##### 



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549
  FORM 10-Q (Mark One)x
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MAY 31, 2004
 OR o
    
    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: 000-49713   ACCENTURE SCA (Exact name of Registrant as specified in its charter)
 Luxembourg
(State or other jurisdiction of
incorporation or organization)
    
    98-0351796
(I.R.S. Employer
Identification No.)
 1 rue Guillaume Kroll
L-1882 Luxembourg
(Address of principal executive offices) (352) 26 42 35 00
(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. Yesx  No o Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act.)
Yes x No o The number of shares of the Registrants Class I common shares, par value
1.25 per
share, outstanding as of June 30, 2004 was 875,017,237 (which number
does not include 96,276,217 issued shares held by the Registrant and by
subsidiaries of the Registrant).




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##### 



ACCENTURE SCA INDEX PagePart I.
    
    Financial InformationItem 1.
    
    Financial Statements (unaudited)Consolidated Balance Sheets as of May 31, 2004 and August 31, 2003
    
    
    3Consolidated Income Statements for the three and nine months ended May 31, 2004 and
2003
    
    
    4Consolidated Shareholders Equity Statement for the nine months ended May 31, 2004
    
    
    5Consolidated Cash Flows Statements for the nine months ended May 31, 2004 and 2003
    
    
    6Notes to Consolidated Financial Statements
    
    
    7Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    16Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    33Item 4.
    
    Controls and Procedures
    
    
    33Part II.
    
    Other InformationItem 1.
    
    Legal Proceedings
    
    
    33Item 2.
    
    Changes in
Securities and Use of Proceeds
    
    
    34Item 6.
    
    Exhibits and Reports on Form 8-K
    
    
    34Signature
    
    
    
    
    35
 2




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##### 



PART IFINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS ACCENTURE SCA CONSOLIDATED BALANCE SHEETS May 31, 2004 and August 31, 2003
(In thousands of U.S. dollars, except share amounts) May 31,
    
    August 31,2004
    
    2003(Unaudited)ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    3,514,647
    
    
    $
    2,332,161Restricted cash
    
    
    
    
    
    
    83,280Short-term investments
    
    
    325,739
    
    
    
    Receivables from clients, net
    
    
    1,475,889
    
    
    
    1,416,153Unbilled services
    
    
    1,163,019
    
    
    
    828,515Deferred income taxes, net
    
    
    155,805
    
    
    
    147,040Other current assets
    
    
    278,875
    
    
    
    230,062Total current assets
    
    
    6,913,974
    
    
    
    5,037,211NON-CURRENT ASSETS:Unbilled services
    
    
    171,757
    
    
    
    132,522Long-term investments
    
    
    309,360
    
    
    
    33,330Property and equipment, net
    
    
    608,522
    
    
    
    650,455Goodwill
    
    
    210,852
    
    
    
    188,659Deferred income taxes, net
    
    
    308,940
    
    
    
    326,286Other non-current assets
    
    
    148,523
    
    
    
    90,777Total non-current assets
    
    
    1,757,954
    
    
    
    1,422,029TOTAL ASSETS
    
    $
    8,671,928
    
    
    $
    6,459,240LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIES:Short-term bank borrowings
    
    $
    45,670
    
    
    $
    43,500Current portion of long-term debt
    
    
    11,737
    
    
    
    2,662Accounts payable
    
    
    529,989
    
    
    
    573,201Deferred revenues
    
    
    903,454
    
    
    
    676,841Accrued payroll and related benefits
    
    
    1,318,038
    
    
    
    974,319Income taxes payable
    
    
    927,538
    
    
    
    671,026Deferred income taxes, net
    
    
    22,532
    
    
    
    22,390Other accrued liabilities
    
    
    518,962
    
    
    
    387,157Total current liabilities
    
    
    4,277,920
    
    
    
    3,351,096NON-CURRENT LIABILITIES:Long-term debt
    
    
    3,076
    
    
    
    13,955Retirement obligation
    
    
    526,016
    
    
    
    575,973Deferred income taxes, net
    
    
    3,874
    
    
    
    3,572Other non-current liabilities
    
    
    680,306
    
    
    
    836,850Total non-current liabilities
    
    
    1,213,272
    
    
    
    1,430,350MINORITY INTEREST
    
    
    42,435
    
    
    
    34,233SHAREHOLDERS EQUITY:Class I common shares, par value 1.25 euros per share, 19,782,549,738 shares authorized, 753,843,192 issued as of May 31, 2004
and August 31, 2003, respectively
    
    
    845,307
    
    
    
    845,307Class I-A common shares, par value 1.25 euros per share, 5,000,000 shares authorized, issued and outstanding
    
    
    5,435
    
    
    
    5,435Class I-B common shares, par value 1.25 euros per share, 5,000,000 shares authorized, issued and outstanding
    
    
    5,435
    
    
    
    5,435Class I-C common shares, par value 1.25 euros per share, 10,000,000 shares authorized, issued and outstanding
    
    
    10,870
    
    
    
    10,870Class I-D common shares, par value 1.25 euros per share, 10,000,000 shares authorized, issued and outstanding
    
    
    10,870
    
    
    
    10,870Class I-E common shares, par value 1.25 euros per share, 15,000,000 shares authorized, issued and outstanding
    
    
    16,304
    
    
    
    16,304Class I-F common shares, par value 1.25 euros per share, 15,000,000 shares authorized, issued and outstanding
    
    
    16,304
    
    
    
    16,304Class I-G common shares, par value 1.25 euros per share, 20,000,000 shares authorized, issued and outstanding
    
    
    21,739
    
    
    
    21,739Class I-H common shares, par value 1.25 euros per share, 25,000,000 shares authorized, issued and outstanding
    
    
    27,174
    
    
    
    27,174Class I-I common shares, par value 1.25 euros per share, 5,000,000 shares authorized, issued and outstanding
    
    
    5,435
    
    
    
    5,435Class I-J common shares, par value 1.25 euros per share, 5,000,000 shares authorized, issued and outstanding
    
    
    5,435
    
    
    
    5,435Class I-K common shares, par value 1.25 euros per share, 16,050,000 shares authorized, issued and outstanding
    
    
    18,074
    
    
    
    18,074Class I-L common shares, par value 1.25 euros per share, 5,025,720 shares authorized, issued and outstanding
    
    
    5,540
    
    
    
    5,540Class I-M common shares, par value 1.25 euros per share, 68,626,707 shares authorized, issued and outstanding
    
    
    78,398
    
    
    
    78,398Class I-N common shares, par value 1.25 euros per share, 12,747,835 and 0 shares authorized, issued and outstanding as of May 31, 2004
and August 31, 2003, respectively
    
    
    18,301
    
    
    
    Class II common shares, par value 1.25 euros per share, 20,000,000,000 shares authorized, 470,958,308 shares issued and outstanding
    
    
    529,281
    
    
    
    529,281Restricted share units (related to Accenture Ltd Class A common shares) 31,711,809 and 33,803,376 units issued and outstanding
as of May 31, 2004 and August 31, 2003, respectively
    
    
    462,352
    
    
    
    495,024Additional paid-in capital
    
    
    3,112,363
    
    
    
    2,687,575Treasury shares, at cost, 50,660,515 and 45,256,961 Class I common shares at May 31, 2004 and August 31, 2003, respectively
    
    
    (1,102,888
    )
    
    
    (846,959
    )Investment in Accenture Ltd shares, at cost, 125,722 and 5,229,487 shares at May 31, 2004 and August 31, 2003, respectively
    
    
    (3,926
    )
    
    
    (88,198
    )Accenture Ltd Class A shares owned by the Accenture Ltd Stock Employee Compensation Trust, at cost, 0 and 18,081,800 shares at
May 31, 2004 and August 31, 2003, respectively
    
    
    
    
    
    
    (308,878
    )Retained deficit
    
    
    (791,951
    )
    
    
    (1,708,371
    )Accumulated other comprehensive loss
    
    
    (157,551
    )
    
    
    (188,233
    )Total shareholders equity
    
    
    3,138,301
    
    
    
    1,643,561TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    $
    8,671,928
    
    
    $
    6,459,240
 The accompanying notes are an integral part of these financial statements. 3




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##### 



ACCENTURE SCA CONSOLIDATED INCOME STATEMENTSFor the Three and Nine Months Ended May 31, 2004 and 2003
(In thousands of U.S. dollars)
(Unaudited) Three Months Ended
    
    Nine Months EndedMay 31,
    
    May 31,
    
    May 31,
    
    May 31,2004
    
    2003
    
    2004
    
    2003REVENUES:Revenues before reimbursements
    
    $
    3,686,662
    
    
    $
    3,044,836
    
    
    $
    10,250,456
    
    
    $
    8,800,990Reimbursements
    
    
    363,579
    
    
    
    373,593
    
    
    
    1,056,577
    
    
    
    1,133,909Revenues
    
    
    4,050,241
    
    
    
    3,418,429
    
    
    
    11,307,033
    
    
    
    9,934,899OPERATING EXPENSES:Cost of services:Cost of services before reimbursable expenses
    
    
    2,379,787
    
    
    
    1,939,075
    
    
    
    6,743,224
    
    
    
    5,529,978Reimbursable expenses
    
    
    363,579
    
    
    
    373,593
    
    
    
    1,056,577
    
    
    
    1,133,909Cost of services
    
    
    2,743,366
    
    
    
    2,312,668
    
    
    
    7,799,801
    
    
    
    6,663,887Sales and marketing
    
    
    391,233
    
    
    
    362,930
    
    
    
