Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 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 toAccenture plc and its subsidiaries. All references to years, unless otherwise noted, refer to our fiscal year, which ends onAugust 31 . For example, a reference to "fiscal 2021" means the 12-month period that ended onAugust 31, 2021 . 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 intoU.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 theU.S. dollar. OverviewAccenture plc is a leading global professional services company, providing a broad range of services in strategy and consulting, interactive, technology and operations. We serve clients in three geographic markets:North America ,Europe and Growth Markets (Asia Pacific ,Latin America ,Africa and theMiddle East ). We help our clients build their digital core, transform their operations, and accelerate revenue growth-creating tangible value across their enterprises at speed and scale. Highlights from fiscal 2021 compared with fiscal 2020 included: •Revenues of$50.5 billion , representing 14% growth inU.S. dollars and 11% growth in local currency; •New bookings of$59.3 billion , an increase of 20% inU.S. dollars; •Operating margin of 15.1%, a 40 basis point expansion from fiscal 2020; •R&D spend of$1.1 billion ; and •Cash returned to shareholders of$5.9 billion , including share purchases of$3.7 billion and dividends of$2.2 billion . In fiscal 2021, the COVID-19 pandemic continued to impact our business operations and financial results. We saw strong demand across our business in the second half of the year as customers accelerated their digital transformation. Revenues for the second half of fiscal 2021 grew 22% inU.S. dollars and 18% in local currency compared to the same period in fiscal 2020. Summary of Results Revenues for fiscal 2021 increased 14% inU.S. dollars and 11% in local currency compared to fiscal 2020. This included the impact of a decline in reimbursable travel costs, which reduced revenues approximately 1%. During fiscal 2021, revenue growth in local currency was very strong inNorth America and Growth Markets and strong inEurope . We experienced local currency revenue growth that was very strong in Health & Public Service, Communications, Media & Technology, Financial Services and Products and slight in Resources. Revenue growth in local currency was very strong in outsourcing and strong in consulting during fiscal 2021. The business environment remained competitive. In many areas, our pricing, which we define as the contract profitability or margin on the work that we sell, was lower. In our consulting business, revenues for fiscal 2021 increased 13% inU.S. dollars and 9% in local currency compared to fiscal 2020. This included the impact of a decline in reimbursable travel costs, which reduced consulting revenues
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Table of Contents Item 7. Management's Discussion and Analysis of Financial ACCENTURE 2021 FORM 10-K Condition and Results of Operations 30 approximately 2%. Consulting revenue growth in local currency in fiscal 2021 was led by very strong growth in Growth Markets and strong growth inNorth America andEurope . 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, revenues for fiscal 2021 increased 15% inU.S. dollars and 13% in local currency compared to fiscal 2020. Outsourcing revenue growth in local currency in fiscal 2021 was led by very strong growth inNorth America and Growth Markets and strong growth inEurope . 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. The majority of our revenues are denominated in currencies other than theU.S. dollar, including the Euro, Japanese yen, andU.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 theU.S. dollar weakens against other currencies, resulting in favorable currency translation, our revenues, revenue growth and results of operations inU.S. dollars may be higher. If theU.S. dollar strengthens against other currencies, resulting in unfavorable currency translation, our revenues, revenue growth and results of operations inU.S. dollars may be lower. TheU.S. dollar weakened against various currencies during fiscal 2021, resulting in favorable currency translation andU.S. dollar revenue growth that was approximately 3% higher than our revenue growth in local currency for the year. Assuming that exchange rates stay within recent ranges, we estimate that our fiscal 2022 revenue growth inU.S. dollars will be approximately 0.5% lower than our revenue growth in local currency. 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 client-service personnel, which consists mainly of compensation, subcontractor and other personnel 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 non-client-facing personnel, information systems, office space and certain acquisition-related costs. Utilization for fiscal 2021 was 93%, up from 90% in fiscal 2020. 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 624,000 as ofAugust 31, 2021 , compared to 506,000 as ofAugust 31, 2020 . 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. For fiscal 2021, attrition, excluding involuntary terminations, was 14%, up from 12% in fiscal 2020. For the fourth quarter of fiscal 2021, annualized attrition, excluding involuntary terminations, was 19%, up from 17% in the third quarter of fiscal 2021. 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 certain skill sets and geographies in order to attract and retain appropriate numbers of qualified employees. For the majority of our personnel, compensation increases become effectiveDecember 1st of each fiscal year. We strive to adjust pricing and/or the mix of people to reduce the impact of compensation increases on our margin. Our ability to grow our revenues and maintain or increase our margin could be adversely affected if we are unable to: keep our supply of skills and resources in balance with changes in the types or amounts of services and solutions clients are demanding; recover increases in compensation; deploy our employees globally on a timely basis; manage attrition; and/or effectively assimilate and utilize new employees. Gross margin (Revenues less Cost of services as a percentage of Revenues) for fiscal 2021 was 32.4%, compared with 31.5% for fiscal 2020. The increase in gross margin for fiscal 2021 was due to lower non-payroll costs, primarily for travel, partially offset by an increase in labor costs, including a one-time bonus for all employees below the managing director level in the second quarter of fiscal 2021. Sales and marketing and General and administrative costs as a percentage of revenues were 17.3% for fiscal 2021, compared with 16.8% for fiscal 2020. For fiscal 2021 compared to fiscal 2020, Sales and marketing costs as a percentage of revenues increased 10 basis points and General and administrative costs as a percentage of revenues increased 40 basis points, primarily due to higher non-payroll costs. Operating margin (Operating income as a percentage of revenues) for fiscal 2021 was 15.1%, compared with 14.7% for fiscal 2020.
