,651			—
Other non-current liabilities	282,251			526,988
Total non-current liabilities	6,370,096			3,900,293
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS’ EQUITY:
Ordinary shares, par value 1.00 euros per share, 40,000 shares authorized and issued as of November 30, 2019 and August 31, 2019	57			57
Class A ordinary shares, par value $0.0000225 per share, 20,000,000,000 shares authorized, 656,946,050 and 654,739,267 shares issued as of November 30, 2019 and August 31, 2019, respectively	15			15
Class X ordinary shares, par value $0.0000225 per share, 1,000,000,000 shares authorized, 593,689 and 609,404 shares issued and outstanding as of November 30, 2019 and August 31, 2019, respectively	—			—
Restricted share units	1,525,898			1,411,903
Additional paid-in capital	6,162,252			5,804,448
Treasury shares, at cost: Ordinary, 40,000 shares as of November 30, 2019 and August 31, 2019; Class A ordinary, 21,950,289 and 18,964,863 shares as of November 30, 2019 and August 31, 2019, respectively	(1,977,391		)	(1,388,376		)
Retained earnings	11,236,275			10,421,538
Accumulated other comprehensive loss	(1,779,968		)	(1,840,577		)
Total Accenture plc shareholders’ equity	15,167,138			14,409,008
Noncontrolling interests	434,070			418,683
Total shareholders’ equity	15,601,208			14,827,691
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	33,170,712		$	29,789,880

The accompanying Notes are an integral part of these Consolidated Financial Statements.

3

ACCENTURE PLC

CONSOLIDATED INCOME STATEMENTS

For the Three Months Ended November 30, 2019 and 2018

(In thousands of U.S. dollars, except share and per share amounts)

(Unaudited)

	2019			2018
REVENUES:
Revenues	$	11,358,958		$	10,605,546
OPERATING EXPENSES:
Cost of services	7,711,199			7,308,121
Sales and marketing	1,191,123			1,070,016
General and administrative costs	689,373			598,397
Total operating expenses	9,591,695			8,976,534
OPERATING INCOME	1,767,263			1,629,012
Interest income	27,419			19,631
Interest expense	(5,474		)	(4,505		)
Other income (expense), net	11,439			(33,654		)
INCOME BEFORE INCOME TAXES	1,800,647			1,610,484
Income tax expense	425,479			319,160
NET INCOME	1,375,168			1,291,324
Net income attributable to noncontrolling interest in Accenture Canada Holdings Inc.	(1,741		)	(1,888		)
Net income attributable to noncontrolling interests – other	(16,459		)	(14,716		)
NET INCOME ATTRIBUTABLE TO ACCENTURE PLC	$	1,356,968		$	1,274,720
Weighted average Class A ordinary shares:
Basic	635,722,309			638,877,445
Diluted	649,389,444			652,151,450
Earnings per Class A ordinary share:
Basic	$	2.13		$	2.00
Diluted	$	2.09		$	1.96
Cash dividends per share	$	0.80		$	1.46

The accompanying Notes are an integral part of these Consolidated Financial Statements.

4

ACCENTURE PLC

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the Three Months Ended November 30, 2019 and 2018

(In thousands of U.S. dollars)

(Unaudited)

	2019		2018
NET INCOME	$	1,375,168	$	1,291,324
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX:
Foreign currency translation	37,730		(8,617		)
Defined benefit plans	8,752		20,413
Cash flow hedges	14,127		88,344
Investments	—		(515		)
OTHER COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO ACCENTURE PLC	60,609		99,625
Other comprehensive income (loss) attributable to noncontrolling interests	1,180		(2,296		)
COMPREHENSIVE INCOME	$	1,436,957	$	1,388,653
COMPREHENSIVE INCOME ATTRIBUTABLE TO ACCENTURE PLC	$	1,417,577	$	1,374,345
Comprehensive income attributable to noncontrolling interests	19,380		14,308
COMPREHENSIVE INCOME	$	1,436,957	$	1,388,653

The accompanying Notes are an integral part of these Consolidated Financial Statements.

