Item 7. Management report and analysis of the financial situation and operating results
The following discussion and analysis should be read in conjunction with our Consolidated Financial Statements and related Notes included elsewhere in this Annual Report on Form 10-K. This discussion and analysis also contains forward-looking statements and should also be read in conjunction with the disclosures and information contained in "Disclosure Regarding Forward-Looking Statements" and "Risk Factors" in this Annual Report on Form 10-K. We use the terms "Accenture," "we," the "Company," "our" and "us" in this report to refer to
Accenture plcand its subsidiaries. All references to years, unless otherwise noted, refer to our fiscal year, which ends on August 31. For example, a reference to "fiscal 2022" means the 12-month period that ended on August 31, 2022. All references to quarters, unless otherwise noted, refer to the quarters of our fiscal year. We use the term "in local currency" so that certain financial results may be viewed without the impact of foreign currency exchange rate fluctuations, thereby facilitating period-to-period comparisons of business performance. Financial results "in local currency" are calculated by restating current period activity into U.S.dollars using the comparable prior-year period's foreign currency exchange rates. This approach is used for all results where the functional currency is not the U.S.dollar.
Accenture plcis a leading global professional services company, providing a broad range of services and solutions across Strategy & Consulting, Technology, Operations, Industry X and Song. We serve clients in three geographic markets: North America, Europeand Growth Markets ( Asia Pacific, Latin America, Africaand the Middle East). We combine our strength in technology with industry experience, functional expertise and global delivery capability to help the world's leading businesses, governments and other organizations build their digital core, optimize their operations, accelerate revenue growth and enhance citizen services-creating tangible value at speed and scale. Our results of operations are affected by economic conditions, including macroeconomic conditions, the overall inflationary environment and levels of business confidence. There continues to be significant economic and geopolitical uncertainty in many markets around the world, which has impacted and may continue to impact our business, particularly with regard to wage inflation and increased volatility in foreign currency exchange rates. During fiscal 2022, we disposed of our business in Russiaand recorded a non-operating loss of $96 million. We do not have a business in Ukraineor Belarus.
We have seen very strong demand across our business in fiscal 2022 as our customers continue their digital transformations. Key metrics for fiscal 2022 versus fiscal 2021 included:
• New bookings of
•Operating margin of 15.2%, up 10 basis points;
• Diluted earnings per share of
• Cash returned to shareholders of
Table of Contents Item 7. Management's Discussion and Analysis of Financial ACCENTURE 2022 FORM 10-K Condition and Results of Operations 33 Revenues Percent Percent Fiscal Increase (Decrease) Increase (Decrease) U.S. Local (in billions of U.S. Dollars) 2022 2021 Dollars Currency Geographic Markets North America
$ 29.1 $ 23.723 % 23 % Europe 20.3 16.7 21 29 Growth Markets 12.2 10.1 21 29 Total Revenues $ 61.6 $ 50.522 % 26 % Industry Groups (1) Communications, Media & Technology $ 12.2 $ 9.824 % 28 % Financial Services 11.8 9.9 19 24 Health & Public Service 11.2 9.5 18 20 Products 18.3 14.4 27 32 Resources 8.1 6.9 18 22 Total Revenues $ 61.6 $ 50.522 % 26 % Type of Work Consulting $ 34.1 $ 27.325 % 29 % Outsourcing 27.5 23.2 19 22 Total Revenues $ 61.6 $ 50.522 % 26 % (1)Effective June 1, 2022, we revised the reporting of our industry groups for the movement of Aerospace & Defense from Communications, Media & Technology to Products. Prior period amounts have been reclassified to conform with the current period presentation. Revenues for fiscal 2022 increased 22% in U.S.dollars and 26% in local currency compared to fiscal 2021. During fiscal 2022, revenue growth in local currency was very strong across all geographic markets, industry groups and types of work. In our consulting business, revenues for fiscal 2022 increased 25% in U.S.dollars and 29% in local currency compared to fiscal 2021. Consulting revenue growth in local currency in fiscal 2022 was driven by very strong growth in Europe, Growth Markets and North America. Our consulting revenue continues to be driven by helping our clients accelerate their digital transformation, including moving to the cloud, embedding security across the enterprise and adopting new technologies. In addition, clients continue to be focused on initiatives designed to deliver cost savings and operational efficiency, as well as projects to