Edgar Filing: Accenture plc

Description

Accenture Adoption Date

Impact on the Financial Statements or Other Significant Matters

2016-02: Leases and related updates (Topic 842)

The guidance amends existing guidance to require lessees to recognize assets and liabilities on the balance sheet for the rights and obligations created by leases and to disclose additional quantitative and qualitative information about leasing arrangements. The guidance requires either a modified retrospective transition method or a cumulative effect adjustment to opening retained earnings in the period of adoption.

September 1, 2019

While we are continuing to assess the potential impact of this ASU, we currently believe the most significant impact relates to our accounting for office space operating leases. We anticipate this ASU will have a material impact on our Consolidated Balance Sheets but will not have a material impact on our other Consolidated Financial Statements or footnotes. We will apply the cumulative effect method.

Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	FOR THE QUARTERLY PERIOD ENDED	February 28, 2019



¨	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)

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 þ	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 March 14, 2019 was 670,473,793 (which number includes 32,641,215 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 March 14, 2019 was 650,821.

Table of Contents

ACCENTURE PLC

INDEX




	Page
Part I. Financial Information	3
Item 1. Financial Statements	3
Consolidated Balance Sheets as of February 28, 2019 (Unaudited) and August 31, 2018	3
Consolidated Income Statements (Unaudited) for the three and six months ended February 28, 2019 and 2018	4
Consolidated Statements of Comprehensive Income (Unaudited) for the three and six months ended February 28, 2019 and 2018	5
Consolidated Shareholders’ Equity Statement (Unaudited) for the three and six months ended February 28, 2019 and 2018	6
Consolidated Cash Flows Statements (Unaudited) for the three and six months ended February 28, 2019 and 2018	10
Notes to Consolidated Financial Statements (Unaudited)	11
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3. Quantitative and Qualitative Disclosures About Market Risk	35
Item 4. Controls and Procedures	36
Part II. Other Information	37
Item 1. Legal Proceedings	37
Item 1A. Risk Factors	37
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	37
Item 3. Defaults Upon Senior Securities	38
Item 4. Mine Safety Disclosures	38
Item 5. Other Information	38
Item 6. Exhibits	38
Signatures	39

Table of Contents

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ACCENTURE PLC

CONSOLIDATED BALANCE SHEETS

February 28, 2019 and August 31, 2018

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



	February 28, 2019			August 31, 2018
	(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	4,464,889		$	5,061,360
Short-term investments	3,111			3,192
Receivables and contract assets	8,151,411			7,496,368
Other current assets	1,213,889			1,024,639
Total current assets	13,833,300			13,585,559
NON-CURRENT ASSETS:
Contract assets	20,691			23,036
Investments	229,085			215,532
Property and equipment, net	1,282,765			1,264,020
Goodwill	5,782,856			5,383,012
Deferred contract costs	702,404			705,124
Deferred income taxes, net	4,258,979			2,086,807
Other non-current assets	1,280,128			1,185,993
Total non-current assets	13,556,908			10,863,524
TOTAL ASSETS	$	27,390,208		$	24,449,083
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt and bank borrowings	$	4,365		$	5,337
Accounts payable	1,472,130			1,348,802
Deferred revenues	3,335,751			2,837,682
Accrued payroll and related benefits	4,016,627			4,569,172
Income taxes payable	554,745			497,885
Other accrued liabilities	835,431			892,873
Total current liabilities	10,219,049			10,151,751
NON-CURRENT LIABILITIES:
Long-term debt	19,753			19,676
Deferred revenues	607,038			618,124
Retirement obligation	1,412,558			1,410,656
Deferred income taxes, net	139,792			125,729
Income taxes payable	826,188			956,836
Other non-current liabilities	437,285			441,723
Total non-current liabilities	3,442,614			3,572,744
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS’ EQUITY:
Ordinary shares, par value 1.00 euros per share, 40,000 shares authorized and issued as of February 28, 2019 and August 31, 2018	57			57
Class A ordinary shares, par value $0.0000225 per share, 20,000,000,000 shares authorized, 670,312,741 and 663,327,677 shares issued as of February 28, 2019 and August 31, 2018, respectively	15			15
Class X ordinary shares, par value $0.0000225 per share, 1,000,000,000 shares authorized, 650,821 and 655,521 shares issued and outstanding as of February 28, 2019 and August 31, 2018, respectively	—			—
Restricted share units	954,613			1,234,623
Additional paid-in capital	5,783,062			4,870,764
Treasury shares, at cost: Ordinary, 40,000 shares as of February 28, 2019 and August 31, 2018; Class A ordinary, 32,399,072 and 24,293,199 shares as of February 28, 2019 and August 31, 2018, respectively	(3,357,665		)	(2,116,948		)
Retained earnings	11,421,964			7,952,413
Accumulated other comprehensive loss	(1,465,013		)	(1,576,171		)
Total Accenture plc shareholders’ equity	13,337,033			10,364,753
Noncontrolling interests	391,512			359,835
Total shareholders’ equity	13,728,545			10,724,588
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	27,390,208		$	24,449,083