5

ACCENTURE PLC

CONSOLIDATED SHAREHOLDERS’ EQUITY STATEMENT

For the Three Months Ended November 30, 2019

(In thousands of U.S. dollars and share amounts)

(Unaudited)

	Ordinary Shares			Class A Ordinary Shares			Class X Ordinary Shares				Restricted Share Units			Additional Paid-in Capital			Treasury Shares					Retained Earnings			Accumulated Other Comprehensive Loss			Total Accenture plc Shareholders’ Equity			Noncontrolling Interests			Total Shareholders’ Equity
	$		No. Shares	$		No. Shares	$		No. Shares								$			No. Shares
Balance as of August 31, 2019	$	57	40	$	15	654,739	$	—	609		$	1,411,903		$	5,804,448		$	(1,388,376	)	(19,005	)	$	10,421,538		$	(1,840,577	)	$	14,409,008		$	418,683		$	14,827,691
Net income																						1,356,968						1,356,968			18,200			1,375,168
Other comprehensive income (loss)																									60,609			60,609			1,180			61,789
Purchases of Class A shares														811			(724,618		)	(3,821	)							(723,807		)	(811		)	(724,618		)
Share-based compensation expense											238,677			36,252														274,929						274,929
Purchases/redemptions of Accenture Canada Holdings Inc. exchangeable shares and Class X shares									(15	)				(4,593		)												(4,593		)				(4,593		)
Issuances of Class A shares for employee share programs						2,207					(142,925		)	323,660			135,603			836		(16,263		)				300,075			325			300,400
Dividends											18,243											(525,968		)				(507,725		)	(656		)	(508,381		)
Other, net														1,674														1,674			(2,851		)	(1,177		)
Balance as of November 30, 2019	$	57	40	$	15	656,946	$	—	594		$	1,525,898		$	6,162,252		$	(1,977,391	)	(21,990	)	$	11,236,275		$	(1,779,968	)	$	15,167,138		$	434,070		$	15,601,208

The accompanying Notes are an integral part of these Consolidated Financial Statements.

6

ACCENTURE PLC

CONSOLIDATED SHAREHOLDERS’ EQUITY STATEMENT

For the Three Months Ended November 30, 2018

(In thousands of U.S. dollars and share amounts)

(Unaudited)

	Ordinary Shares			Class A Ordinary Shares			Class X Ordinary Shares				Restricted Share Units			Additional Paid-in Capital			Treasury Shares					Retained Earnings			Accumulated Other Comprehensive Loss			Total Accenture plc Shareholders’ Equity			Noncontrolling Interests			Total Shareholders’ Equity
	$		No. Shares	$		No. Shares	$		No. Shares								$			No. Shares
Balance as of August 31, 2018	$	57	40	$	15	663,328	$	—	656		$	1,234,623		$	4,870,764		$	(2,116,948	)	(24,333	)	$	7,952,413		$	(1,576,171	)	$	10,364,753		$	359,835		$	10,724,588
Cumulative effect adjustment																						2,134,818						2,134,818			3,158			2,137,976
Net income																						1,274,720						1,274,720			16,604			1,291,324
Other comprehensive income (loss)																									99,625			99,625			(2,296		)	97,329
Purchases of Class A shares														1,026			(787,508		)	(4,861	)							(786,482		)	(1,026		)	(787,508		)
Share-based compensation expense											214,713			31,803														246,516						246,516
Purchases/redemptions of Accenture Canada Holdings Inc. exchangeable shares and Class X shares									(5	)				(819		)												(819		)				(819		)
Issuances of Class A shares for employee share programs						2,213					(133,965		)	277,039			156,008			988		(33,244		)				265,838			344			266,182
Dividends											27,594											(959,054		)				(931,460		)	(1,378		)	(932,838		)
Other, net														(3,064		)						14,411						$	11,347		$	1,471		$	12,818
Balance as of November 30, 2018	$	57	40	$	15	665,541	$	—	651		$	1,342,965		$	5,176,749		$	(2,748,448	)	(28,206	)	$	10,384,064		$	(1,476,546	)	$	12,678,856		$	376,712		$	13,055,568

The accompanying Notes are an integral part of these Consolidated Financial Statements.