accelerate growth and improve customer experiences. In our outsourcing business, which we also refer to as our managed services business, revenues for fiscal 2022 increased 19% in U.S.dollars and 22% in local currency compared to fiscal 2021. Outsourcing revenue growth in local currency in fiscal 2022 was driven by very strong growth in Growth Markets, Europeand North America. We continue to experience growing demand to assist clients with application modernization and maintenance, cloud enablement and managed security services. In addition, clients continue to be focused on transforming their operations through data and analytics, automation and artificial intelligence to drive productivity and operational cost savings. As we are a global company, our revenues are denominated in multiple currencies and may be significantly affected by currency exchange rate fluctuations. While a significant portion of our revenues are in U.S.dollars, the majority of our revenues are denominated in other currencies, including the Euro, Japanese yen and U.K.pound. There continues to be volatility in foreign currency exchange rates. Unfavorable fluctuations in foreign currency exchange rates have had and could in the future have a material effect on our financial results. If the U.S.dollar weakens against other currencies, resulting in favorable currency translation, our revenues, revenue growth and results of operations in U.S.dollars may be higher. If the U.S.dollar strengthens against other currencies, resulting in unfavorable currency translation, our revenues, revenue growth and results of operations in U.S.dollars may be lower. The U.S.dollar strengthened against various currencies during fiscal 2022, resulting in unfavorable currency translation and U.S.dollar revenue growth that was approximately 4% lower than our revenue growth in local currency for the year. Assuming that exchange rates stay within recent ranges, we estimate that our fiscal 2023 revenue growth in U.S.dollars will be approximately 6% lower than our revenue growth in local currency.
Table of Contents Item 7. Management's Discussion and Analysis of Financial ACCENTURE 2022 FORM 10-K Condition and Results of Operations 34 People Metrics Utilization Workforce Annualized Voluntary Attrition 91% 721,000+
down from 93% in fiscal 2021 compared to approximately 624,000
compared to 14% in fiscal year 2021
August 31, 2021Utilization for fiscal 2022 was 91%, down from 93% in fiscal 2021. We hire to meet current and projected future demand. We proactively plan and manage the size and composition of our workforce and take actions as needed to address changes in the anticipated demand for our services and solutions, given that compensation costs are the most significant portion of our operating expenses. Our workforce, the majority of which serves our clients, increased to approximately 721,000 as of August 31, 2022, compared to approximately 624,000 as of August 31, 2021. The year-over-year increase in our workforce reflects an overall increase in demand for our services and solutions, as well as people added in connection with acquisitions. During fiscal 2022, we experienced a competitive labor market with high demand for the skills our people have, which contributed to elevated levels of voluntary attrition. For fiscal 2022, attrition, excluding involuntary terminations, was 19%, up from 14% in fiscal 2021. For the fourth quarter of fiscal 2022, annualized attrition, excluding involuntary terminations, was 20%, flat with 20% in the third quarter of fiscal 2022. We evaluate voluntary attrition, adjust levels of new hiring and use involuntary terminations as means to keep our supply of skills and resources in balance with changes in client demand. In addition, we adjust compensation in order to attract and retain appropriate numbers of qualified employees. For the majority of our people, compensation increases become effective December 1stof each fiscal year. Given the overall inflationary environment, compensation has been and continues to increase faster than in prior years. In fiscal 2022, we have improved pricing, which we define as the contract profitability or margin on the work that we sell, across our business. While we are increasing pricing, as well as changing the mix of people and utilizing technology to reduce the impact of these compensation increases on our margin, the impact of these actions did not in fiscal 2022, and may not in the future, fully offset the impact of the compensation increases, resulting in lower contract profitability. Our ability to grow our revenues and maintain or increase our margin could be adversely affected if we are unable to: match people and skills with the types or amounts of services and solutions clients are demanding; recover or offset increases in compensation; deploy our employees globally on a timely basis; manage attrition; and/or effectively assimilate new employees.