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

Table of Contents

ACCENTURE PLC

CONSOLIDATED INCOME STATEMENTS

For the Three and Six Months Ended February 28, 2019 and 2018

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

(Unaudited)



	Three Months Ended						Six Months Ended
	February 28, 2019			February 28, 2018			February 28, 2019			February 28, 2018
REVENUES:
Revenues	$	10,454,129		$	9,909,238		$	21,059,675		$	19,793,551
OPERATING EXPENSES:
Cost of services	7,399,780			7,049,698			14,707,901			13,869,858
Sales and marketing	1,020,036			998,823			2,090,052			2,000,019
General and administrative costs	647,687			564,673			1,246,084			1,129,454
Total operating expenses	9,067,503			8,613,194			18,044,037			16,999,331
OPERATING INCOME	1,386,626			1,296,044			3,015,638			2,794,220
Interest income	19,081			9,459			38,712			20,895
Interest expense	(5,619		)	(3,840		)	(10,124		)	(8,547		)
Other income (expense), net	(23,834		)	(56,866		)	(57,488		)	(67,647		)
INCOME BEFORE INCOME TAXES	1,376,254			1,244,797			2,986,738			2,738,921
Provision for income taxes	235,534			325,257			554,694			630,839
NET INCOME	1,140,720			919,540			2,432,044			2,108,082
Net income attributable to noncontrolling interests in Accenture Holdings plc and Accenture Canada Holdings Inc.	(1,649		)	(37,401		)	(3,537		)	(86,534		)
Net income attributable to noncontrolling interests – other	(14,622		)	(18,436		)	(29,338		)	(34,185		)
NET INCOME ATTRIBUTABLE TO ACCENTURE PLC	$	1,124,449		$	863,703		$	2,399,169		$	1,987,363
Weighted average Class A ordinary shares:
Basic	638,639,729			617,854,667			638,750,881			616,838,561
Diluted	649,170,699			656,118,796			650,732,700			656,381,177
Earnings per Class A ordinary share:
Basic	$	1.76		$	1.40		$	3.76		$	3.22
Diluted	$	1.73		$	1.37		$	3.69		$	3.16
Cash dividends per share	$	—		$	—		$	1.46		$	1.33

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

Table of Contents

ACCENTURE PLC

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the Three and Six Months Ended February 28, 2019 and 2018

(In thousands of U.S. dollars)

(Unaudited)



	Three Months Ended						Six Months Ended
	February 28, 2019			February 28, 2018			February 28, 2019			February 28, 2018
NET INCOME	$	1,140,720		$	919,540		$	2,432,044		$	2,108,082
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX:
Foreign currency translation	41,645			121,623			33,028			94,291
Defined benefit plans	6,578			7,889			26,991			14,119
Cash flow hedges	(36,690		)	(63,727		)	51,654			(80,994		)
Investments	—			1,102			(515		)	1,102
OTHER COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO ACCENTURE PLC	11,533			66,887			111,158			28,518
Other comprehensive income (loss) attributable to noncontrolling interests	1,625			9,100			(671		)	6,266
COMPREHENSIVE INCOME	$	1,153,878		$	995,527		$	2,542,531		$	2,142,866

COMPREHENSIVE INCOME ATTRIBUTABLE TO ACCENTURE PLC	$	1,135,982		$	930,590		$	2,510,327		$	2,015,881
Comprehensive income attributable to noncontrolling interests	17,896			64,937			32,204			126,985
COMPREHENSIVE INCOME	$	1,153,878		$	995,527		$	2,542,531		$	2,142,866