7

ACCENTURE PLC

CONSOLIDATED CASH FLOWS STATEMENTS

For the Three Months Ended November 30, 2019 and 2018

(In thousands of U.S. dollars)

(Unaudited)

	2019			2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	1,375,168		$	1,291,324
Adjustments to reconcile Net income to Net cash provided by (used in) operating activities —
Depreciation, amortization and other	399,458			211,685
Share-based compensation expense	274,929			246,516
Deferred tax expense (benefit)	36,591			(2,634		)
Other, net	(120,927		)	(42,244		)
Change in assets and liabilities, net of acquisitions —
Receivables and contract assets, current and non-current	(436,872		)	(536,882		)
Other current and non-current assets	(101,096		)	(155,787		)
Accounts payable	(61,929		)	(14,487		)
Deferred revenues, current and non-current	(185,313		)	13,280
Accrued payroll and related benefits	(261,592		)	81,117
Income taxes payable, current and non-current	84,840			(47,554		)
Other current and non-current liabilities	(216,346		)	(16,826		)
Net cash provided by (used in) operating activities	786,911			1,027,508
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment	(95,063		)	(77,691		)
Purchases of businesses and investments, net of cash acquired	(109,848		)	(200,417		)
Proceeds from sales of businesses and investments	39,200			441
Other investing, net	(182		)	4,799
Net cash provided by (used in) investing activities	(165,893		)	(272,868		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of shares	300,400			266,182
Purchases of shares	(729,211		)	(788,327		)
Proceeds from (repayments of) long-term debt, net	(570		)	(369		)
Cash dividends paid	(508,381		)	(932,838		)
Other, net	(10,462		)	(6,816		)
Net cash provided by (used in) financing activities	(948,224		)	(1,462,168		)
Effect of exchange rate changes on cash and cash equivalents	10,890			9,958
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	(316,316		)	(697,570		)
CASH AND CASH EQUIVALENTS, beginning of period	6,126,853			5,061,360
CASH AND CASH EQUIVALENTS, end of period	$	5,810,537		$	4,363,790
SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes paid, net	$	292,787		$	297,166

The accompanying Notes are an integral part of these Consolidated Financial Statements.

8

ACCENTURE PLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)

(Unaudited)

1. BASIS OF PRESENTATION

The accompanying unaudited interim Consolidated Financial Statements of Accenture plc and its controlled subsidiary companies have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for quarterly reports on Form 10-Q and do not include all of the information and note disclosures required by U.S. generally accepted accounting principles (“U.S. GAAP”) for complete financial statements. We use the terms “Accenture,” “we” and “our” in the Notes to Consolidated Financial Statements to refer to Accenture plc and its subsidiaries. These Consolidated Financial Statements should therefore be read in conjunction with the Consolidated Financial Statements and Notes thereto for the fiscal year ended August 31, 2019 included in our Annual Report on Form 10-K filed with the SEC on October 29, 2019.

The accompanying unaudited interim Consolidated Financial Statements have been prepared in accordance with U.S. GAAP, which 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 we may undertake in the future, actual results may differ from those estimates. The Consolidated Financial Statements reflect all adjustments of a normal, recurring nature that are, in the opinion of management, necessary for a fair presentation of results for these interim periods. The results of operations for the three months ended November 30, 2019 are not necessarily indicative of the results that may be expected for the fiscal year ending August 31, 2020.

Allowances for Client Receivables

As of November 30, 2019 and August 31, 2019, total allowances recorded for client receivables were $45,016 and $45,538, respectively.

Depreciation and Amortization

Depreciation expense was $97,090 and $102,713 for the three months ended November 30, 2019 and 2018, respectively. As of November 30, 2019 and August 31, 2019, total accumulated depreciation was $2,096,462 and $1,956,029, respectively. Deferred transition amortization expense was $67,914 and $68,879 for the three months ended November 30, 2019 and 2018, respectively. See Note 6 (Goodwill and Intangible Assets) to these Consolidated Financial Statements for intangible asset amortization balances.