The primary categories of operating expenses include Cost of services, Sales and marketing and General and administrative costs. Cost of services is primarily driven by the cost of people serving our clients, which consists mainly of compensation, subcontractor and other payroll costs, and non-payroll costs on outsourcing contracts. Cost of services includes a variety of activities such as: contract delivery; recruiting and training; software development; and integration of acquisitions. Sales and marketing costs are driven primarily by: compensation costs for business development activities; marketing- and advertising-related activities; and certain acquisition-related costs. General and administrative costs primarily include costs for people that are non-client-facing, information systems, office space and certain acquisition-related costs. Gross margin (Revenues less Cost of services as a percentage of Revenues) for fiscal 2022 was 32.0%, compared with 32.4% for fiscal 2021. The decrease in gross margin for fiscal 2022 was due to higher labor costs, including increased compensation and subcontractor costs, partially offset by a decrease in non-payroll costs.
SG&A expense as a percentage of revenue was 16.8% for fiscal 2022 compared to 17.3% for fiscal 2021. For fiscal 2022 vs. In fiscal 2021, selling and marketing expenses decreased by 60 basis points, primarily due to lower sales and advertising expenses as a percentage of revenue. General and administrative expenses increased by 10 basis points as a percentage of revenue.
Operating margin (operating profit as a percentage of revenue) for fiscal 2022 was 15.2%, compared to 15.1% for fiscal 2021.
Table of Contents Item 7. Management's Discussion and Analysis of Financial ACCENTURE 2022 FORM 10-K Condition and Results of Operations 35 Other Income (Expense), net During fiscal 2021, we recorded gains of
$271 millionand tax expense of $41 million, related to our investment in Duck Creek Technologies. For additional information, see Note 1 (Summary of Significant Accounting Policies) to our Consolidated Financial Statements under Item 8, "Financial Statements and Supplementary Data."
Effective tax rate
The effective tax rates for fiscal years 2022 and 2021 were 24.0% and 22.8%, respectively. Absent the investment gains and related tax expense, our effective tax rate for fiscal 2021 would have been 23.1%.
Diluted earnings per share
Diluted earnings per share were
the negative impact of the disposal of our activities in
Our operating income and diluted earnings per share are affected by currency exchange rate fluctuations on revenues and costs. Most of our costs are incurred in the same currency as the related revenues. Where practical, we seek to manage foreign currency exposure for costs not incurred in the same currency as the related revenues, such as the costs associated with our global delivery model, by using currency protection provisions in our customer contracts and through our hedging programs. We seek to manage our costs, taking into consideration the residual positive and negative effects of changes in foreign exchange rates on those costs. For more information on our hedging programs, see Foreign Currency Risk under Item 7A, "Quantitative and Qualitative Disclosures About Market Risk" and Note 9 (Financial Instruments) to our Consolidated Financial Statements under Item 8, "Financial Statements and Supplementary Data."
Non-GAAP Financial Measures
We have presented our effective tax rate and diluted earnings per share for fiscal 2021, excluding the impact of the investment gains, as we believe doing so facilitates understanding as to the impact of these items and our performance in comparison to the prior period. New Bookings Percent Percent Fiscal Increase (Decrease) Increase (Decrease) U.S. Local (in billions of U.S. dollars) 2022 2021 Dollars Currency Consulting
$ 37.9 $ 30.624 % 28 % Outsourcing 33.9 28.7 18 23 Total New Bookings $ 71.7 $ 59.321 % 25 %
Amounts shown in the table may not total due to rounding.