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

Table of Contents

ACCENTURE PLC

CONSOLIDATED SHAREHOLDERS’ EQUITY STATEMENT

For the Three Months Ended February 28, 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	Restricted Share Units			Additional Paid-in Capital			$			No. Shares		Retained Earnings			Accumulated Other Comprehensive Loss			Total Accenture plc Shareholders’ Equity			Noncontrolling Interests			Total Shareholders’ Equity
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
Net income																					1,124,449						1,124,449			16,271			1,140,720
Other comprehensive income (loss)																								11,533			11,533			1,625			13,158
Purchases of Class A shares													1,247			(995,056		)	(6,663	)							(993,809		)	(1,247		)	(995,056		)
Share-based compensation expense										346,762																	346,762						346,762
Purchases/redemptions of Accenture Canada Holdings Inc. exchangeable shares and Class X shares													(12,751		)												(12,751		)				(12,751		)
Issuances of Class A shares for employee share programs						4,772				(733,906		)	615,692			385,839			2,430		(87,757		)				179,868			227			180,095
Dividends										(1,208		)									1,208						—						—
Other, net													2,125														2,125			(2,076		)	49
Balance as of February 28, 2019	$	57	40	$	15	670,313	$	—	651	$	954,613		$	5,783,062		$	(3,357,665	)	(32,439	)	$	11,421,964		$	(1,465,013	)	$	13,337,033		$	391,512		$	13,728,545

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

Table of Contents

ACCENTURE PLC

CONSOLIDATED SHAREHOLDERS’ EQUITY STATEMENT

For the Three Months Ended February 28, 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 November 30, 2017	57		40	14		641,496	—		19,915		1,187,775			3,755,060			(2,046,811		)	(26,172	)	7,339,188			(1,133,153		)	9,102,130			791,307			9,893,437
Net income																						863,703						863,703			55,837			919,540
Other comprehensive income (loss)																									66,887			66,887			9,100			75,987
Purchases of Class A ordinary shares														28,331			(761,075		)	(4,903	)							(732,744		)	(28,331		)	(761,075		)
Share-based compensation expense											293,035																	293,035						293,035
Purchases/redemptions of Accenture Holdings plc ordinary shares, Accenture Canada Holdings Inc. exchangeable shares and Class X ordinary shares									(196	)				(41,105		)												(41,105		)	(1,767		)	(42,872		)
Issuances of Class A ordinary shares:
Employee share programs						4,986					(594,994		)	524,192			255,858			2,162		(46,902		)				138,154			5,341			143,495
Upon redemption of Accenture Holdings plc ordinary shares						152								1,928														1,928			(1,928		)
Dividends											(834		)									834
Other, net														(1,568		)						(7,733		)				(9,301		)	(73,820		)	(83,121		)
Balance as of February 28, 2018	$	57	40	$	14	646,634	$	—	19,719		$	884,982		$	4,266,838		$	(2,552,028	)	(28,913	)	$	8,149,090		$	(1,066,266	)	$	9,682,687		$	755,739		$	10,438,426

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

Table of Contents

ACCENTURE PLC

CONSOLIDATED SHAREHOLDERS’ EQUITY STATEMENT

For the Six Months Ended February 28, 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		Restricted Share Units			Additional Paid-in Capital			$			No. Shares		Retained Earnings			Accumulated Other Comprehensive Loss			Total Accenture plc Shareholders’ Equity			Noncontrolling Interests			Total Shareholders’ Equity
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																						2,399,169						2,399,169			32,875			2,432,044
Other comprehensive income (loss)																									111,158			111,158			(671		)	110,487
Purchases of Class A shares														2,273			(1,782,564		)	(11,524	)							(1,780,291		)	(2,273		)	(1,782,564		)
Share-based compensation expense											561,475			31,803														593,278						593,278
Purchases/redemptions of Accenture Canada Holdings Inc. exchangeable shares and Class X shares									(5	)				(13,570		)												(13,570		)				(13,570		)
Issuances of Class A shares for employee share programs						6,985					(867,871		)	892,731			541,847			3,418		(121,001		)				445,706			571			446,277
Dividends											26,386											(957,846		)				(931,460		)	(1,378		)	(932,838		)
Other, net														(939		)						14,411						13,472			(605		)	12,867
Balance as of February 28, 2019	$	57	40	$	15	670,313	$	—	651		$	954,613		$	5,783,062		$	(3,357,665	)	(32,439	)	$	11,421,964		$	(1,465,013	)	$	13,337,033		$	391,512		$	13,728,545