9

ACCENTURE PLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)

(Unaudited)

Recently Adopted Accounting Pronouncements

Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) No. 2016-02 and related updates (“Topic 842”)

On September 1, 2019, we adopted FASB ASU No. 2016-02, Leases, and related updates (“Topic 842”) using the effective date method. Prior period amounts were not adjusted. The primary impact of adoption is the requirement for lessees to recognize assets and liabilities on the balance sheet for the rights and obligations created by both operating and finance leases. Enhanced quantitative and qualitative disclosures about leasing arrangements are also required. We elected the package of practical expedients which does not require reassessment of prior conclusions related to identifying leases, lease classification or initial direct costs. We also elected the practical expedient to combine lease and nonlease components, accounting for the combined components as a single lease component, for our office real estate and automobile leases. The standard did not have a material impact on our Consolidated Income Statement.

The impact of adopting Topic 842 on our Consolidated Balance Sheets was as follows:

Balance Sheet	Balance as of August 31, 2019		Adjustments due to ASU 2016-02 (Topic 842)			Balance as of September 1, 2019
CURRENT ASSETS
Other current assets	$	1,225,364	$	(38,666	)	$	1,186,698
NON-CURRENT ASSETS
Lease assets	—		3,169,608			3,169,608
Other non-current assets	1,400,292		(10,333		)	1,389,959
CURRENT LIABILITIES
Lease liabilities	—		699,399			699,399
Other accrued liabilities	951,450		(703		)	950,747
NON-CURRENT LIABILITIES
Lease liabilities	—		2,666,344			2,666,344
Other non-current liabilities	526,988		(244,431		)	282,557

See Note 7 (Leases) to these Consolidated Financial Statements for further details.

FASB ASU No. 2018-09 (“Subtopic 350-40”)

On September 1, 2019, we prospectively adopted FASB ASU No. 2018-15, Intangibles - Goodwill and Other - Internal-Use Software: Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. ASU 2018-15 clarifies and aligns the accounting and capitalization of implementation costs in cloud computing arrangements that are service arrangements with the accounting for implementation costs incurred to develop or obtain internal-use software under ASC No. 350-40. Implementation costs that are currently capitalized in software licensing arrangements (e.g. costs to configure the software) will be capitalized in cloud computing arrangements, and costs expensed in software license arrangements (e.g. data conversion, training, and business process re-engineering) will be expensed in cloud computing arrangements. The adoption did not have a material impact on our Consolidated Financial Statements.

10

ACCENTURE PLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)

(Unaudited)

2. REVENUES

Disaggregation of Revenue

See Note 12 (Segment Reporting) to these Consolidated Financial Statements for our disaggregated revenues.

Remaining Performance Obligations

We had remaining performance obligations of approximately $19 billion and $20 billion as of November 30, 2019 and August 31, 2019, respectively. Our remaining performance obligations represent the amount of transaction price for which work has not been performed and revenue has not been recognized. The majority of our contracts are terminable by the client on short notice with little or no termination penalties, and some without notice. Under Topic 606, only the non-cancelable portion of these contracts is included in our performance obligations. Additionally, our performance obligations only include variable consideration if we assess it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty is resolved. Based on the terms of our contracts, a significant portion of what we consider contract bookings is not included in our remaining performance obligations. We expect to recognize approximately 61% of our remaining performance obligations as of November 30, 2019 as revenue in fiscal 2020, an additional 19% in fiscal 2021, and the balance thereafter.

Contract Estimates

Adjustments in contract estimates related to performance obligations satisfied or partially satisfied in prior periods were immaterial for the three months ended November 30, 2019 and 2018, respectively.

Contract Balances

Deferred transition revenues were $583,531 and $563,245 as of November 30, 2019 and August 31, 2019, respectively, and are included in Non-current deferred revenues. Costs related to these activities are also deferred and are expensed as the services are provided. Generally, 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 remaining undiscounted operating cash flows of the related contract are not sufficient to recover the carrying amount of contract assets. Deferred transition costs were $691,727 and $681,492 as of November 30, 2019 and August 31, 2019, respectively, and are included in Deferred contract costs.

The following table provides information about the balances of our Receivables, Contract assets and Contract liabilities (Deferred revenues):

	As of November 30, 2019		As of August 31, 2019
Receivables, net of allowance	$	7,908,781	$	7,467,338
Contract assets (current)	668,605		627,733
Receivables and contract assets (current)	8,577,386		8,095,071
Contract assets (non-current)	58,071		71,002
Deferred revenues (current)	2,986,524		3,188,835
Deferred revenues (non-current)	585,301		565,224

Changes in the contract asset and liability balances during the three months ended November 30, 2019, were a result of normal business activity and not materially impacted by any other factors.