We provide information regarding our new bookings, which include new contracts, including those acquired through acquisitions, as well as renewals, extensions and changes to existing contracts, because we believe doing so provides useful trend information regarding changes in the volume of our new business over time. New bookings can vary significantly quarter to quarter depending in part on the timing of the signing of a small number of large outsourcing contracts. The types of services and solutions clients are demanding and the pace and level of their spending may impact the conversion of new bookings to revenues. For example, outsourcing bookings, which are typically for multi-year contracts, generally convert to revenue over a longer period of time compared to consulting bookings. Information regarding our new bookings is not comparable to, nor should it be substituted for, an analysis of our revenues over time. New bookings involve estimates and judgments. There are no third-party standards or requirements governing the calculation of bookings. We do not update our new bookings for material subsequent terminations or reductions related to bookings originally recorded in prior fiscal years. New bookings are recorded using then-existing foreign currency exchange rates and are not subsequently adjusted for foreign currency exchange rate fluctuations. The majority of our contracts are terminable by the client on short notice with little or no termination penalties, and some without notice. Only the non-cancelable portion of these contracts is included in our remaining performance obligations disclosed in Note 2 (Revenues) to our Consolidated Financial Statements under Item 8, "Financial Statements and Supplementary Data." Accordingly, a significant portion of what we consider contract bookings is not included in our remaining performance obligations.
Table of Contents Item 7. Management's Discussion and Analysis of Financial ACCENTURE 2022 FORM 10-K Condition and Results of Operations 36
Significant Accounting Policies and Estimates
The preparation of our Consolidated Financial Statements in conformity with
U.S.generally accepted accounting principles requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Consolidated Financial Statements and the reported amounts of revenues and expenses. We continually evaluate our estimates, judgments and assumptions based on available information and experience. Because the use of estimates is inherent in the financial reporting process, actual results could differ from those estimates. Certain of our accounting policies require higher degrees of judgment than others in their application. These include certain aspects of accounting for revenue recognition and income taxes.
Determining the method and amount of revenue to recognize requires us to make judgments and estimates. Specifically, complex arrangements with nonstandard terms and conditions may require contract interpretation to determine the appropriate accounting, including whether promised goods and services specified in an arrangement are distinct performance obligations and should be accounted for separately. Other judgments include determining whether performance obligations are satisfied over time or at a point in time and the selection of the method to measure progress towards completion. We measure progress towards completion for technology integration consulting services and some non-technology consulting services using costs incurred to date relative to total estimated costs at completion. Revenues, including estimated fees, are recorded proportionally as costs are incurred. The amount of revenue recognized for these contracts in a period is dependent on our ability to estimate total contract costs. We continually evaluate our estimates of total contract costs based on available information and experience. Additionally, 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. We conduct reviews prior to signing such contracts to evaluate whether these incentives are reasonably achievable. Our estimates are monitored over the lives of our contracts and are based on an assessment of our anticipated performance, historical experience and other information available at the time.
For more information, see Note 2 (Revenues) to our Consolidated Financial Statements in Section 8, “Financial Statements and Supplementary Data”.
Determining the consolidated provision for income tax expense, income tax liabilities and deferred tax assets and liabilities involves judgment. Deferred tax assets and liabilities, measured using enacted tax rates, are recognized for the future tax consequences of temporary differences between the tax and financial statement bases of assets and liabilities. As a global company, we calculate and provide for income taxes in each of the tax jurisdictions in which we operate. This involves estimating current tax exposures in each jurisdiction as well as making judgments regarding the recoverability of deferred tax assets. Tax exposures can involve complex issues and may require an extended period to resolve. In assessing the realizability of deferred tax assets, we consider whether it is more likely than not that some portion or all of the deferred tax assets will not be realized and adjust the valuation allowances accordingly. Factors considered in making this determination include the period of expiration of the tax asset, planned use of the tax asset, tax planning strategies and historical and projected taxable income as well as tax liabilities for the tax jurisdiction in which the tax asset is located. Valuation allowances will be subject to change in each future reporting period as a result of changes in one or more of these factors. Changes in the geographic mix or estimated level of annual income before taxes can affect the overall effective tax rate. We apply an estimated annual effective tax rate to our quarterly operating results to determine the interim provision for income tax expense. A change in judgment that impacts the measurement of a tax position taken in a prior year is recognized as a discrete item in the interim period in which the change occurs. In the event there is a significant unusual or infrequent item recognized in our quarterly operating results, the tax attributable to that item is recorded in the interim period in which it occurs. We release stranded tax effects from Accumulated other comprehensive loss using the specific identification approach for our defined benefit plans and the portfolio approach for other items. No taxes have been provided on undistributed foreign earnings that are planned to be indefinitely reinvested. If future events, including material changes in estimates of cash, working capital and long-term investment requirements, necessitate that these earnings be distributed, an additional provision for taxes may apply, which could materially affect our future effective tax rate. We currently do not foresee any event that would require us to distribute these indefinitely reinvested earnings. For additional information, see Note 11 (Income Taxes) to our Consolidated Financial Statements under Item 8, "Financial Statements and Supplementary Data."