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

Table of Contents

ACCENTURE PLC

CONSOLIDATED SHAREHOLDERS’ EQUITY STATEMENT

For the Six Months Ended February 28, 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		Restricted Share Units			Additional Paid-in Capital			$			No. Shares		Retained Earnings			Accumulated Other Comprehensive Loss			Total Accenture plc Shareholders’ Equity			Noncontrolling Interests			Total Shareholders’ Equity
Balance as of August 31, 2017	$	57	40	$	14	638,966	$	—	20,531		$	1,095,026		$	3,516,399		$	(1,649,090	)	(23,449	)	$	7,081,855		$	(1,094,784	)	$	8,949,477		$	760,723		$	9,710,200
Net income																						1,987,363						1,987,363			120,719			2,108,082
Other comprehensive income (loss)																									28,518			28,518			6,266			34,784
Purchases of Class A ordinary shares														48,064			(1,284,241		)	(8,650	)							(1,236,177		)	(48,064		)	(1,284,241		)
Share-based compensation expense											476,980			28,946														505,926						505,926
Purchases/redemptions of Accenture Holdings plc ordinary shares, Accenture Canada Holdings Inc. exchangeable shares and Class X ordinary shares									(812	)				(78,006		)												(78,006		)	(4,838		)	(82,844		)
Issuances of Class A ordinary shares:
Employee share programs						7,316					(713,863		)	770,228			381,303			3,186		(68,656		)				369,012			14,213			383,225
Upon redemption of Accenture Holdings plc ordinary shares						352								3,741														3,741			(3,741		)	—
Dividends											26,839											(844,080		)				(817,241		)	(36,373		)	(853,614		)
Other, net														(22,534		)						(7,392		)				(29,926		)	(53,166		)	(83,092		)
Balance as of February 28, 2018	$	57	40	$	14	646,634	$	—	19,719		$	884,982		$	4,266,838		$	(2,552,028	)	(28,913	)	$	8,149,090		$	(1,066,266	)	$	9,682,687		$	755,739		$	10,438,426

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

Table of Contents

ACCENTURE PLC

CONSOLIDATED CASH FLOWS STATEMENTS

For the Six Months Ended February 28, 2019 and 2018

(In thousands of U.S. dollars)

(Unaudited)



	February 28, 2019			February 28, 2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	2,432,044		$	2,108,082
Adjustments to reconcile Net income to Net cash provided by (used in) operating activities —
Depreciation, amortization and asset impairments	431,283			453,297
Share-based compensation expense	593,278			505,926
Deferred income taxes, net	(49,624		)	58,562
Other, net	(79,425		)	61,615
Change in assets and liabilities, net of acquisitions —
Receivables and contract assets, current and non-current	(481,936		)	(467,462		)
Other current and non-current assets	(282,588		)	(287,588		)
Accounts payable	28,730			(179,438		)
Deferred revenues, current and non-current	438,293			139,545
Accrued payroll and related benefits	(555,875		)	(543,604		)
Income taxes payable, current and non-current	(77,969		)	(27,485		)
Other current and non-current liabilities	(9,053		)	108,445
Net cash provided by (used in) operating activities	2,387,158			1,929,895
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment	(217,488		)	(266,248		)
Purchases of businesses and investments, net of cash acquired	(515,082		)	(344,104		)
Proceeds from sales of businesses and investments, net of cash transferred	1,809			(398		)
Other investing, net	6,218			6,115
Net cash provided by (used in) investing activities	(724,543		)	(604,635		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of ordinary shares	446,277			383,225
Purchases of shares	(1,796,134		)	(1,367,085		)
Proceeds from (repayments of) long-term debt, net	(872		)	264
Cash dividends paid	(932,838		)	(853,614		)
Other, net	(10,524		)	(45,014		)
Net cash provided by (used in) financing activities	(2,294,091		)	(1,882,224		)
Effect of exchange rate changes on cash and cash equivalents	35,005			25,183
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	(596,471		)	(531,781		)
CASH AND CASH EQUIVALENTS, beginning of period	5,061,360			4,126,860
CASH AND CASH EQUIVALENTS, end of period	$	4,464,889		$	3,595,079
SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes paid, net	$	645,379		$	666,387

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

Table of Contents

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, 2018 included in our Annual Report on Form 10-K filed with the SEC on October 24, 2018.

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 and six months ended February 28, 2019 are not necessarily indicative of the results that may be expected for the fiscal year ending August 31, 2019.

On March 13, 2018, Accenture Holdings plc merged with and into Accenture plc, with Accenture plc as the surviving entity. As a result, all of the assets and liabilities of Accenture Holdings plc were acquired by Accenture plc, and Accenture Holdings plc ceased to exist. In connection with this internal merger, shareholders of Accenture Holdings plc (other than Accenture entities that held shares of Accenture Holdings plc), who primarily consisted of current and former members of Accenture Leadership and their permitted transferees, received one Class A ordinary share of Accenture plc for each share of Accenture Holdings plc that they owned, and Accenture plc redeemed all Class X ordinary shares of Accenture plc owned by such shareholders.