    1,100,492
    
    
    
    1,088,394General and administrative costs
    
    
    340,549
    
    
    
    339,279
    
    
    
    996,038
    
    
    
    996,043Restructuring and reorganization cost (benefit)
    
    
    1,936
    
    
    
    (570
    )
    
    
    22,976
    
    
    
    (14,565
    )Total operating expenses
    
    
    3,477,084
    
    
    
    3,014,307
    
    
    
    9,919,307
    
    
    
    8,733,759OPERATING INCOME
    
    
    573,157
    
    
    
    404,122
    
    
    
    1,387,726
    
    
    
    1,201,140Gain on investments, net
    
    
    337
    
    
    
    2,286
    
    
    
    4,167
    
    
    
    7,556Interest income
    
    
    16,436
    
    
    
    10,681
    
    
    
    42,046
    
    
    
    30,598Interest expense
    
    
    (5,403
    )
    
    
    (5,232
    )
    
    
    (16,970
    )
    
    
    (16,269
    )Other income (expense)
    
    
    (18,705
    )
    
    
    112
    
    
    
    586
    
    
    
    25,722Equity in gains (losses) of affiliates
    
    
    (70
    )
    
    
    682
    
    
    
    (1,272
    )
    
    
    143INCOME BEFORE INCOME TAXES
    
    
    565,752
    
    
    
    412,651
    
    
    
    1,416,283
    
    
    
    1,248,890Provision for income taxes
    
    
    196,883
    
    
    
    135,576
    
    
    
    492,867
    
    
    
    453,347INCOME BEFORE MINORITY INTEREST
    
    
    368,869
    
    
    
    277,075
    
    
    
    923,416
    
    
    
    795,543Minority interest
    
    
    (3,229
    )
    
    
    (4,230
    )
    
    
    (6,996
    )
    
    
    (6,940
    )NET INCOME
    
    $
    365,640
    
    
    $
    272,845
    
    
    $
    916,420
    
    
    $
    788,603
 The accompanying notes are an integral part of these financial statements. 4




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##### 



ACCENTURE SCA CONSOLIDATED SHAREHOLDERS EQUITY STATEMENT For the Nine Months Ended May 31, 2004
(U.S. dollars and share amounts in thousands)
(Unaudited) Class I
    
    Class II
    
    RestrictedCommon
    
    Common
    
    Share Units
    
    
    
    
    
    
    
    
    
    
    
    
    
    Investment in Accenture
    
    Investment in AccentureShares
    
    Shares
    
    Common Shares
    
    
    
    
    
    Treasury Shares
    
    Ltd
    
    Ltd-SECT
    
    
    
    
    
    AccumulatedOtherAdditional
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Retained
    
    Compre-No.
    
    
    
    
    
    No.
    
    
    
    
    
    No.
    
    Paid-in
    
    
    
    
    
    No.
    
    
    
    
    
    No.
    
    
    
    
    
    No.
    
    Earnings
    
    hensive$
    
    Shares
    
    $
    
    Shares
    
    $
    
    Shares
    
    Capital
    
    $
    
    Shares
    
    $
    
    Shares
    
    $
    
    Shares
    
    (Deficit)
    
    Income(Loss)
    
    TotalBalance at August 31, 2003
    
    $
    1,072,320
    
    
    
    958,546
    
    
    $
    529,281
    
    
    
    470,958
    
    
    $
    495,024
    
    
    
    33,803
    
    
    $
    2,687,575
    
    
    $
    (846,959
    )
    
    
    (45,257
    )
    
    $
    (88,198
    )
    
    
    (5,229
    )
    
    $
    (308,878
    )
    
    
    (18,082
    )
    
    $
    (1,708,371
    )
    
    $
    (188,233
    )
    
    $
    1,643,561Comprehensive
incomeNet income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    916,420
    
    
    
    
    
    
    
    916,420Other comprehensive income (loss):Unrealized gains on marketable
securities, net of
reclassification adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (657
    )
    
    
    (657
    )Foreign currency translation
adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31,183
    
    
    
    31,183Minimum pension liability
adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    156
    
    
    
    156Other comprehensive income
(loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    30,682Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    947,102Income tax benefit on stock-based
compensation plans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,849
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,849Purchase of Accenture Ltd Class A
common shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (18,357
    )
    
    
    
    
    
    
    
    
    
    
    (31,890
    )
    
    
    (1,223
    )
    
    
    (78,965
    )
    
    
    (3,500
    )
    
    
    
    
    
    
    
    
    
    
    (129,212
    )Transfer of shares from SECT
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,222
    
    
    
    (92,119
    )
    
    
    (3,707
    )
    
    
    (303,946
    )
    
    
    (17,875
    )
    
    
    387,843
    
    
    
    21,582
    
    
    
    
    
    
    
    
    
    
    
    Vesting of restricted share units, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,164
    
    
    
    494
    
    
    
    914
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,078Purchases/redemptions of Accenture
Class I common shares and Canada
Holdings Inc. exchangeable shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,751
    )
    
    
    (2,002,292
    )
    
    
    (95,664
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,012,043
    )Issuance of common shares:Employee share purchase plan
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15,783
    )
    
    
    63,522
    
    
    
    3,293
    
    
    
    86,951
    
    
    
    4,394
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    134,690Employee stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (30,021
    )
    
    
    102,793
    
    
    
    5,763
    
    
    
    44,181
    
    
    
    2,256
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    116,953Restricted share units
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (42,836
    )
    
    
    (2,585
    )
    
    
    (1,651
    )
    
    
    38,912
    
    
    
    2,003
    
    
    
    5,575
    
    
    
    251
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    In September 2003 secondary offering
    
    
    18,301
    
    
    
    12,748
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    369,582
    
    
    
    750,591
    
    
    
    39,647
    
    
    
    283,401
    
    
    
    17,300
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,421,875In May 2004 secondary offering
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    105,509
    
    
    
    882,664
    
    
    
    43,261
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    988,173Minority Interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,275
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,275Balance at May 31, 2004
    
    $
    1,090,621
    
    
    
    971,294
    
    
    $
    529,281
    
    
    
    470,958
    
    
    $
    462,352
    
    
    
    31,712
    
    
    $
    3,112,363
    
    
    $
    (1,102,888
    )
    
    
    (50,661
    )
    
    $
    (3,926
    )
    
    
    (126
    )
    
    $
    
    
    
    
    
    
    
    $
    (791,951
    )
    
    $
    (157,551
    )
    
    $
    3,138,301
 The accompanying notes are an integral part of these financial statements. 5




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##### 



ACCENTURE SCA CONSOLIDATED CASH FLOWS STATEMENTS
For the Nine Months Ended May 31, 2004 and 2003
(In thousands of U.S. dollars)
(Unaudited) 2004
    
    2003CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    916,420
    
    
    $
    788,603Adjustments to reconcile net income to net cash provided by operating
activitiesDepreciation and amortization
    
    
    197,958
    
    
    
    179,458Reorganization benefit
    
    
    (84,280
    )
    
    
    (14,565
    )Gain on investments, net
    
    
    (4,167
    )
    
    
    (7,556
    )Loss (gain) on disposal of property and equipment, net
    
    
    7,560
    
    
    
    (5,881
    )Stock-based compensation expense
    
    
    47,126
    
    
    
    37,796Deferred income taxes, net
    
    
    9,972
    
    
    
    29,122Minority interest
    
    
    6,996
    
    
    
    6,940Other items, net
    
    
    7,225
    
    
    
    13,931Change in assets and liabilities(Increase) decrease in receivables from clients, net
    
    
    (13,406
    )
    
    
    3,089(Increase) decrease in other current assets
    
    
    (28,741
    )
    
    
    62,420Increase in unbilled services, current and non-current
    
    
    (343,619
    )
    
    
    (121,397
    )Increase in other non-current assets
    
    
    (53,462
    )
    
    
    (28,441
    )Decrease in accounts payable
    
    
    (54,335
    )
    
    
    (38,383
    )Increase in deferred revenues
    
    
    207,470
    
    
    
    89,137Increase (decrease) in accrued payroll and related benefits
    
    
    317,817
    
    
    
    (86,091
    )Increase in income taxes payable
    
    
    266,432
    
    
    
    213,882Increase (decrease) in other accrued liabilities
    
    
    93,487
    
    
    
    (28,560
    )Decrease in other non-current liabilities
    
    
    (133,819
    )
    
    
    (14,625
    )Net cash provided by operating activities
    
    
    1,362,634
    
    
    
    1,078,879CASH FLOWS FROM INVESTING ACTIVITIES:Proceeds from sales of investments
    
    
    210,599
    
    
    
    102,772Proceeds from sales of property and equipment
    
    
    4,618
    
    
    
    17,241Purchases of businesses and investments, net of cash acquired
    
    
    (17,950
    )
    
    
    (8,403
    )Purchases of available-for-sale investments
    
    
    (815,294
    )
    
    
    Purchases of property and equipment
    
    
    (179,891
    )
    
    
    (133,761
    )Net cash used in investing activities
    
    
    (797,918
    )
    
    
    (22,151
    )CASH FLOWS FROM FINANCING ACTIVITIES:Contract termination payment
    
    
    
    
    
    
    (147,569
    )Distribution of partners pre-incorporation retirement benefits
    
    
    (13,194
    )
    
    
    Issuance of Accenture Ltd Class A common shares
    
    
    2,661,691
    
    
    
    196,315Purchase of Accenture Ltd Class A common shares
    
    
    (216,162
    )
    
    
    (179,976
    )Purchase of Accenture SCA Class I common shares
    
    
    (1,925,113
    )
    
    
    (240,023
    )Proceeds from issuance of long-term debt
    
    
    435
    
    
    
    832Repayment of long-term debt
    
    
    (2,553
    )
    
    
    (3,625
    )Proceeds from issuance of short-term bank borrowings
    
    
    89,659
    
    
    
    77,143Repayments of short-term bank borrowings
    
    
    (86,225
    )
    
    
    (87,950
    )Decrease (increase) in restricted cash of Accenture Ltd Share Employee
Compensation Trust
    
    
    83,280
    
    
    
    (71,483
    )Net cash provided by (used in) financing activities
    
    
    591,818
    
    
    
    (456,336
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    25,952
    
    
    
    44,826NET INCREASE IN CASH AND CASH EQUIVALENTS
    
    
    1,182,486
    
    
    
    645,218CASH AND CASH EQUIVALENTS,beginning of period
    
    
    2,332,161
    
    
    
    1,316,976CASH AND CASH EQUIVALENTS,end of period
    
    $
    3,514,647
    
    
    $
    1,962,194
 The accompanying notes are an integral part of these financial statements. 6




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##### 



ACCENTURE SCA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of U.S. dollars, except share amounts or as otherwise disclosed)
(Unaudited)  1.
    