Table of Contents Item 7. Management's Discussion and Analysis of Financial ACCENTURE 2022 FORM 10-K Condition and Results of Operations 37 As a matter of course, we are regularly audited by various taxing authorities, and sometimes these audits result in proposed assessments where the ultimate resolution may result in us owing additional taxes. We establish tax liabilities or reduce tax assets when, despite our belief that our tax return positions are appropriate and supportable under local tax law, we believe we may not succeed in realizing the tax benefit of certain positions if challenged. In evaluating a tax position, we determine whether it is more likely than not that the position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. Our estimate of the ultimate tax liability contains assumptions based on past experiences, judgments about potential actions by taxing jurisdictions as well as judgments about the likely outcome of issues that have been raised by taxing jurisdictions. The tax position is measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon settlement. We evaluate tax positions each quarter and adjust the related tax liabilities or assets in light of changing facts and circumstances, such as the progress of a tax audit or the expiration of a statute of limitations. We believe the estimates and assumptions used to support our evaluation of tax positions are reasonable. However, final determinations of prior-year tax liabilities, either by settlement with tax authorities or expiration of statutes of limitations, could be materially different from estimates reflected in assets and liabilities and historical income tax provisions. The outcome of these final determinations could have a material effect on our income tax provision, net income, or cash flows in the period in which that determination is made. We believe our tax positions comply with applicable tax law and that we have adequately accounted for these positions.
Revenue by segment/geographic market
Our three reportable operating segments are our geographic markets,
North America, Europeand Growth Markets. In addition to reporting revenues by geographic market and industry group, we also report revenues by two types of work: consulting and outsourcing, which represent the services sold by our geographic markets. Consulting revenues, which include strategy, management and technology consulting and technology integration consulting, reflect a finite, distinct project or set of projects with a defined outcome and typically a defined set of specific deliverables. Outsourcing revenues typically reflect ongoing, repeatable services or capabilities provided to transition, run and/or manage operations of client systems or business functions. From time to time, our geographic markets work together to sell and implement certain contracts. The resulting revenues and costs from these contracts may be apportioned among the participating geographic markets. Generally, operating expenses for each geographic market have similar characteristics and are subject to the same factors, pressures and challenges. However, the economic environment and its effects on the industries served by our geographic markets affect revenues and operating expenses within our geographic markets to differing degrees. The mix between consulting and outsourcing is not uniform among our geographic markets. Local currency fluctuations also tend to affect our geographic markets differently, depending on the geographic concentrations and locations of their businesses. While we provide discussion about our results of operations below, we cannot measure how much of our revenue growth in a particular period is attributable to changes in price or volume. Management does not track standard measures of unit or rate volume. Instead, our measures of volume and price are extremely complex, as each of our services contracts is unique, reflecting a customized mix of specific services that does not fit into standard comparability measurements. Revenue for our services is a function of the nature of each service to be provided, the skills required and the outcome sought, as well as estimated cost, risk, contract terms and other factors.
