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INCOME TAXES
 12 Months Ended
Aug. 31, 2026
Income Tax Disclosure [Abstract]  
INCOME TAXES Income Taxes
Fiscal
202620252024
Current taxes
U.S. federal$515,474 $238,115 $408,281 
U.S. state and local158,711 88,612 173,024 
Non-U.S.2,050,077 1,753,918 1,792,809 
Total current tax expense2,724,262 2,080,645 2,374,114 
Deferred taxes
U.S. federal(24,245)53,095 (154,553)
U.S. state and local30,676 33,112 (55,141)
Non-U.S.118,640 271,141 115,706 
Total deferred tax (benefit) expense 125,071 357,348 (93,988)
Total income tax expense
U.S. federal491,229 291,210 253,728 
U.S. state and local189,387 121,724 117,883 
Non-U.S.2,168,717 2,025,059 1,908,515 
  Total income tax expense$2,849,333 $2,437,993 $2,280,126 
The components of Income before income taxes are as follows:
Fiscal
202620252024
U.S. sources$1,964,490 $1,071,581 $1,628,818 
Non-U.S. sources9,407,725 9,198,812 8,070,505 
Total$11,372,215 $10,270,393 $9,699,323 
We adopted ASU No. 2023-09, Improvements to Income Tax Disclosures, on a prospective basis. The reconciliation of the U.S. federal statutory income tax rate to our effective income tax rate for fiscal 2026, pursuant to the requirements of ASU 2023-09, is as follows:
Fiscal 2026
U.S. federal statutory income tax rate$2,388,165 21.0 %
U.S. federal
Effect of cross-border tax laws
Foreign-derived intangible income deduction(157,732)(1.4)
Other65,908 0.6 
Nontaxable or nondeductible items48,736 0.4 
Other adjustments, net49,782 0.4 
U.S. state and local income tax, net of federal effect (1)141,174 1.2 
Non-U.S. tax effects
Ireland
Statutory income tax rate difference(357,958)(3.1)
Other(36,393)(0.3)
India150,052 1.3 
Other non-U.S. jurisdictions493,570 4.4 
Worldwide changes in unrecognized tax benefits64,029 0.6 
Effective income tax rate$2,849,333 25.1 %
(1)For fiscal 2026, state and local taxes in California, Illinois, New York, New York City, Pennsylvania and Virginia made up the majority (greater than 50 percent) of the tax effect in this category.
The reconciliations of the U.S. federal statutory income tax rate to our effective income tax rate for fiscal 2025 and 2024, as previously disclosed prior to adoption of ASU 2023-09, were as follows:
Fiscal
20252024
U.S. federal statutory income tax rate21.0 %21.0 %
U.S. state and local taxes, net0.7 0.9 
Non-U.S. operations taxed at other rates— 1.0 
Final determinations (1)(1.5)(1.2)
Other net activity in unrecognized tax benefits
3.0 2.7 
Excess tax benefits from share based payments(0.6)(1.0)
Foreign-derived intangible income deduction(1.4)(1.5)
Other, net2.5 1.6 
Effective income tax rate23.7 %23.5 %
(1)Final determinations include final agreements with tax authorities and expirations of statutes of limitations.
As of August 31, 2026, we had not recognized a deferred tax liability on undistributed earnings for certain foreign subsidiaries, because these earnings are intended to be indefinitely reinvested. If such earnings were distributed, some countries may impose additional taxes. The unrecognized deferred tax liability (the amount payable if distributed) is approximately $450,000.
Portions of our operations are subject to reduced tax rates or are free of tax under various tax holidays which expire through fiscal 2034. The income tax benefits attributable to the tax status of these subsidiaries were estimated to be approximately $54,000, $50,000 and $44,000 in fiscal 2026, 2025 and 2024, respectively.
The revaluation of deferred tax assets and liabilities due to enacted changes in tax laws and tax rates did not have a material impact on our effective tax rate in fiscal 2026, 2025, or 2024.
The components of our deferred tax assets and liabilities included the following:
August 31, 2026August 31, 2025 (1)
Deferred tax assets
Pensions$491,045 $494,346 
Compensation and benefits1,054,353 902,451 
Share-based compensation614,239 603,195 
Tax credit carryforwards1,537,225 1,544,834 
Net operating loss carryforwards279,892 266,770 
Deferred amortization deductions512,145 649,143 
Indirect effects of unrecognized tax benefits412,081 369,406 
Licenses and other intangibles441,204 651,160 
Leases766,092 725,001 
Other1,536,065 1,472,502 
Total deferred tax assets7,644,341 7,678,808 
Valuation allowance(1,674,836)(1,689,015)
Deferred tax assets, net of valuation allowance5,969,505 5,989,793 
Deferred tax liabilities
Pensions(278,136)(156,872)
Investments in subsidiaries(195,275)(226,901)
Intangibles(955,086)(813,876)
Leases(694,218)(635,331)
Revenue recognition(270,838)(255,333)
Other(618,452)(582,196)
Total deferred tax liabilities(3,012,005)(2,670,509)
Net deferred tax assets$2,957,500 $3,319,284 
(1)Prior period amounts have been reclassified to conform with the current period presentation.