    BASIS OF PRESENTATION The accompanying unaudited interim consolidated financial statements of
Accenture SCA, a Luxembourg partnership limited by shares, and its controlled
subsidiary companies (together Accenture or the Company) 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 accounting principles generally
accepted in the United States of America for complete financial statements.
These financial statements should therefore be read in conjunction with the
consolidated financial statements and notes thereto for the fiscal year ended
August 31, 2003 included in the Companys Annual Report on Form 10-K filed with
the SEC on November 19, 2003. The accompanying unaudited interim consolidated
financial statements have been prepared in accordance with accounting
principles generally accepted in the United States of America and 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 nine months ended May 31,
2004 are not necessarily indicative of the results that may be expected for the
fiscal year ending August 31, 2004. Certain prior-period amounts have been
reclassified to conform to the current-period presentation.  2.
    
    RECENTLY ADOPTED ACCOUNTING STANDARDS In November 2002, the Emerging Issues Task Force (EITF) issued a final
consensus on Issue 00-21, Accounting for Revenue Arrangements with Multiple
Deliverables. In May 2003, the EITF issued additional interpretive guidance
regarding the application of Issue 00-21. Issue 00-21, which provides guidance
on how and when to recognize revenues on arrangements requiring delivery of
more than one product or service, is effective prospectively for arrangements
entered into in fiscal periods beginning after June 15, 2003. Effective September 1, 2003, Accenture adopted Issue 00-21 on a
prospective basis. The Company will continue to account for contracts signed on
or before August 31, 2003 under the previous policy for contracts containing
multiple elements, as described in the notes to the consolidated financial
statements in the Companys Annual Report on Form 10-K for the fiscal year
ended August 31, 2003. Revenues related to new revenue arrangements with
multiple elements signed after August 31, 2003 are allocated to each element
based on the lesser of the elements relative fair value or the amount that is
not contingent on future delivery of another element. Revenues allocated to separate elements are recognized for each separate
element in accordance with Accentures accounting policy for that element as
described in the notes to the consolidated financial statements in the
Companys Annual Report on Form 10-K for the fiscal year ended August 31, 2003.
If the amount of non-contingent revenue allocated to a delivered element is
less than the costs to deliver such services, then such costs are deferred and
recognized in future periods when the revenue becomes non-contingent. The adoption of Issue 00-21 reduced revenues by approximately $18,000 and
$26,000 for the three- and nine-month periods ended May 31, 2004, respectively,
and reduced operating income by approximately $17,000 and $24,000 for the
corresponding periods.  3.
    
    PRO FORMA IMPACT OF EMPLOYEE STOCK OPTIONS AND SHARE PURCHASE PLANS Accenture follows Accounting Principles Board Opinion No. 25 (APB 25),
Accounting for Stock Issued to Employees, in accounting for its employee
stock options and share purchase rights. Accordingly, no compensation expense
is recognized for stock options and share purchase rights granted under the
Companys employee share incentive and employee share purchase plans. Had
compensation cost for the Companys employee share incentive and employee share
purchase plans been determined based on fair value at the grant date consistent
with Statement of Financial Accounting Standards (SFAS) No. 123, Accounting
for Stock-Based Compensation, the Companys net income would have been reduced
to the pro forma amounts indicated below: 7




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##### 



ACCENTURE SCA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(In thousands of U.S. dollars, except share amounts or as otherwise disclosed)
(Unaudited) Three Months Ended
    
    Nine Months EndedMay 31,
    
    May 31,
    
    May 31,
    
    May 31,2004
    
    2003
    
    2004
    
    2003Net income as reported
    
    $
    365,640
    
    
    $
    272,845
    
    
    $
    916,420
    
    
    $
    788,603Add: Stock-based compensation expense already included in
net income as reported, net of tax and minority interest
    
    
    13,760
    
    
    
    9,516
    
    
    
    42,464
    
    
    
    26,044Deduct: Pro forma employee compensation cost related to
stock options, restricted share units and employee share
purchase plans, net of tax and minority interest
    
    
    (35,986
    )
    
    
    (36,689
    )
    
    
    (116,377
    )
    
    
    (125,796
    )Pro forma net income
    
    $
    343,414
    
    
    $
    245,672
    
    
    $
    842,507
    
    
    $
    688,851
  4.
    
    INVESTMENTS In February 2004, the Company transferred approximately $1,400,000 of
money-market mutual fund balances to managed investment accounts. All highly
liquid investments purchased with an original maturity of 90 days or less are
considered to be cash equivalents and are recorded at fair market value.
Investments with a maturity greater than 90 days, but less than one year, at
the time of purchase are considered to be short-term investments. Investments
with a maturity greater than one year at the time of purchase are considered to
be long-term investments. Marketable short- and long-term investments are
classified and accounted for as available-for-sale. Available-for-sale
investments are reported at fair value with unrealized gains and losses
recorded as a separate component of Accumulated other comprehensive income
(loss) in shareholders equity until realized. Interest and amortization of
premiums and discounts for debt securities are included in interest income.
Realized gains and losses on securities are determined based on the FIFO method
and are included in Gain (loss) on investments, net. The Company does not hold
these investments for speculative or trading purposes. Investments at May 31, 2004 were as follows: Amortized Cost
    
    Estimated Fair ValueU.S. Treasury securities
    
    $
    68,159
    
    
    $
    67,784Asset-backed securities
    
    
    162,853
    
    
    
    162,141Corporate debt securities
    
    
    375,407
    
    
    
    374,661Foreign government securities
    
    
    13,188
    
    
    
    13,181Total available-for-sale debt securities
    
    
    619,607
    
    
    
    617,767Other
    
    
    17,487
    
    
    
    17,332Total investments
    
    $
    637,094
    
    
    $
    635,099
 The amortized cost and estimated fair value of available-for-sale
investments in debt securities at May 31, 2004, by contractual maturity, were
as follows: Amortized Cost
    
    Estimated Fair ValueDue in 1 year or less
    
    $
    326,732
    
    
    $
    326,670Due in 1-2 years
    
    
    191,784
    
    
    
    191,367Due in 2-3 years
    
    
    12,530
    
    
    
    12,404Due in 3-4 years
    
    
    31,868
    
    
    
    31,678Due in 4-5 years
    
    
    28,740
    
    
    
    28,330Due after 5 years
    
    
    27,953
    
    
    
    27,318Total investments in available-for-sale debt securities
    
    $
    619,607
    
    
    $
    617,767
 8




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##### 



ACCENTURE SCA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(In thousands of U.S. dollars, except share amounts or as otherwise disclosed)
(Unaudited)  5.
    
    GOODWILL A summary of the changes in the carrying amount of goodwill by segment for
the nine months ended May 31, 2004 is as follows: Comm.& High
    
    FinancialTech
    
    Services
    
    Government
    
    Products
    
    Resources
    
    TotalBeginning balance at August 31, 2003
    
    $
    60,265
    
    
    $
    40,509
    
    
    $
    21,519
    
    
    $
    38,724
    
    
    $
    27,642
    
    
    $
    188,659Goodwill additions
    
    
    3,902
    
    
    
    341
    
    
    
    252
    
    
    
    4,360
    
    
    
    293
    
    
    
    9,148Foreign currency translation adjustments
    
    
    5,300
    
    
    
    2,216
    
    
    
    1,161
    
    
    
    2,576
    
    
    
    1,792
    
    
    
    13,045Ending balance May 31, 2004
    
    $
    69,467
    
    
    $
    43,066
    
    
    $
    22,932
    
    
    $
    45,660
    
    
    $
    29,727
    
    
    $
    210,852
  6.
    
    REORGANIZATION BENEFITS/COSTS During the three and nine months ended May 31, 2004, Accenture recorded
expense of $1,936 and a benefit of $84,280, respectively, primarily resulting
from final determinations of certain reorganization liabilities established in
connection with Accentures transition to a corporate structure in 2001. During
the three and nine months ended May 31, 2003, the reorganization benefits were
$570 and $14,565, respectively. The carrying amount of the reorganization
liabilities was $444,534 at May 31, 2004 and $510,149 at August 31, 2003. The
remaining change in the reorganization liabilities during the nine months ended
May 31, 2004 was due to foreign currency translation. The reorganization
liabilities are recorded as a component of Other accrued liabilities and Other
non-current liabilities on the Consolidated Balance Sheet.  7.
    