Table of Contents Item 7. Management's Discussion and Analysis of Financial ACCENTURE 2022 FORM 10-K Condition and Results of Operations 38
Operating results for fiscal year 2022 compared to fiscal year 2021
Revenues by geographic market, industry group and type of work are as follows: Percent Percent Increase Increase Percent of Total (Decrease) (Decrease) Revenues Fiscal U.S. Local for Fiscal (in millions of U.S. dollars) 2022 2021 Dollars Currency 2022 2021 Geographic Markets North America
$ 29,121 $ 23,70123 % 23 % 47 % 47 % Europe 20,264 16,749 21 29 33 33 Growth Markets 12,209 10,083 21 29 20 20 Total Revenues $ 61,594 $ 50,53322 % 26 % 100 % 100 % Industry Groups (1) Communications, Media & Technology $ 12,200 $ 9,80124 % 28 % 20 % 19 % Financial Services 11,811 9,933 19 24 19 20 Health & Public Service 11,226 9,498 18 20 18 19 Products 18,275 14,439 27 32 30 29 Resources 8,082 6,863 18 22 13 14 Total Revenues $ 61,594 $ 50,53322 % 26 % 100 % 100 % Type of Work Consulting $ 34,076 $ 27,33825 % 29 % 55 % 54 % Outsourcing 27,518 23,196 19 22 45 46 Total Revenues $ 61,594 $ 50,53322 % 26 % 100 % 100 %
Amounts shown in the table may not total due to rounding.
June 1, 2022, we revised the reporting of our industry groups for the movement of Aerospace & Defense from Communications, Media & Technology to Products. Prior period amounts have been reclassified to conform with the current period presentation.
The following revenue commentary discusses changes in local currency revenue for fiscal year 2022 compared to fiscal year 2021:
•North America revenues increased 23% in local currency, driven by growth in utilities, consumer goods, retail and travel services, and software and platforms. Revenue growth was driven by
•Europe revenues increased 29% in local currency, led by growth in Industrial, Consumer Goods, Retail & Travel Services and Banking & Capital Markets. Revenue growth was driven by
Germany, the United Kingdom, Franceand Italy. •Growth Markets revenues increased 29% in local currency, led by growth in Consumer Goods, Retail & Travel Services, Banking & Capital Markets and Public Service. Revenue growth was driven by Japan, Australiaand Brazil.
Operating expenses for fiscal 2022 increased
$9,315 million, or 22%, over fiscal 2021, and decreased as a percentage of revenues to 84.8% from 84.9% during this period.
Operating expenses by category are as follows:
Fiscal Increase (in millions of U.S. dollars) 2022 2021 (Decrease) Operating Expenses
$ 52,22784.8 % $ 42,91284.9 % $ 9,315Cost of services 41,893 68.0 34,169 67.6 7,724 Sales and marketing 6,108 9.9 5,288 10.5 820
General and administrative expenses 4,226 6.9 3,454
Amounts shown in the table may not total due to rounding.
Table of Contents Item 7. Management's Discussion and Analysis of Financial ACCENTURE 2022 FORM 10-K Condition and Results of Operations 39 Cost of Services Cost of services for fiscal 2022 increased
$7,724 million, or 23%, over fiscal 2021, and increased as a percentage of revenues to 68.0% over 67.6% during this period. Gross margin for fiscal 2022 decreased to 32.0% from 32.4% in fiscal 2021. The decrease in gross margin for fiscal 2022 was primarily due to higher labor costs, including increased compensation and subcontractor costs, partially offset by a decrease in non-payroll costs.
Sales and Marketing
Sales and marketing expense for fiscal 2022 increased
$820 million, or 16%, over fiscal 2021, and decreased as a percentage of revenues to 9.9% from 10.5% during this period. The decrease was primarily due to lower selling and advertising costs.
General and administrative costs
General and administrative costs for fiscal 2022 increased
$772 million, or 22%, over fiscal 2021, and increased as a percentage of revenues to 6.9% over 6.8% during this period.
Operating profit and operating margin
Operating income for fiscal 2022 increased
$1,746 million, or 23%, over fiscal 2021. Operating margin for fiscal 2022 was 15.2%, compared with 15.1% for fiscal 2021. Operating income and operating margin for each of the geographic markets are as follows: Fiscal 2022 2021 Operating Operating Operating Operating Increase (in millions of U.S. dollars) Income Margin Income Margin (Decrease) North America $ 4,97717 % $ 3,90816 % $ 1,069Europe 2,437 12 2,236 13 201 Growth Markets 1,953 16 1,477 15 476 Total $ 9,36715.2 % $ 7,62215.1 % $ 1,746
Amounts shown in the table may not total due to rounding.