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Table of Contents Item 7. Management's Discussion and Analysis of Financial ACCENTURE 2021 FORM 10-K Condition and Results of Operations 31 During fiscal 2021 and 2020, we recorded gains of$271 million and$332 million and related tax expense of$41 million and$52 million , respectively, 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." The effective tax rates for fiscal 2021 and 2020 were 22.8% and 23.5%, respectively. Absent the investment gains and related tax expense, our effective tax rates for fiscal 2021 and 2020 would have been 23.1% and 23.9%, respectively. Diluted earnings per share were$9.16 for fiscal 2021, compared with$7.89 for fiscal 2020. The$230 million and$280 million gains on an investment, net of taxes, increased diluted earnings per share by$0.36 and$0.43 in fiscal 2021 and 2020, respectively. Excluding the impact of these gains, diluted earnings per share would have been$8.80 and$7.46 for fiscal 2021 and 2020, respectively. We have presented our effective tax rate and diluted earnings per share excluding the impact of gains related to an investment in fiscal 2021 and 2020, as we believe doing so facilitates understanding as to the impact of these items and our performance in comparison to the prior period. 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 Note 9 (Financial Instruments) to our Consolidated Financial Statements under Item 8, "Financial Statements and Supplementary Data." Bookings New bookings for fiscal 2021 were$59.3 billion , with consulting bookings of$30.6 billion and outsourcing bookings of$28.7 billion , compared to$49.6 billion in fiscal 2020, with consulting bookings of$25.8 billion and outsourcing bookings of$23.7 billion . 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.
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Table of Contents Item 7. Management's Discussion and Analysis of Financial ACCENTURE 2021 FORM 10-K Condition and Results of Operations 32 Critical Accounting Policies and Estimates The preparation of our Consolidated Financial Statements in conformity withU.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. Revenue Recognition 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 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 additional information, see Note 2 (Revenues) to our Consolidated Financial Statements under Item 8, "Financial Statements and Supplementary Data." Income Taxes 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."
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Table of Contents Item 7. Management's Discussion and Analysis of Financial ACCENTURE 2021 FORM 10-K Condition and Results of Operations 33 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. Revenues by Segment/Geographic Market EffectiveMarch 1, 2020 , we began managing our business under a new growth model through our three geographic markets,North America ,Europe and Growth Markets, which became our reportable segments in the third quarter of fiscal 2020. Prior to this change, our reportable segments were our five industry groups, Communications, Media & Technology, Financial Services, Health & Public Service, Products and Resources. In addition to reporting revenues by geographic market, 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.