Revenues recognized during the three months ended November 30, 2019 that were included in Deferred revenues as of August 31, 2019 were $1.8 billion. Revenues recognized during the three months ended November 30, 2018 that were included in Deferred revenues as of September 1, 2018 were $1.8 billion.

11

ACCENTURE PLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)

(Unaudited)

3. EARNINGS PER SHARE

Basic and diluted earnings per share were calculated as follows:

	Three Months Ended
	November 30, 2019		November 30, 2018
Basic earnings per share
Net income attributable to Accenture plc	$	1,356,968	$	1,274,720
Basic weighted average Class A ordinary shares	635,722,309		638,877,445
Basic earnings per share	$	2.13	$	2.00
Diluted earnings per share
Net income attributable to Accenture plc	$	1,356,968	$	1,274,720
Net income attributable to noncontrolling interest in Accenture Canada Holdings Inc. (1)	1,741		1,888
Net income for diluted earnings per share calculation	$	1,358,709	$	1,276,608
Basic weighted average Class A ordinary shares	635,722,309		638,877,445
Class A ordinary shares issuable upon redemption/exchange of noncontrolling interest (1)	815,515		945,336
Diluted effect of employee compensation related to Class A ordinary shares	12,626,225		12,093,353
Diluted effect of share purchase plans related to Class A ordinary shares	225,395		235,316
Diluted weighted average Class A ordinary shares	649,389,444		652,151,450
Diluted earnings per share	$	2.09	$	1.96

_______________

(1) Diluted earnings per share assumes the exchange of all Accenture Canada Holdings Inc. exchangeable shares for Accenture plc Class A ordinary shares on a one-for-one basis. The income effect does not take into account “Net income attributable to noncontrolling interests - other,” since those shares are not redeemable or exchangeable for Accenture plc Class A ordinary shares.

12

ACCENTURE PLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)

(Unaudited)

4. ACCUMULATED OTHER COMPREHENSIVE LOSS

The following table summarizes the changes in the accumulated balances for each component of accumulated other comprehensive loss attributable to Accenture plc:

	Three Months Ended
	November 30, 2019			November 30, 2018
Foreign currency translation
Beginning balance	$	(1,207,975	)	$	(1,075,268	)
Foreign currency translation	40,145			(12,396		)
Income tax benefit (expense)	(1,264		)	1,324
Portion attributable to noncontrolling interests	(1,151		)	2,455
Foreign currency translation, net of tax	37,730			(8,617		)
Ending balance	(1,170,245		)	(1,083,885		)
Defined benefit plans
Beginning balance	(672,323		)	(419,284		)
Reclassifications into net periodic pension and post-retirement expense (1)	12,784			22,894
Income tax benefit (expense)	(4,021		)	(2,451		)
Portion attributable to noncontrolling interests	(11		)	(30		)
Defined benefit plans, net of tax	8,752			20,413
Ending balance	(663,571		)	(398,871		)
Cash flow hedges
Beginning balance	38,993			(84,010		)
Unrealized gain (loss)	38,408			115,678
Reclassification adjustments into Cost of services	(20,019		)	1,878
Income tax benefit (expense)	(4,244		)	(29,082		)
Portion attributable to noncontrolling interests	(18		)	(130		)
Cash flow hedges, net of tax	14,127			88,344
Ending balance (2)	53,120			4,334
Investments
Beginning balance	728			2,391
Unrealized gain (loss)	—			(516		)
Portion attributable to noncontrolling interests	—			1
Investments, net of tax	—			(515		)
Ending balance	728			1,876
Accumulated other comprehensive loss	$	(1,779,968	)	$	(1,476,546	)

_______________

(1) Reclassifications into net periodic pension and post-retirement expense are recognized in Cost of services, Sales and marketing, General and administrative costs and non-operating expenses.

(2) As of November 30, 2019, $49,723 of net unrealized gains related to derivatives designated as cash flow hedges is expected to be reclassified into Cost of services in the next twelve months.

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ACCENTURE PLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)

(Unaudited)

5. BUSINESS COMBINATIONS

During the three months ended November 30, 2019, we completed individually immaterial acquisitions for total consideration of $97,028, net of cash acquired. The pro forma effects of these acquisitions on our operations were not material.