We estimate that the aggregate percentage impact of foreign currency exchange rates on our operating income during fiscal 2022 was similar to that disclosed for revenue for each geographic market. The commentary below provides insight into other factors affecting geographic market performance and operating income for fiscal 2022 compared with fiscal 2021:
•North America operating profit increased primarily due to revenue growth, partially offset by lower contract profitability.
•Operating profit in Europe increased primarily due to revenue growth, partially offset by lower contract profitability and higher acquisition-related costs.
•Growing Markets operating income increased primarily due to revenue growth, partially offset by lower contract profitability.
Other income (expenses), net
Other income (expense), net primarily consists of foreign currency gains and losses, non-operating components of pension expense, as well as gains and losses associated with our investments. During fiscal 2022, Other income (expense) decreased
$238 millionfrom fiscal 2021, primarily due to lower gains on investments. For additional information on investments, see Note 1 (Summary of Significant Accounting Policies) to our Consolidated Financial Statements under Item 8, "Financial Statements and Supplementary Data."
Loss on sale of activities in Russia
We recorded a loss on the disposal of our business in
in fiscal year 2022.
Income Tax Expense The effective tax rate for fiscal 2022 was 24.0%, compared with 22.8% for fiscal 2021. Absent the
$271 millioninvestment gains and related $41 millionin tax expense, our effective tax rate for fiscal 2021 would have been 23.1%. The higher effective tax rate for fiscal 2022 was primarily due to lower benefits from final determinations of prior year taxes. For
Table of Contents Item 7. Management's Discussion and Analysis of Financial ACCENTURE 2022 FORM 10-K Condition and Results of Operations 40
for more information, see Note 11 (Income Taxes) to our Consolidated Financial Statements in Section 8, “Financial Statements and Supplementary Data”.
Net income attributable to non-controlling interests
Net income attributable to noncontrolling interests reflects the income earned or expense incurred attributable to the equity interest that some current and former members of Accenture Leadership and their permitted transferees have in our
Accenture Canada Holdings Inc.subsidiary. See "Business-Organizational Structure." Noncontrolling interests also includes amounts primarily attributable to noncontrolling shareholders in our Avanade Inc.subsidiary. Net income attributable to Accenture plcrepresents the income attributable to the shareholders of Accenture plc.
Earnings per share
Diluted earnings per share were
$10.71for fiscal 2022, including a $0.15negative impact from the disposition of our business in Russia, compared with $9.16for fiscal 2021. The $230 millioninvestment gains, net of taxes, increased diluted earnings per share by $0.36in fiscal 2021. Excluding the impact of these gains, diluted earnings per share would have been $8.80for fiscal 2021. For information regarding our earnings per share calculations, see Note 3 (Earnings Per Share) to our Consolidated Financial Statements under Item 8, "Financial Statements and Supplementary Data."
The increase in diluted earnings per share is due to the following factors:
Earnings Per Share Fiscal 2022 FY21 As Reported
$ 9.16Higher revenue and operating results 2.08
Decrease in non-operating expenses (excluding loss on disposal of
0.05 Higher net income attributable to noncontrolling interests (0.03)
Higher effective tax rate (excluding loss on disposal of
(0.10) Loss on disposition of Russia business (0.15) Lower gains on an investment, net of tax (0.36) FY22 As Reported
Operating results for fiscal year 2021 compared to fiscal year 2020
Our annual report on Form 10-K for the year ended
includes a discussion and analysis of our financial condition and results of operations for the year ended
Table of Contents Item 7. Management's Discussion and Analysis of Financial ACCENTURE 2022 FORM 10-K Condition and Results of Operations 41
Cash and capital resources
Our primary sources of liquidity are cash flows from operations, available cash reserves and debt capacity available under various credit facilities. We could raise additional funds through other public or private debt or equity financings. We may use our available or additional funds to, among other things:
•facilitate purchases, redemptions and exchanges of shares and payment of dividends;
•acquiring complementary companies or technologies;
•seize opportunities, including faster expansion; Where
•develop new services and solutions.