Allowances for Client Receivables

As of February 28, 2019 and August 31, 2018, total allowances recorded for client receivables were $53,616 and $49,913, respectively.

Depreciation and Amortization

Depreciation expense was $110,635 and $213,348 for the three and six months ended February 28, 2019, respectively, and $107,445 and $213,596 for the three and six months ended February 28, 2018, respectively. As of February 28, 2019 and August 31, 2018, total accumulated depreciation was $2,027,164 and $1,862,098, respectively. Deferred transition amortization expense was $68,209 and $137,088 for the three and six months ended February 28, 2019, respectively, and $71,288 and $153,142 for the three and six months ended February 28, 2018, respectively. See Note 6 (Goodwill and Intangible Assets) to these Consolidated Financial Statements for intangible asset amortization balances.

Recently Adopted Accounting Pronouncements

Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) No. 2014-09 (“Topic 606”)

On September 1, 2018, we adopted FASB ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which replaced most existing revenue recognition guidance. The core principle of Topic 606 is that an entity should recognize revenue for the transfer of goods or services equal to the amount that it expects to be entitled to receive for those goods or services. Topic 606 has been applied to contracts that were not completed as of September 1, 2018. Results for reporting periods beginning after September 1, 2018 are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting. See Note 2 (Revenues) to these Consolidated Financial Statements for further details.

In connection with the adoption of Topic 606, we are now presenting total revenues and no longer reporting revenues before reimbursements. Prior period results have been revised to reflect this change in presentation. As a result of this change, for the three and six months ended February 28, 2018, both total revenues and cost of services

Table of Contents

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)

decreased by $158,594 and $328,774, respectively, for hardware/software resale previously included in reimbursements. This change had no impact on operating income.

The impact of adopting the new standard was not material to our Consolidated Financial Statements. The primary impacts included additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from client contracts, including judgments and changes in estimates. Upon adoption, we recorded a decrease to retained earnings of $6,451, net of a tax impact of $3,071, as of September 1, 2018.

The impact of adopting the new standard for the three and six months ended February 28, 2019 was an increase to revenues of approximately $6.9 million and $19.4 million, respectively. The impact on our balance sheet as of February 28, 2019 was not material with the exception of the classification of $2.2 billion of receivables and $571.8 million of contract assets, which were previously classified as Unbilled services, net.

FASB ASU No. 2016-16

On September 1, 2018, we adopted FASB ASU No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory, which requires an entity to recognize the income tax consequences of intra-entity transfers, other than inventory, when the transfer occurs. Upon adoption, we recorded deferred tax assets and an increase in retained earnings of $2,144,427, and we will recognize incremental income tax expense as these deferred tax assets are utilized. Our fiscal 2019 annual effective tax rate is expected to be approximately 3.3% higher due to the adoption. The adoption had no impact on cash flows.

The impact of adoption as of September 1, 2018 of FASB ASU No. 2014-09 (Topic 606) and No. 2016-16 (Topic 740) on our Consolidated Balance Sheets was as follows:



	Balance as of August 31, 2018		Adjustments Due to ASU 2014-09 (Topic 606)			Adjustments Due to ASU 2016-16 (Topic 740)		Balance as of September 1, 2018
Balance Sheet
CURRENT ASSETS
Receivables from clients, net	$	4,996,454	$	2,100,402		$	—	$	7,096,856
Unbilled services, net	2,499,914		(2,499,914		)	—		—
Contract assets	—		547,809			—		547,809
Receivables and contract assets	$	7,496,368	$	148,297		$	—	$	7,644,665
NON-CURRENT ASSETS
Unbilled services, net	$	23,036	$	(23,036	)	$	—	$	—
Contract assets	—		23,036			—		23,036
Deferred contract costs	705,124		(2,867		)	—		702,257
Deferred income taxes, net	2,086,807		3,071			2,144,427		4,234,305

CURRENT LIABILITIES
Deferred revenues	2,837,682		154,952			—		2,992,634
SHAREHOLDERS' EQUITY
Retained earnings	7,952,413		(6,451		)	2,144,427		10,090,389

FASB ASU No. 2017-07

On September 1, 2018, we adopted FASB ASU No. 2017-07, Compensation-Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. The new guidance amends certain presentation and disclosure requirements for employers with defined benefit pension and post-retirement medical plans. The standard requires the service cost component of the net benefit cost to be in the same line item as other compensation in operating income and the other components of net benefit cost to be presented outside of operating income on a retrospective basis. Upon adoption, we reclassified $13 million and $26 million for the three and six months ended February 28, 2018, respectively and $58 million for fiscal 2018 of operating expenses to non-operating expense to conform with the fiscal 2019 treatment of these expenses.