    RESTRUCTURING COSTS In the fourth quarter of 2002, Accenture recognized restructuring costs of
$110,524 related to a global consolidation of office space. At August 31, 2003,
the related liability for restructuring costs was $40,327. This liability was
reduced by payments made in the three and nine months ended May 31, 2004 of
$5,645 and $15,699, respectively. The liability was also affected by immaterial
changes in lease estimates, imputed interest and foreign currency translation.
The liability at May 31, 2004 was $27,006, representing the net present value
of the estimated remaining obligations related to exiting operating leases. In the second quarter of 2004, Accenture management approved a real estate
consolidation plan, which was substantially completed during the second quarter
of fiscal 2004, primarily in the United States and the United Kingdom.
Accenture recognized restructuring costs of $107,256, consisting of $89,331 to
consolidate various locations and $17,925 to abandon the related fixed assets.
Payments totaling $4,032 and $4,806 were made in the three and nine months
ended May 31, 2004. The liability was also affected by immaterial changes in
lease estimates, imputed interest and foreign currency translation. At May 31,
2004, the related liability for restructuring costs was $85,592 and was
recorded as a component of Other accrued liabilities and Other non-current
liabilities.  8.
    
    ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) The components of Comprehensive income are as follows: 9




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##### 



ACCENTURE SCA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(In thousands of U.S. dollars, except share amounts or as otherwise disclosed)
(Unaudited) Three Months Ended
    
    Nine Months EndedMay 31,
    
    May 31,
    
    May 31,
    
    May 31,2004
    
    2003
    
    2004
    
    2003Net income
    
    $
    365,640
    
    
    $
    272,845
    
    
    $
    916,420
    
    
    $
    788,603Foreign currency translation adjustments
    
    
    (33,894
    )
    
    
    1,375
    
    
    
    31,183
    
    
    
    (4,806
    )Unrealized gains (losses) on marketable securities, net of
reclassification adjustments
    
    
    (2,275
    )
    
    
    1,617
    
    
    
    (657
    )
    
    
    2,454Minimum pension liability adjustment
    
    
    
    
    
    
    
    
    
    
    156
    
    
    
    Comprehensive income
    
    $
    329,471
    
    
    $
    275,837
    
    
    $
    947,102
    
    
    $
    786,251
 10




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##### 



ACCENTURE SCA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(In thousands of U.S. dollars, except share amounts or as otherwise disclosed)
(Unaudited) The components of Accumulated other comprehensive loss are as follows: May 31,
    
    August 31,2004
    
    2003Foreign currency translation adjustments
    
    $
    (35,881
    )
    
    $
    (67,064
    )Unrealized losses on marketable securities
    
    
    (1,718
    )
    
    
    (1,061
    )Minimum pension liability, net of tax
    
    
    (119,952
    )
    
    
    (120,108
    )Accumulated other comprehensive loss
    
    $
    (157,551
    )
    
    $
    (188,233
    )
  9.
    
    PENSION AND OTHER POSTRETIREMENT BENEFITS In the United States and certain other countries, Accenture maintains and
administers noncontributory retirement and postretirement medical plans for
active, retired and resigned Accenture employees. The components of net
periodic benefit cost for material defined benefit pension and postretirement
benefit plans are as follows: Pension BenefitsThree Months Ended
    
    Three Months EndedMay 31, 2004
    
    May 31, 2003Components of Net Periodic Benefit Cost
    
    U.S. Plans
    
    Non-U.S. Plans
    
    U.S. Plans
    
    Non-U.S. PlansService cost
    
    $
    11,312
    
    
    $
    10,805
    
    
    $
    7,303
    
    
    $
    6,382Interest cost
    
    
    9,065
    
    
    
    2,578
    
    
    
    7,720
    
    
    
    2,747Expected return on plan assets
    
    
    (6,184
    )
    
    
    (1,894
    )
    
    
    (6,471
    )
    
    
    (1,508
    )Amortization of transitional obligation
    
    
    
    
    
    
    (51
    )
    
    
    (2
    )
    
    
    (48
    )Amortization of (gain) loss
    
    
    5,169
    
    
    
    502
    
    
    
    1,211
    
    
    
    449Amortization of prior service cost
    
    
    618
    
    
    
    22
    
    
    
    568
    
    
    
    21Net Periodic Pension Benefit Cost
    
    $
    19,980
    
    
    $
    11,962
    
    
    $
    10,329
    
    
    $
    8,043
 Pension BenefitsNine Months Ended
    
    Nine Months EndedMay 31, 2004
    
    May 31, 2003Components of Net Periodic Benefit Cost
    
    U.S. Plans
    
    Non-U.S. Plans
    
    U.S. Plans
    
    Non-U.S. PlansService cost
    
    $
    33,936
    
    
    $
    24,789
    
    
    $
    21,909
    
    
    $
    17,496Interest cost
    
    
    27,195
    
    
    
    8,693
    
    
    
    23,158
    
    
    
    7,983Expected return on plan assets
    
    
    (18,552
    )
    
    
    (5,419
    )
    
    
    (19,413
    )
    
    
    (4,459
    )Amortization of transitional obligation
    
    
    
    
    
    
    (162
    )
    
    
    (6
    )
    
    
    (124
    )Amortization of (gain) loss
    
    
    15,507
    
    
    
    796
    
    
    
    3,635
    
    
    
    1,294Amortization of prior service cost
    
    
    1,854
    
    
    
    67
    
    
    
    1,704
    
    
    
    59Net Periodic Pension Benefit Cost
    
    $
    59,940
    
    
    $
    28,764
    
    
    $
    30,987
    
    
    $
    22,249
 11




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##### 



ACCENTURE SCA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(In thousands of U.S. dollars, except share amounts or as otherwise disclosed)
(Unaudited) Other Postretirement BenefitsThree Months Ended
    
    Three Months EndedMay 31, 2004
    
    May 31, 2003Components of Net Periodic Benefit Cost
    
    U.S. Plans
    
    Non-U.S. Plans
    
    U.S. Plans
    
    Non-U.S. PlansService cost
    
    $
    1,816
    
    
    $
    449
    
    
    $
    1,835
    
    
    $
    204Interest cost
    
    
    1,292
    
    
    
    420
    
    
    
    1,421
    
    
    
    200Expected return on plan assets
    
    
    (356
    )
    
    
    
    
    
    
    (352
    )
    
    
    Amortization of transitional obligation
    
    
    20
    
    
    
    (6
    )
    
    
    20
    
    
    
    46Amortization of (gain) loss
    
    
    600
    
    
    
    17
    
    
    
    552
    
    
    
    9Amortization of prior service cost
    
    
    (200
    )
    
    
    
    
    
    
    (63
    )
    
    
    Net Periodic Postretirement Benefit Cost
    
    $
    3,172
    
    
    $
    880
    
    
    $
    3,413
    
    
    $
    459
 Other Postretirement BenefitsNine Months Ended
    
    Nine Months EndedMay 31, 2004
    
    May 31, 2003Components of Net Periodic Benefit Cost
    
    U.S. Plans
    
    Non-U.S. Plans
    
    U.S. Plans
    
    Non-U.S. PlansService cost
    
    $
    5,448
    
    
    $
    1,346
    
    
    $
    5,505
    
    
    $
    613Interest cost
    
    
    3,876
    
    
    
    1,260
    
    
    
    4,263
    
    
    
    599Expected return on plan assets
    
    
    (1,068
    )
    
    
    
    
    
    
    (1,056
    )
    
    
    Amortization of transitional obligation
    
    
    60
    
    
    
    (18
    )
    
    
    60
    
    
    
    137Amortization of (gain) loss
    
    
    1,800
    
    
    
    52
    
    
    
    1,656
    
    
    
    27Amortization of prior service cost
    
    
    (600
    )
    
    
    
    
    
    
    (189
    )
    
    
    Net Periodic Postretirement Benefit Cost
    
    $
    9,516
    
    
    $
    2,640
    
    
    $
    10,239
    
    
    $
    1,376
  10.
    
    MATERIAL TRANSACTIONS AFFECTING SHAREHOLDERS EQUITY Secondary Offering On May 4, 2004, as part of its Share Management Plan, Accenture closed an
underwritten public offering of Accenture Ltd Class A common shares. The
offering was comprised of 35,761,232 such shares newly issued by Accenture Ltd and
14,238,768 of such shares offered by Accenture partners, former partners and their
permitted transferees. The price to the public was $23.50 per share and the price net of the underwriters discount of 2.8% was $22.84.
Accenture Ltd
received $816,858 as the result of the issuance of 35,761,232 shares newly
issued by Accenture Ltd. On May 4, 2004, the underwriters, in connection with
the underwritten public offering, exercised their option to purchase an
additional 7,500,000 newly issued Class A common shares at the
same price per share. On May 4, 2004, Accenture Ltd received
$171,315 as a result of the
issuance of the additional 7,500,000 newly issued shares. Accenture Ltd
remitted proceeds from the offering to Accenture SCA in exchange for Accenture
SCA Class I common shares.
As a result of these transactions, Accenture Ltds ownership
interest in Accenture SCA increased from 55% to 57%. All proceeds
from the secondary offering that concluded on May 4, 2004, and exercise of the
related underwriters option,
as well as $56,661 of the $600,000 previously authorized for acquisitions from
partners, former partners and their permitted transferees, were used to redeem or
purchase Accenture SCA Class I common shares and Accenture
Canada Holdings Inc. exchangeable shares on June 3, 2004. For further discussion on the Accenture SCA tender offer see Subsequent Event section below. Subsequent Event On June 3, 2004, Accenture SCA and one of its controlled subsidiaries
redeemed or purchased an aggregate of 45,087,451 Accenture SCA Class I common
shares at a price of $23.50 per share less transaction fees as a result of a
tender offer made to Accenture SCA Class I shareholders on April 29, 2004. At
the same time, a subsidiary of Accenture SCA purchased 654,344 Accenture Canada
Holdings Inc. exchangeable shares at a price of $23.50 per share less transaction fees. The total
cash outlay for these transactions was $1,074,932. As a result of this
transaction, Accenture Ltds ownership interest in Accenture SCA increased from
57% to 60%. Accenture Stock Employee Compensation Trust 12