6. GOODWILL AND INTANGIBLE ASSETS

Goodwill

The changes in the carrying amount of goodwill by reportable operating segment were as follows:

	August 31, 2019		Additions/ Adjustments			Foreign Currency Translation		November 30, 2019
Communications, Media & Technology	$	992,743	$	19,381		$	4,577	$	1,016,701
Financial Services	1,393,628		(1,027		)	8,736		1,401,337
Health & Public Service	1,005,428		27,076			3,014		1,035,518
Products	2,328,317		19,355			10,526		2,358,198
Resources	485,434		381			2,435		488,250
Total	$	6,205,550	$	65,166		$	29,288	$	6,300,004

Goodwill includes immaterial adjustments related to prior period acquisitions.

Intangible Assets

Our definite-lived intangible assets by major asset class were as follows:

	August 31, 2019							November 30, 2019
Intangible Asset Class	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Customer-related	$	1,013,976	$	(358,130	)	$	655,846	$	1,053,237	$	(398,751	)	$	654,486
Technology	119,686		(45,851		)	73,835		111,510		(42,838		)	68,672
Patents	127,796		(66,167		)	61,629		127,552		(65,833		)	61,719
Other	78,344		(28,875		)	49,469		76,985		(32,555		)	44,430
Total	$	1,339,802	$	(499,023	)	$	840,779	$	1,369,284	$	(539,977	)	$	829,307

Total amortization related to our intangible assets was $53,372 and $40,093 for the three months ended November 30, 2019 and 2018, respectively. Estimated future amortization related to intangible assets held as of November 30, 2019 is as follows:

Fiscal Year	Estimated Amortization
Remainder of 2020	$	145,127
2021	158,646
2022	137,918
2023	123,029
2024	98,037
Thereafter	166,550
Total	$	829,307

14

ACCENTURE PLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)

(Unaudited)

7. LEASES

We account for leases in accordance with Topic 842. See Note 1 (Basis of Presentation) to these Consolidated Financial Statements for further information on our adoption.

As a lessee, substantially all of our lease obligation is for office real estate. Our significant judgments used in determining our lease obligation include whether a contract is or contains a lease and the determination of the discount rate used to calculate the lease liability.

Our leases may include the option to extend or terminate before the end of the contractual term and are often non-cancelable or cancelable only by the payment of penalties. Our lease assets and liabilities include these options in the lease term when it is reasonably certain that they will be exercised. In certain cases, we sublease excess office real estate to third-party tenants.

Lease assets and liabilities recognized at the lease commencement date are determined predominantly as the present value of the payments due over the lease term. Unless the implicit rate can be determined, we use our incremental borrowing rate on that date to calculate the present value. Our incremental borrowing rate approximates the rate at which we could borrow, on a secured basis for a similar term, an amount equal to our lease payments in a similar economic environment.

Effective September 1, 2019, when we are the lessee, all leases are recognized as lease liabilities and associated lease assets on the Consolidated Balance Sheet. Lease liabilities represent our obligation to make payments arising from the lease. Lease assets represent our right to use an underlying asset for the lease term and may also include advance payments, initial direct costs or lease incentives. Fixed and variable payments that depend upon an index or rate, such as the Consumer Price Index (CPI), are included in the recognition of lease assets and liabilities at the commencement-date rate. Other variable payments, such as common area maintenance, property and other taxes, utilities and insurance that are based on the lessor’s cost, are recognized in the Consolidated Income Statement in the period incurred.

As of November 30, 2019, we had no material finance leases. Operating lease expense is recorded on a straight-line basis over the lease term. Lease costs were as follows:

	Three Months Ended November 30, 2019
Operating lease cost	$	181,082
Variable lease cost	48,159
Sublease income	(6,538		)
Total net lease cost	$	222,703

Supplemental information related to operating lease transactions was as follows:

	Three Months Ended November 30, 2019
Lease liability payments	$	174,857
Lease assets obtained in exchange for liabilities	$	111,949

As of November 30, 2019, our operating leases had a weighted average remaining lease term of 7.4 years and a weighted average discount rate of 4.2%.