Cash flows from operating, investing and financing activities, as reflected in our Consolidated Cash Flows Statements, are summarized in the following table: Fiscal (in millions of U.S. dollars) 2022 2021 Change Net cash provided by (used in): Operating activities
$ 9,541 $ 8,975 $ 566Investing activities (4,261) (4,310) 49 Financing activities (5,311) (4,926) (385) Effect of exchange rate changes on cash and cash equivalents (248) 14 (262)
Net increase (decrease) in cash and cash equivalents
Amounts shown in the table may not total due to rounding.
Operational activities: The
Investing activities: The
$49 milliondecrease in cash used was primarily due to lower spending on business acquisitions, partially offset by lower proceeds from the sale of businesses and investments and higher spending on purchases of property and equipment. For additional information, see Note 6 (Business Combinations and Dispositions) to our Consolidated Financial Statements under Item 8, "Financial Statements and Supplementary Data." Financing activities: The $385 millionincrease in cash used was primarily due to an increase in the net purchases of shares as well as an increase in cash dividends paid, partially offset by an increase in net proceeds from share issuances. For additional information, see Note 14 (Shareholders' Equity) to our Consolidated Financial Statements under Item 8, "Financial Statements and Supplementary Data."
We estimate that our current and longer-term working capital, investments and other general business financing needs will be met over the next twelve months and thereafter from cash flow from operations and, in to the extent necessary, our borrowing facilities and our future capital markets activities. .
Substantially all of our cash is held in jurisdictions where there are no regulatory restrictions or material tax effects on the free flow of funds. In addition, domestic cash inflows for our Irish parent, principally dividend distributions from lower-tier subsidiaries, have been sufficient to meet our historic cash requirements, and we expect this to continue into the future.
Purchases and redemptions of shares
We intend to continue to use a significant portion of cash generated from operations for share repurchases during fiscal 2023. The number of shares ultimately repurchased under our open-market share purchase program may vary depending on numerous factors, including, without limitation, share price and other market conditions, our ongoing capital allocation planning, the levels of cash and debt balances, other demands for cash, such as acquisition activity, general economic and/or business conditions, and board and management discretion. Additionally, as these factors may change over the course of the year, the amount of share repurchase activity during any particular period cannot be predicted and may fluctuate from time to time. Share repurchases may be made from time to time through open-market purchases, in respect of purchases and redemptions of
Accenture Canada Holdings Inc.exchangeable shares, through the use of Rule 10b5-1 plans and/or by other means. The repurchase program may be accelerated, suspended, delayed or discontinued at any time, without notice. For additional information, see Note 14 (Shareholders' Equity) to our Consolidated Financial Statements under Item 8, "Financial Statements and Supplementary Data."
Table of Contents Item 7. Management's Discussion and Analysis of Financial ACCENTURE 2022 FORM 10-K Condition and Results of Operations 42 Subsequent Events
See Note 14 (Equity) to our Consolidated Financial Statements in Section 8, “Financial Statements and Supplementary Data”.
Obligations and Commitments
August 31, 2022, we had commitments of $2.8 billionrelated to cloud hosting arrangements, software subscriptions, information technology services and other obligations in the ordinary course of business that we cannot cancel or where we would be required to pay a termination fee in the event of cancellation. Payments under these commitments are estimated to be made as follows: (in millions of U.S. dollars) Payments (1) Less than 1 year $ 774 1-3 years 931 3-5 years 665 More than 5 years 467 Total $ 2,837
(1) Amounts do not include any recourse we may have to recover termination fees or penalties from customers.
For information about borrowing facilities and leases, see Note 10 (Borrowings and Indebtedness) and Note 8 (Leases) to our Consolidated Financial Statements under Item 8, "Financial Statements and Supplementary Data."
Off-balance sheet arrangements
In the normal course of business and in conjunction with some client engagements, we have entered into contractual arrangements through which we may be obligated to indemnify clients with respect to certain matters. To date, we have not been required to make any significant payment under any of these arrangements. For further discussion of these transactions, see Note 15 (Commitments and Contingencies) to our Consolidated Financial Statements under Item 8, "Financial Statements and Supplementary Data."
New accounting statements
See Note 1 (Summary of Significant Accounting Policies) to our Consolidated Financial Statements in Section 8, “Financial Statements and Supplementary Data”.
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