Table of Contents

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)

FASB ASU No. 2016-01

On September 1, 2018, we adopted FASB ASU No. 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, which amends certain aspects of recognition, measurement, presentation and disclosure of financial instruments. The standard requires investments previously accounted for under the cost method of accounting to be measured at fair value with changes in fair value recognized in net income. Investments in equity securities that do not have readily determinable fair values will be measured at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions. We adopted this standard using the prospective method. The adoption did not have a material impact on our Consolidated Financial Statements.

New Accounting Pronouncement

The following standard, issued by the FASB, will result in a change in practice and will have a financial impact on our Consolidated Financial Statements:

2. REVENUES

We account for revenue in accordance with Topic 606, which we adopted on September 1, 2018 using the modified retrospective method.

Performance Obligations

A performance obligation is a promise in a contract to transfer a distinct good or service to the client and is the unit of accounting in Topic 606. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. For contracts with multiple performance obligations, we allocate the contract’s transaction price to each performance obligation based on the relative standalone selling price. The primary method used to estimate standalone selling price is the expected cost plus a margin approach, under which we forecast our expected costs of satisfying a performance obligation and then add an appropriate margin for that distinct good or service based on margins for similar services sold on a standalone basis. While determining relative standalone selling price and identifying separate performance obligations require judgment, generally relative standalone selling prices and the separate performance obligations are readily identifiable as we sell those performance obligations unaccompanied by other performance obligations. Contract modifications are routine in the performance of our contracts. Contracts are often modified to account for changes in the contract specifications, requirements or duration. If a contract modification results in the addition of performance obligations priced at a standalone selling price or if the post-modification services are distinct from the services provided prior to the modification, the modification is accounted for separately. If the modified services are not distinct, they are accounted for as part of the existing contract.

Our revenues are derived from contracts for outsourcing services, technology integration consulting services and non-technology consulting services. These contracts have different terms based on the scope, performance obligations and complexity of the engagement, which frequently require us to make judgments and estimates in recognizing revenues. We have many types of contracts, including time-and-materials contracts, fixed-price contracts, fee-per-transaction contracts and contracts with multiple fee types.

Table of Contents

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 nature of our contracts gives rise to several types of variable consideration, including incentive fees. Many contracts include incentives or penalties related to costs incurred, benefits produced or adherence to schedules that may increase the variability in revenues and margins earned on such contracts. These variable amounts generally are awarded or refunded upon achievement of or failure to achieve certain performance metrics, milestones or cost targets and can be based upon client discretion. We include these variable fees in the estimated transaction price when there is a basis to reasonably estimate the amount of the fee and it is not probable a significant reversal of revenue will occur. These estimates reflect the expected value of the variable fee and are based on an assessment of our anticipated performance, historical experience and other information available at the time.

Our performance obligations are satisfied over time as work progresses or at a point in time. The majority of our revenues are recognized over time based on the extent of progress towards satisfying our performance obligations. The selection of the method to measure progress towards completion requires judgment and is based on the contract and the nature of the services to be provided.

Outsourcing Contracts

Our outsourcing contracts typically span several years. Revenues are generally recognized on outsourcing contracts over time because our clients benefit from the services as they are performed. Outsourcing contracts require us to provide a series of distinct services each period over the contract term. Revenues from unit-priced contracts are recognized as transactions are processed. When contractual billings represent an amount that corresponds directly with the value provided to the client (e.g., time-and-materials contracts), revenues are recognized as amounts become billable in accordance with contract terms.

Technology Integration Consulting Services

Revenues from contracts for technology integration consulting services where we design/redesign, build and implement new or enhanced systems and related processes for our clients are recognized over time as control of the system is transferred continuously to the client. Contracts for technology integration consulting services generally span six months to two years. Generally, revenue is recognized using costs incurred to date relative to total estimated costs at completion to measure progress toward satisfying our performance obligations. Revenues, including estimated fees, are recorded proportionally as costs are incurred. Incurred cost represents work performed, which corresponds with, and thereby best depicts, the transfer of control to the client.