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Table of Contents Item 7. Management's Discussion and Analysis of Financial ACCENTURE 2021 FORM 10-K Condition and Results of Operations 34 Results of Operations for Fiscal 2021 Compared to Fiscal 2020 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) 2021 2020 Dollars Currency 2021 2020 GEOGRAPHIC MARKETS North America$ 23,701 $ 20,982 13 % 12 % 47 % 47 % Europe 16,749 14,402 16 8 33 32 Growth Markets 10,083 8,943 13 11 20 20 TOTAL REVENUES$ 50,533 $ 44,327 14 % 11 % 100 % 100 % INDUSTRY GROUPS (1) Communications, Media & Technology$ 10,286 $ 8,883 16 % 14 % 20 % 20 % Financial Services 9,933 8,519 17 13 20 19 Health & Public Service 9,498 8,024 18 16 19 18 Products 13,954 12,287 14 10 28 28 Resources 6,863 6,614 4 1 14 15 TOTAL REVENUES$ 50,533 $ 44,327 14 % 11 % 100 % 100 % TYPE OF WORK Consulting$ 27,338 $ 24,227 13 % 9 % 54 % 55 % Outsourcing 23,196 20,100 15 13 46 45 TOTAL REVENUES$ 50,533 $ 44,327 14 % 11 % 100 % 100 % Amounts in table may not total due to rounding. (1)EffectiveSeptember 1, 2020 , we revised the reporting of our industry groups to include amounts previously reported in Other. Prior period amounts have been reclassified to conform with the current period presentation. Revenues Revenues were impacted by a reduction of approximately 1% from a decline in revenues from reimbursable travel costs in fiscal 2021 across all markets. The following revenues commentary discusses local currency revenue changes for fiscal 2021 compared to fiscal 2020: Geographic Markets •North America revenues increased 12% in local currency, led by growth in Public Service, Software & Platforms and Banking & Capital Markets. These increases were partially offset by a decline in Energy. Revenue growth was driven bythe United States . •Europe revenues increased 8% in local currency, led by growth in Consumer Goods, Retail & Travel Services, Banking & Capital Markets, Software & Platforms, Industrial and Life Sciences. Revenue growth was driven by theUnited Kingdom ,Italy ,Germany andSwitzerland . •Growth Markets revenues increased 11% in local currency, led by growth in Banking & Capital Markets, Public Service and Consumer Goods, Retail & Travel Services. Revenue growth was driven byJapan . Operating Expenses Operating expenses for fiscal 2021 increased$5,098 million , or 13%, over fiscal 2020, and decreased as a percentage of revenues to 84.9% from 85.3% during this period.
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Table of Contents Item 7. Management's Discussion and Analysis of Financial ACCENTURE 2021 FORM 10-K Condition and Results of Operations 35
Operating expenses by category are as follows:
Fiscal Increase (in millions of U.S. dollars) 2021 2020 (Decrease) Operating Expenses$ 42,912 84.9 %$ 37,813 85.3 %$ 5,098 Cost of services 34,169 67.6 30,351 68.5 3,818 Sales and marketing 5,288 10.5 4,626 10.4 662
General and administrative costs 3,454 6.8 2,837
6.4 618
Amounts in table may not total due to rounding.
Cost of Services Cost of services for fiscal 2021 increased$3,818 million , or 13%, over fiscal 2020, and decreased as a percentage of revenues to 67.6% from 68.5% during this period. Gross margin for fiscal 2021 increased to 32.4% from 31.5% in fiscal 2020. The increase in gross margin for fiscal 2021 was primarily due to lower non-payroll costs, primarily for travel, partially offset by an increase in labor costs, including a one-time bonus for all employees below the managing director level in the second quarter of fiscal 2021. Sales and Marketing Sales and marketing expense for fiscal 2021 increased$662 million , or 14%, over fiscal 2020, and increased as a percentage of revenues to 10.5% from 10.4% during this period. General and Administrative Costs General and administrative costs for fiscal 2021 increased$618 million , or 22%, over fiscal 2020, and increased as a percentage of revenues to 6.8% from 6.4% during this period. The increase as a percentage of revenues was primarily due to higher non-payroll costs. Operating Income and Operating Margin Operating income for fiscal 2021 increased$1,108 million , or 17%, over fiscal 2020. Operating margin for fiscal 2021 was 15.1%, compared with 14.7% for fiscal 2020. Operating income and operating margin for each of the geographic markets are as follows: Fiscal 2021 2020 Operating Operating Operating Operating Increase (in millions of U.S. dollars) Income Margin Income Margin (Decrease) North America$ 3,908 16 %$ 3,170 15 %$ 738 Europe 2,236 13 1,799 12 437 Growth Markets 1,477 15 1,545 17 (67) TOTAL$ 7,622 15.1 %$ 6,514 14.7 %$ 1,108 Amounts in 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 2021 was similar to that disclosed for revenue for each geographic market. The reduction in travel costs during fiscal 2021 had a favorable impact on operating income. In addition, during fiscal 2021 each geographic market's operating income was unfavorably impacted by higher labor costs, including a one-time bonus in the second quarter of fiscal 2021 equal to one week of base pay for all employees below the managing director level. The commentary below provides insight into other factors affecting geographic market performance and operating income for fiscal 2021 compared with fiscal 2020: •North America operating income increased primarily due to revenue growth, higher consulting contract profitability and lower sales and marketing costs as a percentage of revenues. •Europe operating income increased primarily due to revenue growth and higher contract profitability. •Growth Markets operating income decreased as revenue growth was offset by lower contract profitability and higher sales and marketing costs as a percentage of revenues.