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##### 



ACCENTURE SCA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(In thousands of U.S. dollars, except share amounts or as otherwise disclosed)
(Unaudited) On December 19, 2003, the Accenture Stock Employee Compensation Trust was
terminated. A subsidiary of Accenture Ltd that is not a subsidiary of Accenture
SCA created a new Share Employee Compensation Trust (SECT). Substantially all
treasury shares purchased by the predecessor trust that had not been used to
fund employee share awards were transferred to the new SECT. In a series of open-market purchases during the three and nine months
ended May 31, 2004, the SECT and its predecessor trust acquired 1,800,000 and
7,113,050 Accenture Ltd Class A common shares, respectively, at aggregate
purchase prices of $44,448 and $165,915, respectively, for use in conjunction
with employee equity awards. At May 31, 2004, the SECT had $66,213 of
previously authorized contributions available for share purchases.  11.
    
    ANDERSEN CONTRACTS In October 2002, Accenture and Arthur Andersen LLP terminated the prior
training facility services agreement, as well as the services agreements by
which Arthur Andersen LLP and other Arthur Andersen firms were to provide
services to Accenture and by which Accenture was to provide Arthur Andersen LLP
and other Arthur Andersen firms with services. In conjunction with the
termination of all contracts and in settlement of all related matters with
Arthur Andersen LLP and other Arthur Andersen firms, Accenture paid Arthur
Andersen LLP $190,290. This payment offset previously accrued amounts and
resulted in an immaterial gain.  12.
    
    GUARANTEES As a result of Accenture increasing its ownership percentage of Accenture
HR Services from 50 percent to 100 percent in February 2002, Accenture may be
required to make payments totaling up to $187,500 in additional purchase price
over a five-year period starting February 28, 2002, conditional on Accenture HR
Services achieving certain levels of qualifying revenues. During the three and
nine months ended May 31, 2004, Accenture made payments totaling $0 and $1,720,
respectively. The remaining potential liability at May 31, 2004 was $185,780. In connection with Accenture increasing its ownership interest in Avanade,
Inc. from 50 percent to 78 percent in December 2001, Accenture has the right to
purchase substantially all of the remaining outstanding shares of Avanade, Inc.
not owned by Accenture at fair market value but not less than $28,650 and not
to exceed $58,650 anytime after December 31, 2004 or earlier if certain events
occur. Accenture may also be required to purchase substantially all of the
remaining outstanding shares of Avanade, Inc. not owned by Accenture anytime
after December 31, 2006, or earlier if certain events occur, for fair market
value but not less than $28,650 and not to exceed $58,650. Accenture has various agreements in which it may be obligated to indemnify
the other party with respect to certain matters. Generally, these
indemnification provisions are included in contracts arising in the normal
course of business under which the Company customarily agrees to hold the other
party harmless against losses arising from a breach of representations related
to such matters as title to assets sold and licensed or certain intellectual
property rights. Payments by Accenture under such indemnification clauses are
generally conditioned on the other party making a claim. Such claims are
typically subject to challenge by Accenture and to dispute resolution
procedures specified in the particular contract. Further, the Companys
obligations under these agreements may be limited in terms of time and/or
amount and, in some instances,
Accenture may have recourse against third parties for certain payments made by
the Company. It is not possible to predict the maximum potential amount of
future payments under these indemnification agreements due to the conditional
nature of Accentures obligations and the unique facts of each particular
agreement. Historically, the Company has not made any payments under these
agreements that have been material individually or in the aggregate. As of May
31, 2004, management was not aware of any obligations arising under
indemnification agreements that would require material payments. From time to time, Accenture enters into contracts with clients whereby it
has joint and several liability with other participants and third parties
providing related services and products to clients. Under these arrangements,
Accenture and other parties may assume some responsibility to the client for
the performance of others under the terms and conditions of the contract with
or for the benefit of the client. In some arrangements, the extent of
Accentures obligations for the performance 13




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ACCENTURE SCA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(In thousands of U.S. dollars, except share amounts or as otherwise disclosed)
(Unaudited) of others is not expressly specified. As of May 31, 2004, Accenture
estimates it had assumed an aggregate potential liability of approximately
$404,413 to its clients for the performance of others under arrangements
described in this paragraph. These contracts typically provide recourse
provisions that would allow Accenture to recover from the other parties all but
approximately $39,593 if Accenture is obligated to make payments to the clients
that are the consequence of a performance default by the other parties. In some
of these contracts, the guarantee is contractually given to the client by one
of the other parties providing services to the client. In the event of
Accentures performance default, Accenture could be responsible for repayment
to the other party. To date, Accenture has not been required to make any
payments under any of the contracts described in this paragraph, and we believe
that if we were to incur a loss in the future in connection with any one of
these arrangements, such a loss should not have a material effect on
Accentures financial condition or results of operations.  13.
    
    SEGMENT REPORTING Operating segments are defined by SFAS No. 131, Disclosures about
Segments of an Enterprise and Related Information, as components of an
enterprise about which separate financial information is available that is
evaluated regularly by the chief operating decision maker, or decision-making
group, in deciding how to allocate resources and in assessing performance. Accentures chief operating decision maker is the chief executive officer.
The operating segments are managed separately because each operating segment
represents a strategic business unit that serves clients in different
industries. The reportable operating segments are the Companys five operating
groups, which are Communications & High Tech, Financial Services, Government,
Products and Resources. Financial information for the Companys reportable segments is as follows: Comm. &
    
    FinancialThree Months Ended May 31, 2004
    
    High Tech
    
    Services
    
    Government
    
    Products
    
    Resources
    
    Other
    
    TotalRevenues before reimbursements
    
    $
    1,018,385
    
    
    $
    752,600
    
    
    $
    547,616
    
    
    $
    811,548
    
    
    $
    554,620
    
    
    $
    1,893
    
    
    $
    3,686,662Operating income
    
    $
    145,241
    
    
    $
    106,090
    
    
    $
    110,365
    
    
    $
    141,965
    
    
    $
    69,496
    
    
    $
    
    
    
    $
    573,157
 Comm. &
    
    FinancialThree Months Ended May 31, 2003
    
    High Tech
    
    Services
    
    Government
    
    Products
    
    Resources
    
    Other
    
    TotalRevenues before reimbursements
    
    $
    825,114
    
    
    $
    605,209
    
    
    $
    418,598
    
    
    $
    679,336
    
    
    $
    511,391
    
    
    $
    5,188
    
    
    $
    3,044,836Operating income
    
    $
    66,439
    
    
    $
    69,828
    
    
    $
    85,841
    
    
    $
    116,796
    
    
    $
    65,218
    
    
    $
    
    
    
    $
    404,122
 Comm. &
    
    FinancialNine Months Ended May 31, 2004
    
    High Tech
    
    Services
    
    Government
    
    Products
    
    Resources
    
    Other
    
    TotalRevenues before reimbursements
    
    $
    2,828,207
    
    
    $
    2,046,180
    
    
    $
    1,493,761
    
    
    $
    2,228,075
    
    
    $
    1,647,515
    
    
    $
    6,718
    
    
    $
    10,250,456Operating income
    
    $
    279,761
    
    
    $
    271,909
    
    
    $
    247,539
    
    
    $
    371,817
    
    
    $
    216,700
    
    
    $
    
    
    
    $
    1,387,726
 Comm. &
    
    FinancialNine Months Ended May 31, 2003
    
    High Tech
    
    Services
    
    Government
    
    Products
    
    Resources
    
    Other
    
    TotalRevenues before reimbursements
    
    $
    2,441,565
    
    
    $
    1,777,380
    
    
    $
    1,139,096
    
    
    $
    1,971,144
    
    
    $
    1,462,376
    
    
    $
    9,429
    
    
    $
    8,800,990Operating income
    
    $
    250,232
    
    
    $
    243,662
    
    
    $
    206,201
    
    
    $
    346,228
    
    
    $
    154,817
    
    
    $
    
    
    
    $
    1,201,140
 Reorganization costs for the three months ended May 31, 2004 were $1,936
while restructuring costs, net of a reorganization benefit, totaled $22,976 for
the nine months ended May 31, 2004. For the three and nine months ended May 31,
2003, the reorganization benefits were $570 and $14,565, respectively. These
amounts were allocated to the operating groups, affecting their operating
income by the following amounts: 14




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##### 



ACCENTURE SCA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(In thousands of U.S. dollars, except share amounts or as otherwise disclosed)
(Unaudited) Three Months Ended
    
    Nine Months EndedMay 31,
    
    May 31,Increase (Decrease) to Operating Income
    
    2004
    
    2003
    
    2004
    
    2003Communications & High Tech
    
    $
    (486
    )
    
    $
    139
    
    
    $
    (5,774
    )
    
    $
    3,623Financial Services
    
    
    (420
    )
    
    
    155
    
    
    
    (5,088
    )
    
    
    3,034Government
    
    
    (272
    )
    
    
    46
    
    
    
    (3,364
    )
    
    
    2,116Products
    
    
    (437
    )
    
    
    126
    
    
    
    (5,034
    )
    
    
    3,220Resources
    
    
    (321
    )
    
    
    104
    
    
    
    (3,716
    )
    
    
    2,572Total
    
    $
    (1,936
    )
    
    $
    570
    
    
    $
    (22,976
    )
    
    $
    14,565
 15




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ITEM 2.
    