Non-Technology Integration Consulting Services

Our contracts for non-technology integration consulting services are typically less than a year in duration. Revenues are generally recognized over time as our clients benefit from the services as they are performed, or the contract includes termination provisions enabling payment for performance completed to date. When contractual billings represent an amount that corresponds directly with the value provided to the client (e.g. time-and-materials contracts), revenues are recognized as amounts become billable in accordance with contract terms. Revenues from fixed-price contracts are generally recognized using costs incurred to date relative to total estimated costs at completion to measure progress toward satisfying our performance obligations. Incurred cost represents work performed, which corresponds with, and thereby best depicts, the transfer of control to the client. For non-technology integration consulting contracts which do not qualify to recognize revenue over time, we recognize revenues at a point in time when we satisfy our performance obligations and the client obtains control of the promised good or service.

Remaining Performance Obligations

On February 28, 2019, we had approximately $19 billion of remaining performance obligations. 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 57% of our remaining performance obligations as revenue in fiscal 2019, an additional 24% in fiscal 2020, and the balance thereafter.

See Note 11 (Segment Reporting) to these Consolidated Financial Statements for our disaggregated revenues.

Table of Contents

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)

Contract Estimates

Estimates of total contract revenues and costs are continuously monitored over the life of our contracts, and recorded revenues and cost estimates are subject to revision as the contract progresses. If at any time the estimate of contract profitability indicates an anticipated loss on a technology integration consulting contract, we recognize the loss in the quarter it first becomes probable and reasonably estimable.

Adjustments in contract estimates related to performance obligations satisfied or partially satisfied in prior periods increased our revenues by approximately $37 million and $38 million for the three and six months ended February 28, 2019, respectively. No adjustment on any one contract was material to our Consolidated Financial Statements for the three and six months ended February 28, 2019.

Contract Balances

The timing of revenue recognition, billings and cash collections results in Receivables, Contract assets, and Deferred revenues (Contract liabilities) on our Consolidated Balance Sheet. Amounts are billed as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals (e.g., monthly or quarterly) or upon achievement of contractual milestones. Our receivables are rights to consideration that are conditional only upon the passage of time as compared to our contract assets, which are rights to consideration conditional upon additional factors. When we bill or receive payments from our clients before revenue is recognized, we record Contract liabilities. Contract assets and liabilities are reported on our Consolidated Balance Sheet on a contract-by-contract basis at the end of each reporting period.

For some outsourcing contracts, we receive payments for transition or set-up activities, which are deferred and recognized as revenue as the services are provided. These advance payments are typically not a significant financing component because they are used to meet working capital demands in the early stages of a contract and to protect us from the other party failing to complete its obligations under the contract. Deferred transition revenues were $587,356 and $581,395 as of February 28, 2019 and August 31, 2018, 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 $702,404 and $690,868 as of February 28, 2019 and August 31, 2018, 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):



	February 28, 2019		As of September 1, 2018 (as adjusted)
Receivables, net of allowance	$	7,579,589	$	7,096,856
Contract assets (current)	571,822		547,809
Receivables and contract assets (current)	8,151,411		7,644,665
Contract assets (non-current)	20,691		23,036
Deferred revenues (current)	3,335,751		2,992,634
Deferred revenues (non-current)	607,038		618,124

Changes in the contract asset and liability balances during the six months ended February 28, 2019, were a result of normal business activity and not materially impacted by any other factors.

Revenues recognized during the three and six months ended February 28, 2019 that were included in Deferred revenues as of November 30, 2018 and September 1, 2018 were $1.5 billion and $2.4 billion, respectively.

Table of Contents

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				Six Months Ended
	February 28, 2019		February 28, 2018		February 28, 2019		February 28, 2018
Basic Earnings per share
Net income attributable to Accenture plc	$	1,124,449	$	863,703	$	2,399,169	$	1,987,363
Basic weighted average Class A ordinary shares	638,639,729		617,854,667		638,750,881		616,838,561
Basic earnings per share	$	1.76	$	1.40	$	3.76	$	3.22
Diluted Earnings per share
Net income attributable to Accenture plc	$	1,124,449	$	863,703	$	2,399,169	$	1,987,363
Net income attributable to noncontrolling interests in Accenture Holdings plc and Accenture Canada Holdings Inc. (1)	1,649		37,401		3,537		86,534
Net income for diluted earnings per share calculation	$	1,126,098	$	901,104	$	2,402,706	$	2,073,897
Basic weighted average Class A ordinary shares	638,639,729		617,854,667		638,750,881		616,838,561
Class A ordinary shares issuable upon redemption/exchange of noncontrolling interests (1)	936,572		26,754,491		940,978		27,010,093
Diluted effect of employee compensation related to Class A ordinary shares	9,405,244		11,250,825		10,756,722		12,279,965
Diluted effect of share purchase plans related to Class A ordinary shares	189,154		258,813		284,119		252,558
Diluted weighted average Class A ordinary shares	649,170,699		656,118,796		650,732,700		656,381,177
Diluted earnings per share	$	1.73	$	1.37	$	3.69	$	3.16