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Table of Contents Item 7. Management's Discussion and Analysis of Financial ACCENTURE 2021 FORM 10-K Condition and Results of Operations 36 Other Income (Expense), 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 2021, other income (expense) decreased$59 million from fiscal 2020, primarily due to lower gains on investments, including lower gains related to our investment in Duck Creek Technologies, partially offset by lower foreign currency losses. 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." Income Tax Expense The effective tax rate for fiscal 2021 was 22.8%, compared with 23.5% for fiscal 2020. Absent the$271 million and$332 million gains on an investment and related$41 million and$52 million in tax expense, our effective tax rates for fiscal 2021 and fiscal 2020 would have been 23.1% and 23.9%, respectively. The lower effective tax rate for fiscal 2021 was primarily due to changes in the geographic distribution of earnings. For additional information, see Note 11 (Income Taxes) to our Consolidated Financial Statements under Item 8, "Financial Statements and Supplementary Data." Net Income Attributable to Noncontrolling 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 ourAccenture Canada Holdings Inc. subsidiary. See "Business-Organizational Structure." Noncontrolling interests also includes amounts primarily attributable to noncontrolling shareholders in ourAvanade Inc. subsidiary. Net income attributable toAccenture plc represents the income attributable to the shareholders ofAccenture plc . Earnings Per Share Diluted earnings per share were$9.16 for fiscal 2021, compared with$7.89 for fiscal 2020. The$230 million and$280 million gains on an investment, net of taxes, increased diluted earnings per share by$0.36 and$0.43 in fiscal 2021 and 2020, respectively. Excluding the impact of these gains, diluted earnings per share would have been$8.80 and$7.46 for fiscal 2021 and 2020, respectively. For information regarding our earnings per share calculations, see Note 3 (Earnings Per Share) to our Consolidated Financial Statements under Item 8, "Financial Statements and Supplementary Data." The increase in diluted earnings per share is due to the following factors: Earnings Per Share Fiscal 2021 FY20 As Reported$ 7.89 Revenue and operating results 1.30 Lower effective tax rate 0.09 Lower share count 0.03
Net Income attributable to noncontrolling interests (0.01) Non-operating income
(0.07) Lower gains on an investment, net of tax (0.07) FY21 As Reported$ 9.16
Results of Operations for Fiscal 2020 Compared to Fiscal 2019
Our Annual Report on Form 10-K for the fiscal year ended
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Table of Contents Item 7. Management's Discussion and Analysis of Financial ACCENTURE 2021 FORM 10-K Condition and Results of Operations 37 Liquidity 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 pay dividends; •acquire complementary businesses or technologies; •take advantage of opportunities, including more rapid expansion; or •develop new services and solutions. As ofAugust 31, 2021 , Cash and cash equivalents were$8.2 billion , compared with$8.4 billion as ofAugust 31, 2020 . Cash flows from operating, investing and financing activities, as reflected in our Consolidated Cash Flows Statements, are summarized in the following table:
Fiscal
(in millions of U.S. dollars) 2021 2020 Change Net cash provided by (used in): Operating activities$ 8,975 $ 8,215 $ 760 Investing activities (4,310) (1,895) (2,415) Financing activities (4,926) (4,049) (877) Effect of exchange rate changes on cash and cash equivalents 14 17 (3)
Net increase (decrease) in cash and cash equivalents
Amounts in table may not total due to rounding. Operating activities: The$760 million increase in operating cash flows was due to higher net income, partially offset by changes in operating assets and liabilities. Investing activities: The$2,415 million increase in cash used was due to higher spending on business acquisitions and investments, partially offset by increased proceeds from investments. For additional information, see Note 6 (Business Combinations) to our Consolidated Financial Statements under Item 8, "Financial Statements and Supplementary Data." Financing activities: The$877 million increase 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 believe that our current and longer-term working capital, investments and other general corporate funding requirements will be satisfied for the next twelve months and thereafter through cash flows from operations and, to the extent necessary, from our borrowing facilities and future financial market 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. Borrowing Facilities See Note 10 (Borrowings and Indebtedness) and Note 8 (Leases) to our Consolidated Financial Statements under Item 8, "Financial Statements and Supplementary Data." Share Purchases and Redemptions We intend to continue to use a significant portion of cash generated from operations for share repurchases during fiscal 2022. 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 ofAccenture Canada Holdings Inc. exchangeable shares, through the use of Rule 10b5-1 plans and/or by
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Table of Contents Item 7. Management's Discussion and Analysis of Financial ACCENTURE 2021 FORM 10-K Condition and Results of Operations 38 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." Subsequent Events See Note 14 (Shareholders' Equity) 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 Pronouncements See Note 1 (Summary of Significant Accounting Policies) to our Consolidated Financial Statements under Item 8, "Financial Statements and Supplementary Data."
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