    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 Quarterly Report onForm 10-Qand in our Annual Report onForm 10-Kfor
the fiscal year ended August 31, 2003, and with the information under the
heading Managements Discussion and Analysis of Financial Condition and
Results of Operations in our Annual Report onForm 10-Kfor the fiscal year
ended August 31, 2003. We use the terms Accenture, the Company, we, our, and us in this
report to refer to Accenture SCA and its subsidiaries. All references to years,
unless otherwise noted, refer to our fiscal year, which ends on August 31. For
example, a reference to 2003 or fiscal year 2003 means the 12-month period
that ended on August 31, 2003. All references to quarters, unless otherwise
noted, refer to the quarters of our fiscal year. We use the term partner to
refer to the executive employees of Accenture with the partner title. Disclosure Regarding Forward-Looking Statements This Quarterly Report on Form 10-Q contains forward-looking statements
within the meaning of Section 27A of the Securities Act and Section 21E of the
Exchange Act relating to our operations, results of operations and other
matters that are based on our current expectations, estimates and projections.
Words such as expects, intends, plans, projects, believes,
estimates and similar expressions are used to identify these forward-looking
statements. These statements are not guarantees of future performance and
involve risks, uncertainties and assumptions that are difficult to predict.
Forward-looking statements are based upon assumptions as to future events that
may not prove to be accurate. Actual outcomes and results may differ materially
from what is expressed or forecast in these forward-looking statements. The
reasons for this include changes in general economic and political conditions,
including fluctuations in exchange rates, and the following factors:  
    
    Our results of operations are materially affected by economic conditions, levels of business activity and rates of change
in the industries we serve.
    
    Our business will be negatively affected if we are not able to anticipate and keep pace with rapid changes in technology or
if growth in the use of technology in business is not as rapid as in the past.
    
    We may face damage to our professional reputation or legal liability if our clients are not satisfied with our services.
    
    Our services or solutions may infringe upon the intellectual property rights of others.
    
    Our engagements with clients may not be profitable.
    
    If our alliances do not succeed, we may not be successful in implementing our growth strategy.
    
    Our global operations pose complex management, foreign currency, legal, tax and economic risks, which we may not adequately
address.
    
    The consulting, technology and outsourcing markets are highly competitive and the pace of consolidation, as well as
vertical integration, among our competitors continues to increase. As a result, we may not be able to compete effectively
if we cannot efficiently respond to these developments in a timely manner.
    
    If we are unable to attract, retain and motivate employees, we will not be able to compete effectively and will not be able
to grow our business.
    
    We have only a limited ability to protect our intellectual property rights, which are important to our success.
    
    Our profitability will suffer if we are not able to maintain our pricing and utilization rates and control our costs. A
continuation of current pricing pressures could result in permanent changes in pricing policies and delivery capabilities.
    
    Our quarterly revenues, operating results and profitability will vary from quarter to quarter, which may result in
increased volatility of our share price.
    
    We continue to position ourselves to achieve increasing percentages of revenues and growth through outsourcing. This
strategy could result in higher concentrations of revenues and contributions to income from a smaller number of larger
clients on customized outsourcing solutions or, in the case of our BPO businesses, from larger portfolios of clients for
whom we provide similar services and solutions utilizing standard operating models. As we continue to accelerate the 16




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growth of new outsourcing contracts, we may experience increased pressure on our overall margins during the early stages of these contracts.
    
    On certain complex engagements where we partner with others, clients are increasingly demanding that we guarantee
the performance of our business partners whom we do not control. New accounting pronouncements may also affect
when and how we report revenues associated with certain engagements.
    
    We may be named in lawsuits as a result of Arthur Andersens current legal and financial situation based on
misconceptions about the nature of our past relationship with Arthur Andersen firms.
    
    Negative publicity about Bermuda companies, such as our parent, Accenture Ltd, may lead to new tax or other
legislation that could increase our tax burden and may affect our relationships with our clients.
    
    We will continue to be controlled by Accenture Ltd, which in turn will continue to be controlled by our partners,
whose interests may differ from those of our other shareholders.
    
    The share price of Accenture Ltd Class A common shares may decline due to the large number of Class A common
shares eligible for future sale.
    
    We may need additional capital in the future, and this capital may not be available to us. The raising of
additional capital may dilute shareholders ownership in us.
    
    We are registered in Luxembourg, and a significant portion of our assets is located outside the United States. As
a result, it may not be possible for shareholders to enforce civil liability provisions of the federal or state
securities laws of the United States.
    
    Luxembourg law differs from the laws in effect in the United States and may afford less protection to shareholders. For a more detailed discussion of these factors, see the information under
the heading BusinessRisk Factors in our Annual Report on Form 10-K for the
fiscal year ended August 31, 2003. We undertake no obligation to update or
revise any forward-looking statements. Overview Our results of operations are affected by the economic conditions, levels
of business activity and rates of change in the industries we serve. Our
business is also driven, in part, by the pace of technological change and the
type and amount of technology spending by our clients. The ability to identify
and capitalize on these market and technological changes early in their cycles
is a key driver of our performance. Revenues are driven by the ability of our partners and other senior
executives to secure contracts for new engagements and to deliver solutions and
services that add value to our clients. Our ability to add value to clients and
therefore drive revenues depends in part on our ability to deliver
market-leading service offerings and to deploy skilled teams of professionals
quickly and on a global basis. For the three months ended May 31, 2004, we
experienced revenue growth in all major areas in which we operate and in all of
our operating groups. Revenues before reimbursements increased 21% and 16% in
U.S. dollars for the three and nine months ended May 31, 2004, respectively,
from the comparable periods last year. In local currency terms, revenues before
reimbursements for the three and nine months ended May 31, 2004 increased 13%
and 8%, respectively, from the comparable periods last year. As a global
company, our revenues are denominated in multiple currencies and may be
significantly affected by currency exchange-rate fluctuations. The
strengthening of various currencies versus the U.S. dollar has resulted in
favorable currency translation and increased our reported revenues, operating
expenses and operating income. If the U.S. dollar strengthens against other
currencies, the resulting unfavorable currency translation could lower reported
U.S. dollar revenues, operating expenses and operating income and result in
U.S. dollar revenue growth lower than growth in local currency terms. We continue to achieve an increasing percentage of our revenues and growth
through business transformation outsourcing, our approach that combines
outsourcing with our other capabilities to help clients transform and outsource
key processes, applications and infrastructure to improve business performance.
For the three and nine months ended May 31, 2004, outsourcing revenues before
reimbursements increased 37% and 42%, respectively, in U.S. dollars and 29% and
34%, respectively, in local currency terms compared with the same periods last
year. Outsourcing contracts typically have longer contract terms than
consulting contracts; may not generate revenues as quickly in the early stages
of the contract; and generally have lower gross margins than consulting
contracts, particularly in the first year. As our outsourcing business
continues to grow, we are seeing an increase in the size, geographic scope
and/or delivery complexity of many of our 17




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outsourcing contracts. These contracts increasingly have complex pricing
models that often tie portions of our fees to achieving improvements in various
business metrics. In some cases, portions of our fees are affected by the level
of a clients business activity, which is outside of our control. Often such
contracts also have major transformational components or transitional
activities, such as hiring large numbers of new employees, the timely
implementation of which can have a significant impact on the timing and/or
amount of costs incurred and revenues recognized. Global economic and political conditions are continuing to cause companies
to be cautious about increasing their use of consulting services, but as their
profit margins begin to recover and companies return to focusing on improving
business performance, we are beginning to see an upturn in demand for our
consulting services. For the three months ended May 31, 2004, consulting
revenues before reimbursements increased by 13% in U.S. dollars and 5% in local
currency terms compared to the third quarter of fiscal 2003. For the nine
months ended May 31, 2004, consulting revenues before reimbursements increased
by 5% in U.S. dollars and decreased by 3% in local currency terms compared to
the nine months ended May 31, 2003. This was the first time in ten quarters
that our consulting revenues increased in local currency. Growth of our
consulting business continues to be a critical part of our strategy. While there are currently no indications of a significant new wave of
technology to stimulate spending, the strengthening economic recovery is
beginning to affect the patterns of technology investment of many companies.
As a result, growth-oriented business initiatives are again competing with
cost-cutting strategies. While outsourcing will continue to deliver solid
growth to our business, it is likely to grow overall at a slower rate than it has over
the past several quarters. These trends will likely be particularly pronounced
in our Communications & High Tech and Resources operating groups. We continue to experience ongoing pricing pressures from competitors as
well as from clients facing pressure to control costs. The pace of
consolidation and of vertical integration among our competitors continues to
increase and to affect our revenues and operating margins. In addition, the
growing use of off-shore resources to provide lower-cost service delivery
capabilities within our industry continues to be a source of pressure on our
revenues and operating margins. While we have recently experienced increases in
demand for our services and while margins in our consulting business have
recently stabilized, it is too early to tell if these developments will
translate into sustainable improvements in our pricing or margins over the long
term. 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, sub-contractor and other personnel costs, and non-payroll
outsourcing costs. Cost of services as a percentage of revenues is driven by
the prices we obtain for our solutions and services; the chargeability, or
utilization, of our client-service workforces; and the level of non-payroll
costs associated with the continuing accelerated growth of new outsourcing
contracts. Chargeability, or utilization, represents the percentage of our
professionals time spent on billable work. Sales and marketing expense is
driven primarily by business-development activities; the development of new
service offerings; the level of concentration of clients in a particular
industry or market; and client-targeting, image-development and brand-
recognition activities. General and administrative costs primarily include
costs for non-client-facing personnel, information systems and office space,
which we seek to manage at levels consistent with changes in activity levels in
our business. Gross margins (revenues less cost of services) for the three and nine
months ended May 31, 2004 were 35% and 34%, respectively, of revenues before
reimbursements, compared to 36% and 37%, respectively, for the same periods
last year. These decreases resulted from the continuing shift in our mix of
business toward outsourcing and increased variable compensation expense and
were partly offset by lower severance costs and higher consulting margins. Our cost-management strategy continues to be to anticipate changes in
demand for our services and to identify cost management initiatives. We
aggressively plan and manage our payroll costs to meet the anticipated demand
for our services, as operating expenses can be significantly affected by
variable compensation and severance costs. We continue to take actions to
create a more variable cost structure. While our chargeability levels are at or
near all-time highs, we continue to have supply-and-demand and skill-level
imbalances in certain industry segments and/or countries. We continue to take actions to balance our mix of skills and resources to
meet current and projected future demand in each of our markets and will use
our global sourcing approach, which includes our network of delivery centers
and other capabilities around the world, as part of our cost-effective delivery
model. Our headcount increased from approximately 83,000 employees worldwide at
August 31, 2003 to approximately 95,000 employees as of May 31, 2004. We hired
approximately 25,000 new employees in the first nine months of fiscal 2004 and
expect to hire several thousand more during 18