15

ACCENTURE PLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)

(Unaudited)

The following maturity analysis presents future undiscounted cash outflows for operating leases as of November 30, 2019:

	Lease Payments			Sublease Receipts
2020 (Remainder)	$	545,128		$	(15,789	)
2021	668,309			(15,975		)
2022	567,493			(7,616		)
2023	463,033			(7,493		)
2024	388,902			(7,459		)
Thereafter	1,255,478			(32,479		)
Total lease payments (receipts)	3,888,343			$	(86,811	)
Less interest	(525,905		)
Total lease liabilities	$	3,362,438

As of November 30, 2019, we have entered into operating leases that have not yet commenced with future lease payments of $430 million that are not reflected in the table above. These leases are primarily related to office real estate and will commence in or before fiscal year 2022 with lease terms of up to 17 years.

Future minimum rental commitments under non-cancelable operating leases as of August 31, 2019, which were accounted for in accordance with Topic 840, were as follows:

	Lease Payments		Sublease Receipts
2020	$	688,020	$	(24,884	)
2021	597,307		(17,908		)
2022	516,544		(8,535		)
2023	428,481		(7,541		)
2024	363,107		(7,184		)
Thereafter	1,246,097		(30,708		)
	$	3,839,556	$	(96,760	)

16

ACCENTURE PLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)

(Unaudited)

8. MATERIAL TRANSACTIONS AFFECTING SHAREHOLDERS’ EQUITY

Dividends

Our dividend activity during the three months ended November 30, 2019 was as follows:

	Dividend Per Share		Accenture plc Class A Ordinary Shares			Accenture Canada Holdings Inc. Exchangeable Shares			Total Cash Outlay
Dividend Payment Date			Record Date	Cash Outlay		Record Date	Cash Outlay
November 15, 2019	$	0.80	October 17, 2019	$	507,725	October 15, 2019	$	656	$	508,381

The payment of the cash dividends also resulted in the issuance of an immaterial number of additional restricted share units to holders of restricted share units.

Subsequent Event

On December 16, 2019, the Board of Directors of Accenture plc declared a quarterly cash dividend of $0.80 per share on its Class A ordinary shares for shareholders of record at the close of business on January 16, 2020 payable on February 14, 2020. The payment of the cash dividend will result in the issuance of an immaterial number of additional restricted share units to holders of restricted share units.

9. FINANCIAL INSTRUMENTS

Derivatives

In the normal course of business, we use derivative financial instruments to manage foreign currency exchange rate risk. Our derivative financial instruments consist of deliverable and non-deliverable foreign currency forward contracts.

Cash Flow Hedges

For a cash flow hedge, the effective portion of the change in estimated fair value of a hedging instrument is recorded in Accumulated other comprehensive loss as a separate component of Shareholders’ Equity and is reclassified into Cost of services in the Consolidated Income Statements during the period in which the hedged transaction is recognized. For information related to derivatives designated as cash flow hedges that were reclassified into Cost of services during the three months ended November 30, 2019 and 2018, as well as those expected to be reclassified into Cost of services in the next 12 months, see Note 4 (Accumulated Other Comprehensive Loss) to these Consolidated Financial Statements.

Other Derivatives

Realized gains or losses and changes in the estimated fair value of foreign currency forward contracts that have not been designated as hedges were net losses of $56,619 and $48,983 for the three months ended November 30, 2019 and 2018, respectively. Gains and losses on these contracts are recorded in Other income (expense), net in the Consolidated Income Statements and are offset by gains and losses on the related hedged items.

17

ACCENTURE PLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)

(Unaudited)

Fair Value of Derivative Instruments

The notional and fair values of all derivative instruments were as follows:

	November 30, 2019		August 31, 2019
Assets
Cash Flow Hedges
Other current assets	$	59,675	$	53,033
Other non-current assets	50,686		49,525
Other Derivatives
Other current assets	7,126		8,059
Total assets	$	117,487	$	110,617
Liabilities
Cash Flow Hedges
Other accrued liabilities	$	9,952	$	18,826
Other non-current liabilities	6,390		8,770
Other Derivatives
Other accrued liabilities	14,292		32,195
Total liabilities	$	30,634	$	59,791
Total fair value	$	86,853	$	50,826
Total notional value	$	8,953,147	$	8,709,917