_______________

(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 and the redemption of all Accenture Holdings plc ordinary shares owned by holders of noncontrolling interests prior to March 13, 2018, when these were redeemed for Accenture plc Class A ordinary shares. 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.

Table of Contents

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						Six Months Ended
	February 28, 2019			February 28, 2018			February 28, 2019			February 28, 2018
Foreign currency translation
Beginning balance	$	(1,083,885	)	$	(797,375	)	$	(1,075,268	)	$	(770,043	)
Foreign currency translation	46,008			134,318			33,612			103,561
Income tax benefit (expense)	(2,685		)	(1,257		)	(1,361		)	(183		)
Portion attributable to noncontrolling interests	(1,678		)	(11,438		)	777			(9,087		)
Foreign currency translation, net of tax	41,645			121,623			33,028			94,291
Ending balance	(1,042,240		)	(675,752		)	(1,042,240		)	(675,752		)

Defined benefit plans
Beginning balance	(398,871		)	(434,389		)	(419,284		)	(440,619		)
Pension settlement	—			2,119			—			2,119
Reclassifications into net periodic pension and post-retirement expense (1)	8,435			9,036			31,329			18,797
Income tax benefit (expense)	(1,850		)	(2,933		)	(4,301		)	(6,192		)
Portion attributable to noncontrolling interests	(7		)	(333		)	(37		)	(605		)
Defined benefit plans, net of tax	6,578			7,889			26,991			14,119
Ending balance	(392,293		)	(426,500		)	(392,293		)	(426,500		)

Cash flow hedges
Beginning balance	4,334			97,368			(84,010		)	114,635
Unrealized gain (loss)	(38,653		)	(53,710		)	77,025			(45,385		)
Reclassification adjustments into Cost of services	(8,138		)	(32,105		)	(6,260		)	(60,721		)
Income tax benefit (expense)	10,041			19,370			(19,041		)	21,639
Portion attributable to noncontrolling interests	60			2,718			(70		)	3,473
Cash flow hedges, net of tax	(36,690		)	(63,727		)	51,654			(80,994		)
Ending balance (2)	(32,356		)	33,641			(32,356		)	33,641

Investments
Beginning balance	1,876			1,243			2,391			1,243
Unrealized gain (loss)	—			1,454			(516		)	1,454
Income tax benefit (expense)	—			(305		)	—			(305		)
Portion attributable to noncontrolling interests	—			(47		)	1			(47		)
Investments, net of tax	—			1,102			(515		)	1,102
Ending balance	1,876			2,345			1,876			2,345

Accumulated other comprehensive loss	$	(1,465,013	)	$	(1,066,266	)	$	(1,465,013	)	$	(1,066,266	)

_______________


(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 February 28, 2019, $38 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.

Table of Contents

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 six months ended February 28, 2019, we completed individually immaterial acquisitions for total consideration of $495,618, 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, 2018		Additions/ Adjustments		Foreign Currency Translation			February 28, 2019
Communications, Media & Technology	$	865,509	$	49,770	$	(2,618	)	$	912,661
Financial Services	1,162,066		123,793		1,648			1,287,507
Health & Public Service	959,048		37,729		(34		)	996,743
Products	1,948,401		164,273		(3,663		)	2,109,011
Resources	447,988		28,679		267			476,934
Total	$	5,383,012	$	404,244	$	(4,400	)	$	5,782,856

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, 2018							February 28, 2019
Intangible Asset Class	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Customer-related	$	862,418	$	(299,702	)	$	562,716	$	912,857	$	(306,886	)	$	605,971
Technology	94,844		(55,690		)	39,154		85,271		(47,051		)	38,220
Patents	128,179		(66,659		)	61,520		128,750		(67,055		)	61,695
Other	50,490		(26,770		)	23,720		47,844		(21,847		)	25,997
Total	$	1,135,931	$	(448,821	)	$	687,110	$	1,174,722	$	(442,839	)	$