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##### 



the remainder of the fiscal year to meet this demand. Additionally, we
are experiencing a higher attrition rate as global economic conditions continue
to improve and the demand for technical talent in certain markets increases.
As a result of the substantial numbers of new hires in our workforces, our
hiring and training costs may increase. To combat attrition, compensation
adjustments will be made in certain markets in order to attract and retain
appropriate numbers of employees with the skills necessary to expand our
business. Our ability to grow our business could be adversely affected if we
do not effectively assimilate these new employees into our workforces. If
recent pricing improvements cannot be maintained, these additional costs and
compensation adjustments could adversely affect our operating margins. As a result of our ongoing cost-management initiatives and the continued
shift in our mix of business toward outsourcing, sales and marketing and
general and administrative costs decreased as a percentage of revenues before
reimbursements to 20% for both the three and nine months ended May 31, 2004,
respectively, from 23% and 24% for the three and nine months ended May 31,
2003, respectively. Operating income as a percentage of revenues before
reimbursements increased to 15.5% for the three months ended May 31, 2004 from
13.3% for the three months ended May 31, 2003. This increase was due to lower
sales and marketing expense and lower general and administrative costs as a
percentage of revenues before reimbursements, partly offset by a slight decline
in gross margins as described above. Operating income as a percentage of
revenues before reimbursements decreased slightly to 13.5% for the nine months
ended May 31, 2004, from 13.6% for the nine months ended May 31, 2003. This
slight decrease was due to the decline in gross margins as described above and
$107 million of restructuring costs relating to real estate consolidation,
offset by lower sales and marketing expense and general and administrative
costs as a percentage of revenues before reimbursements and by income of $84
million primarily resulting from final determinations of certain reorganization
liabilities established in connection with our transition to a corporate
structure in 2001. Bookings and Backlog New contract bookings for the three months ended May 31, 2004 were $3,393
million, a decrease of $1,785 million, or 34%, from new bookings of $5,178
million for the three months ended May 31, 2003, with consulting bookings
decreasing 3%, to $2,151 million, and outsourcing bookings decreasing 58%, to
$1,241 million. For the nine months ended May 31, 2004, bookings increased by
30% over bookings for the nine months ended May 31, 2003, with consulting
bookings increasing 11% and outsourcing bookings increasing 50%. For the twelve
months ended May 31, 2004, bookings increased 31% over bookings for the twelve
months ended May 31, 2003, with consulting bookings increasing 14% and
outsourcing bookings increasing 49%. We provide information regarding our bookings because we believe doing so
provides useful trend information regarding changes in the volume of our new
business over time. However, the timing of large bookings can significantly
impact the level of bookings in a particular quarter. Information regarding our
new bookings is not comparable to, nor should it be substituted for, an
analysis of our revenues over time. The majority of our contracts are
terminable by the client on short notice or without notice. Accordingly, we do
not believe it is appropriate to characterize bookings attributable to these
contracts as backlog. Normally, if a client terminates a project, the client
remains obligated to pay for commitments we have made to third parties in
connection with the project, services performed and reimbursable expenses
incurred by us through the date of termination. Critical Accounting Policies and Estimates For a complete description of our income statement line items and
accounting policies, see our Annual Report on Form 10-K for the fiscal year
ended August 31, 2003. The preparation of our consolidated financial statements in conformity
with accounting principles generally accepted in the United States 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. Our estimates, judgments and assumptions are continually
evaluated 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, income taxes, variable
compensation and defined benefit pension plans. 19




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##### 



Revenue Recognition Our contracts have different terms based on the scope, deliverables and
complexity of the engagement, the terms of which frequently require Accenture
to make judgments and estimates in recognizing revenues. We have many types of
contracts, including time-and-materials contracts, fixed-price contracts and
contracts with features of both of these contract types. In addition, there is
a trend to include greater incentives in our contracts related to costs
incurred, benefits produced or adherence to schedule that may increase the
variability in revenues and margins earned on such contracts. We conduct
rigorous reviews prior to signing such contracts to evaluate whether these
incentives are reasonably achievable. For technology integration contracts,
estimated revenues for applying the percentage-of-completion method include
estimated incentives for which achievement of defined goals is deemed probable.
For non-technology integration consulting and outsourcing contracts, revenues
relating to such incentive payments are recorded when the contingency is
satisfied and when acceptance, where applicable, and delivery of agreed
benefits have occurred in accordance with SEC Staff Accounting Bulletin (SAB)
No. 101, Revenue Recognition in Financial Statements, as amended by SAB No.
104, Revenue Recognition. We recognize revenues from technology integration consulting contracts
using the percentage-of-completion method pursuant to the American Institute of
Certified Public Accountants Statement of Position 81-1, Accounting for
Performance of Construction Type and Certain Production Type Contracts.
Percentage-of-completion accounting involves calculating the percentage of
services provided during the reporting period compared with the total estimated
services to be provided over the duration of the contract. This method is
followed where reasonably dependable estimates of revenues and costs can be
made. Estimates of total contract revenues and costs are continuously monitored
during the term of the contract, and recorded revenues and costs are subject to
revision as the contract progresses. Such revisions may result in increases or
decreases to revenues and income and are reflected in the financial statements
in the periods in which they are first identified. Outsourcing contracts typically span several years and involve complex
delivery, often through multiple workforces in different geographies. We
continuously review and reassess our estimates of contract profitability. If
our estimates indicate that a contract loss will occur, a loss accrual is
recorded in the consolidated financial statements in the period it is first
identified. Circumstances that could potentially result in contract losses over
the life of the contract include decreases in volumes of transactions or other
inputs/outputs on which we are paid, failure to deliver agreed benefits,
variances from planned internal/external costs to deliver our services, and
other factors affecting revenues and costs. Revenues for contracts with multiple elements are allocated based on the
fair value of the elements. Fair value is determined based on the prices
charged when each element is sold separately. Revenues are recognized in
accordance with our accounting policies for the separate elements when the
services have value on a stand-alone basis, fair value of the separate elements
exists and, in arrangements that include a general right of refund relative to
the delivered element, performance of the undelivered element is considered
probable and substantially in our control. While determining fair value and
identifying separate elements requires judgment, generally fair value and the
separate elements are readily identifiable as we also sell those elements
unaccompanied by other elements. Effective September 1, 2003, we adopted
Emerging Issues Task Force Issue 00-21, Accounting for Revenue Arrangements
with Multiple Deliverables. As such, for contracts signed after August 31,
2003, revenues are allocated to each element based on the lesser of fair value
or the amount that is not contingent on future delivery of another element. If
the amount of non-contingent revenue allocated to a delivered element is less
than the costs to deliver such services, then such costs are deferred and
recognized in future periods when the revenue becomes non-contingent. Income Taxes Determining the consolidated provision for income tax expense, deferred
tax assets and liabilities and related valuation allowance involves judgment.
As a global company, we are required to calculate and provide for income taxes
in each of the tax jurisdictions where 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. Changes in the
geographic mix or estimated level of annual pre-tax income can affect the
overall effective tax rate. Our effective tax rate for both the three and nine
months ended May 31, 2004 was 34.8% as compared to 32.9% and 36.3% for the
three and nine months ended May 31, 2003, respectively. We expect our
effective tax rate for fiscal 2004 to be 34.8%. 20