We utilize standard counterparty master agreements containing provisions for the netting of certain foreign currency transaction obligations and for the set-off of certain obligations in the event of an insolvency of one of the parties to the transaction. In the Consolidated Balance Sheets, we record derivative assets and liabilities at gross fair value. The potential effect of netting derivative assets against liabilities under the counterparty master agreements was as follows:

	November 30, 2019		August 31, 2019
Net derivative assets	$	98,125	$	88,811
Net derivative liabilities	11,272		37,985
Total fair value	$	86,853	$	50,826

Equity Securities Without Readily Determinable Fair Values

We hold investments in equity securities that do not have readily determinable fair values. We record these investments at cost and remeasure them to fair value based on certain observable price changes or impairment events as they occur. The carrying amount of these investments was $149,525 and $131,675 as of November 30, 2019 and August 31, 2019, respectively. 

10. INCOME TAXES

We apply an estimated annual effective tax rate to our year-to-date operating results to determine the interim provision for income tax expense. In addition, we recognize taxes related to unusual or infrequent items or resulting from a change in judgment regarding a position taken in a prior year as discrete items in the interim period in which the event occurs.

Our effective tax rates for the three months ended November 30, 2019 and 2018 were 23.6% and 19.8%, respectively. The effective tax rate for the three months ended November 30, 2019 was higher primarily due to lower benefits from final determinations of prior year taxes and the phased-in effects of US tax reform.

18

ACCENTURE PLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)

(Unaudited)

11. COMMITMENTS AND CONTINGENCIES

Indemnifications and Guarantees

In the normal course of business and in conjunction with certain client engagements, we have entered into contractual arrangements through which we may be obligated to indemnify clients with respect to certain matters.

As of November 30, 2019 and August 31, 2019, our aggregate potential liability to our clients for expressly limited guarantees involving the performance of third parties was approximately $730,000 and $794,000, respectively, of which all but approximately $144,000 and $128,000, respectively, may be recovered from the other third parties if we are obligated to make payments to the indemnified parties as a consequence of a performance default by the other third parties. For arrangements with unspecified limitations, we cannot reasonably estimate the aggregate maximum potential liability, as it is inherently difficult to predict the maximum potential amount of such payments, due to the conditional nature and unique facts of each particular arrangement.

To date, we have not been required to make any significant payment under any of the arrangements described above. We have assessed the current status of performance/payment risk related to arrangements with limited guarantees, warranty obligations, unspecified limitations and/or indemnification provisions and believe that any potential payments would be immaterial to the Consolidated Financial Statements, as a whole.

Legal Contingencies

As of November 30, 2019, we or our present personnel had been named as a defendant in various litigation matters. We and/or our personnel also from time to time are involved in investigations by various regulatory or legal authorities concerning matters arising in the course of our business around the world. Based on the present status of these matters, including the putative class action lawsuit discussed below, management believes the range of reasonably possible losses in addition to amounts accrued, net of insurance recoveries, will not have a material effect on our results of operations or financial condition.

On July 24, 2019, Accenture was named in a putative class action lawsuit filed by consumers of Marriott International, Inc. (“Marriott”) in the U.S. District Court for the District of Maryland. The complaint alleges negligence by us, and seeks monetary damages, costs and attorneys’ fees and other related relief, relating to a data security incident involving unauthorized access to the reservations database of Starwood Worldwide Resorts, Inc. (“Starwood”), which was acquired by Marriott on September 23, 2016. Since 2009, we have provided certain IT infrastructure outsourcing services to Starwood. We believe the lawsuit is without merit and we will vigorously defend it. We cannot reasonably estimate a range of loss, if any, at this time.

19

ACCENTURE PLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)

(Unaudited)

12. SEGMENT REPORTING

Our reportable operating segments are our five operating groups, which are Communications, Media & Technology; Financial Services; Health & Public Service; Products; and Resources. Information regarding our reportable operating segments, geographic regions and type of work is as follows:

	Revenues
	Three Months Ended
	November 30, 2019		November 30, 2018
OPERATING GROUPS
Communications, Media & Technology	$	2,245,448	$	2,134,576
Financial Services	2,189,913