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Income Taxes
9 Months Ended
Apr. 30, 2012
Income Tax Disclosure [Abstract]  
Income Taxes
Income Taxes
Effective Tax Rate
We compute our provision for or benefit from income taxes by applying the estimated annual effective tax rate to income or loss from recurring operations and adding the effects of any discrete income tax items specific to the period. Our effective tax rates for the three months ended April 30, 2012 and April 30, 2011 were approximately 34% and 35% and did not differ significantly from the federal statutory rate of 35%.
Our effective tax rate for the nine months ended April 30, 2012 was approximately 34% and did not differ significantly from the federal statutory rate of 35%. Our effective tax rate for the nine months ended April 30, 2011 was approximately 34%. Excluding discrete tax benefits primarily related to the retroactive reinstatement of the federal research and experimentation credit as described below, our effective tax rate for that period was 35% and did not differ significantly from the statutory rate of 35%.
In December 2010 the Tax Relief, Unemployment Insurance Reauthorization, and Jobs Creation Act of 2010 was signed into law. The Act included a reinstatement of the federal research and experimentation credit through December 31, 2011 that was retroactive to January 1, 2010.
Unrecognized Tax Benefits and Other Considerations
The total amount of our unrecognized tax benefits at July 31, 2011 was $41 million. Net of related deferred tax assets, unrecognized tax benefits were $35 million at that date. If we were to recognize these net benefits, our income tax expense would reflect a favorable net impact of $35 million. There were no material changes to these amounts during the nine months ended April 30, 2012. We do not believe that it is reasonably possible that there will be a significant increase or decrease in our unrecognized tax benefits over the next 12 months.