We recorded valuation allowances of $1,674,836 and $1,689,015 as of August 31, 2026 and 2025, respectively, against deferred tax assets principally associated with certain tax credit and tax net operating loss carryforwards, as we believe it is more likely than not that these assets will not be realized. For all other deferred tax assets, we believe it is more likely than not that the results of future operations will generate sufficient taxable income to realize these deferred tax assets. During fiscal 2026 and 2025, we recorded a net decrease and net increase of $14,179 and $70,601 in the valuation allowance, respectively, primarily related to valuation allowances on certain tax net operating loss carryforwards in fiscal 2026 and certain tax credit carryforwards in fiscal 2025, as we believe it is more likely than not that these assets will not be realized.
We had tax credit carryforwards as of August 31, 2026 of $1,537,225, of which $23,050 will expire between 2027 and 2036 and $1,514,175 has an indefinite carryforward period. We had net operating loss carryforwards as of August 31, 2026 of $1,116,954. Of this amount, $100,779 expires between 2027 and 2036, $83,769 expires between 2037 and 2046, and $932,406 has an indefinite carryforward period.
Income taxes paid (net of refunds received) in fiscal 2026, pursuant to the disclosure requirements of ASU 2023-09, were as follows:
Fiscal 2026
U.S. federal$368,304 
U.S. state and local124,800 
Non-U.S.
India 584,037 
Japan - national354,682 
Ireland141,637 
Other1,064,658 
 Total non-U.S. 2,145,014 
Total income taxes paid, net of refunds$2,638,118 
As of August 31, 2026, we had $2,529,828 of unrecognized tax benefits, of which $1,647,268, if recognized, would favorably affect our effective tax rate. As of August 31, 2025, we had $2,409,655 of unrecognized tax benefits, of which $1,614,917, if recognized, would favorably affect our effective tax rate. The remaining unrecognized tax benefits as of August 31, 2026 and 2025 of $882,560 and $794,738, respectively, represent items recorded as offsetting tax benefits associated with the correlative effects of potential transfer pricing adjustments, state income taxes and timing adjustments.
A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows:
Fiscal
20262025
Balance, beginning of year$2,409,655 $1,904,867 
Additions for tax positions related to the current year382,980 430,312 
Additions for tax positions related to prior years115,880 501,497 
Reductions for tax positions related to prior years(263,775)(314,740)
Statute of limitations expirations(73,481)(99,001)
Settlements with tax authorities(10,389)(12,396)
Cumulative translation adjustment(31,042)(884)
Balance, end of year$2,529,828 $2,409,655 
We recognize interest and penalties related to unrecognized tax benefits in our Income tax expense. During fiscal 2026, 2025 and 2024, we recognized an expense of $12,402, a benefit of $20,036 and expense of $37,396 in interest and penalties, respectively. Accrued interest and penalties related to unrecognized tax benefits of $199,714 ($179,073, net of tax benefits) and $186,901 ($173,628, net of tax benefits) were reflected on our Consolidated Balance Sheets as of August 31, 2026 and 2025, respectively.
As a global company, we file tax returns in numerous tax jurisdictions including the U.S. and Ireland. We participate in the U.S. Internal Revenue Service (“IRS”) Compliance Assurance Process (“CAP”). In CAP, the IRS examines tax years on a contemporaneous basis, and most issues are resolved prior to filing the tax return. The years from fiscal 2021 forward remain open for examination by the IRS. We also participate in the Irish Cooperative Compliance Framework (“CCF”) which promotes a collaborative approach to tax return review between taxpayers and Irish Revenue. The years from fiscal 2022 forward remain open for examination by the Irish tax authorities. In addition, we are negotiating a bilateral Advance Pricing Agreement (“APA”) with the U.S. and Ireland that covers fiscal 2021 through fiscal 2025. We expect through this APA to gain certainty and avoid prolonged disputes on the pricing of intercompany transactions between the U.S. and Ireland. We expect to conclude the APA in fiscal 2027 or fiscal 2028.
We are currently under audit in U.S. state and other non-U.S. tax jurisdictions. However, with limited exceptions, we are no longer subject to examination by those taxing authorities for years before fiscal 2018. Although the outcome of tax audits is always uncertain and could result in significant cash tax payments, we do not believe the outcome of these audits will have a material adverse effect on our consolidated financial position or results of operations. We believe that it is reasonably possible that our unrecognized tax benefits could increase by approximately $1,300,000 in the next 12 months as a result of tax audit activity and other agreements with taxing authorities. These amounts relate to transfer pricing matters in both U.S. and non-U.S. tax jurisdictions.