7.	Income taxes

We record our interim provision for income taxes based on our estimated annual effective tax rate, as well as certain items discrete to the current period. The effective tax rates for the three and nine months ended July 31, 2018 were 22.7% and 15.6%, respectively. The effective tax rates for the three and nine months ended July 31, 2017 were 28.8% and 29.8%, respectively. The effective tax rate for the current quarter was lower than the comparable prior year period primarily due to recently enacted law commonly referred to as the U.S. Tax Cuts and Jobs Act ("the Act") as set forth below.

The Act was enacted into law on December 22, 2017. It reduces the U.S. federal corporate income tax rate from 35% to 21%. We have an October 31 fiscal year-end, therefore the lower corporate income tax rate will be phased in, resulting in a U.S. statutory federal rate of 23.3% for our fiscal year ending October 31, 2018, and 21% for subsequent fiscal years. The statutory tax rate of 23.3% was applied to earnings in the current quarter.

The Act requires us to revalue our existing U.S. deferred tax balance to reflect the lower statutory tax rate and pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously deferred from U.S. taxes. As a result, during the first quarter of 2018, we recorded a provisional tax benefit of $45,213 to reflect the revaluation of our tax assets and liabilities at the reduced corporate tax rate. We also recorded a provisional tax expense of $23,124 to reflect the transition tax on previously deferred foreign earnings. The net tax effect of these discrete items resulted in a decrease of $22,089 in income tax expense for the nine months ended July 31, 2018. We intend to pay the transition tax in installments over the eight year period allowable under the Act. The transition tax is primarily included in other long-term liabilities in the Consolidated Balance Sheet at July 31, 2018. The amounts recorded are considered a provisional estimate under the U.S. Securities and Exchange Commission Staff Accounting Bulletin No. 118. The provisional calculations may change after the underlying temporary differences and foreign earnings are finalized. Furthermore, we are still analyzing certain aspects of the Act and related interpretive guidance and refining our calculations which could potentially affect the measurement of these balances or potentially give rise to new or additional deferred tax amounts.

In March 2016, the FASB issued a new standard which simplifies the accounting for share-based payment transactions, which we adopted in the first quarter of 2018. This guidance requires that excess tax benefits and tax deficiencies be recognized as income tax expense or benefit in the Consolidated Statements of Income rather than as additional paid-in capital. As a result, our income tax provision for the three and nine months ended July 31, 2018 includes a discrete tax benefit of $544 and $7,494, respectively.

During the three months ended July 31, 2018, we recorded a favorable adjustment to unrecognized tax benefits of $1,041 related to the lapse of statute of limitations.

During the nine months ended July 31, 2017, we recorded a discrete tax expense of $2,600 related to nondeductible acquisition costs.