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##### 



Variable Compensation We record compensation expense for payments to be made in later fiscal
periods to our partners and other employees under the variable compensation
portions of our overall compensation programs. In fiscal 2004, we increased the
variable component of target compensation for larger portions of our global
workforce. Determining the amount of expense to recognize as operating expenses
for variable compensation at interim and annual reporting dates involves
judgment. Expenses accrued for variable compensation are based on actual
quarterly and annual operational performance versus plan targets and other
factors. Amounts accrued are subject to change in future periods if future
performance is below plan targets or is below the performance levels
anticipated in prior periods. Management believes it makes reasonable judgments
using all significant information available. The liability recorded as of May
31, 2004 for variable compensation was $162 million, of which we expect to pay
approximately $9 million in the fourth quarter of fiscal 2004 with the
remainder payable in subsequent quarters provided performance targets are met.
The following table shows quarterly variable compensation expense (benefit). Third
    
    Second
    
    First
    
    Fourth
    
    Third
    
    Second
    
    FirstQuarter
    
    Quarter
    
    Quarter
    
    Quarter
    
    Quarter
    
    Quarter
    
    Quarter(in millions)
    
    2004
    
    2004
    
    2004
    
    2003
    
    2003
    
    2003
    
    2003Variable Compensation
    
    $
    93
    
    
    $
    64
    
    
    $
    (4
    )
    
    $
    
    
    
    $
    
    
    
    $
    (6
    )
    
    $
    17
 We reversed $4 million of previously accrued variable compensation during
the first quarter of fiscal 2004 and accrued $157 million of variable
compensation expense during the second and third quarters of fiscal 2004,
bringing the year-to-date expense to $153 million, compared with $11 million in
the first nine months of fiscal 2003. Defined Benefit Pension Plans In the United States and certain other countries, Accenture maintains and
administers defined benefit pension plans. The annual cost of these plans can
be significantly affected by changes in assumptions and differences between
expected and actual experience. Pension expense was $89 million and $53 million
for the first nine months of fiscal 2004 and 2003, respectively. The pension
assumptions used to determine annual pension expense for fiscal 2004 and 2003
are as follows: Fiscal 2004
    
    Fiscal 2003U.S. Plans
    
    Non-U.S. Plans
    
    U.S. Plans
    
    Non-U.S. PlansDiscount rate
    
    
    6.00
    %
    
    
    4.85
    %
    
    
    7.25
    %
    
    
    4.92
    %Expected return on plan assets
    
    
    8.00
    %
    
    
    5.66
    %
    
    
    8.50
    %
    
    
    5.35
    %
 A one-percentage-point increase in the discount rate would decrease our
annual pension expense by $31 million. A one-percentage-point decrease in the
discount rate would increase our annual pension expense by $40 million. A one-percentage-point increase in our return on plan assets would
decrease our annual pension expense by $5 million. A one-percentage point
decrease in our return on plan assets would increase our annual pension expense
by $5 million. At the end of fiscal year 2003 we had an under-funded pension obligation
of approximately $385 million, of which $298 million related to U.S. plans and
$87 million related to non-U.S. plans. During the third quarter of fiscal
2004, Accenture made a cash contribution of $105 million to its U.S. pension
plans. With this funding, the fair value of the U.S. plan assets at May 31,
2004 was approximately $463 million, while our U.S. pension obligation was
approximately $646 million, resulting in an estimated under-funding of $183
million for the U.S. plans. We are updating our actuarial estimates for all
pension plans in the fourth quarter in conjunction with our normal year-end
reporting process. Statement of Financial Accounting Standards No. 87, Employers Accounting
for Pensions, requires recognition of a minimum pension liability if the fair
value of pension assets is less than the accumulated benefit obligation. During
fiscal 2003, we recorded a charge to equity of $108 million, representing an
adjustment to increase our pension liability by $180 million, net of a tax
benefit of $72 million. This charge was included in Accumulated other
comprehensive loss in the shareholders equity section of our balance sheet.
Additional charges to equity may be required in the future depending on future
contributions to our pension plans, returns on pension plan assets and interest
rates. 21




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##### 



Revenues by Segment/Operating Group Our five reportable operating segments are our operating groups, which are
Communications & High Tech, Financial Services, Government, Products and
Resources. Operating groups are managed on the basis of revenues before
reimbursements because our management believes it is a better indicator of
operating group performance than is revenues. From time to time, our operating
groups work together to sell and implement certain engagements. The resulting
revenues and costs from these engagements may be apportioned among the
participating operating groups. Generally, operating expenses for each
operating group have similar characteristics and are subject to the same
factors, pressures and challenges. However, the current economic environment
and its continuing effects on the industries served by our operating segments
affect revenues and operating expenses within our operating segments to
different degrees. Personnel reductions have not been taken uniformly across
our operating segments, due in part to an increased need on behalf of some of
our operating groups to tailor their workforces to the needs of their
businesses. The shift to outsourcing engagements is not uniform among our
operating groups and, consequently, neither is the impact on operating group
revenues caused by these transitions. Local currency fluctuations also tend to
affect our operating groups differently, depending on the historical and
current geographic concentrations and locations of their businesses. The following tables provide revenues for each of these operating groups. PercentageThree Months Ended
    
    Percentage
    
    IncreaseIncrease
    
    (Decrease)May 31,
    
    May 31,
    
    (Decrease)
    
    Local(in millions, except for percentages)
    
    2004
    
    2003
    
    US$
    
    CurrencyRevenues:Communications & High Tech
    
    $
    1,018
    
    
    $
    825
    
    
    
    23
    %
    
    
    17
    %Financial Services
    
    
    753
    
    
    
    605
    
    
    
    24
    
    
    
    15Government
    
    
    548
    
    
    
    419
    
    
    
    31
    
    
    
    24Products
    
    
    812
    
    
    
    679
    
    
    
    19
    
    
    
    11Resources
    
    
    555
    
    
    
    511
    
    
    
    8
    
    
    
    Other
    
    
    1
    
    
    
    6
    
    
    
    n/m
    
    
    
    n/mTotal revenues before reimbursements
    
    
    3,687
    
    
    
    3,045
    
    
    
    21
    %
    
    
    13
    %Reimbursements
    
    
    363
    
    
    
    373Total
    
    $
    4,050
    
    
    $
    3,418Revenues as a percentage of total:Communications & High Tech
    
    
    25
    %
    
    
    24
    %Financial Services
    
    
    19
    
    
    
    18Government
    
    
    13
    
    
    
    12Products
    
    
    20
    
    
    
    20Resources
    
    
    14
    
    
    
    15Other
    
    
    
    
    
    
    Total revenues before reimbursements
    
    
    91
    
    
    
    89Reimbursements
    
    
    9
    
    
    
    11Total
    
    
    100
    %
    
    
    100
    %
 22




---



##### 



PercentageNine Months Ended
    
    Percentage
    
    IncreaseIncrease
    
    (Decrease)May 31,
    
    May 31,
    
    (Decrease)
    
    Local(in millions, except for percentages)
    
    2004
    
    2003
    
    US$
    
    CurrencyRevenues:Communications & High Tech
    
    $
    2,828
    
    
    $
    2,442
    
    
    
    16
    %
    
    
    9
    %Financial Services
    
    
    2,046
    
    
    
    1,777
    
    
    
    15
    
    
    
    6Government
    
    
    1,494
    
    
    
    1,139
    
    
    
    31
    
    
    
    25Products
    
    
    2,228
    
    
    
    1,971
    
    
    
    13
    
    
    
    5Resources
    
    
    1,648
    
    
    
    1,462
    
    
    
    13
    
    
    
    4Other
    
    
    6
    
    
    
    10
    
    
    
    n/m
    
    
    
    n/mTotal revenues before reimbursements
    
    
    10,250
    
    
    
    8,801
    
    
    
    16
    %
    
    
    8
    %Reimbursements
    
    
    1,057
    
    
    
    1,134Total
    
    $
    11,307
    
    
    $
    9,935Revenues as a percentage of total:Communications & High Tech
    
    
    25
    %
    
    
    25
    %Financial Services
    
    
    18
    
    
    
    18Government
    
    
    13
    
    
    
    11Products
    
    
    20
    
    
    
    20Resources
    
    
    15
    
    
    
    15Other
    
    
    
    
    
    
    Total revenues before reimbursements
    
    
    91
    
    
    
    89Reimbursements
    
    
    9
    
    
    
    11Total
    
    
    100
    %
    
    
    100
    %
   n/m
    
    = not meaningful Geographic Information Revenues are attributed to geographic areas based on where client services
are supervised. PercentageThree Months Ended
    
    Percentage
    
    IncreaseIncrease
    
    (Decrease)May 31,
    
    May 31,
    
    (Decrease)
    
    Local(in millions, except for percentages)
    
    2004
    
    2003
    
    US$
    
    CurrencyRevenues:Americas
    
    $
    1,637
    
    
    $
    1,449
    
    
    
    13
    %
    
    
    12
    %EMEA (1)
    
    
    1,785
    
    
    
    1,401
    
    
    
    27
    
    
    
    13Asia/Pacific
    
    
    265
    
    
    
    195
    
    
    
    36
    
    
    
    23Total revenues before reimbursements
    
    
    3,687
    
    
    
    3,045
    
    
    
    21
    %
    
    
    13
    %Reimbursements
    
    
    363
    
    
    
    373Total
    
    $
    4,050
    
    
    $
    3,418Revenues as a percentage of total:Americas
    
    
    40
    %
    
    
    42
    %EMEA (1)
    
    
    44
    
    
    
    41Asia/Pacific
    
    
    7
    
    
    
    6Total revenues before reimbursements
    
    
    91
    
    
    
    89Reimbursements
    
    
    9
    
    
    
    11Total
    
    
    100
    %
    
    
    100
    %
 23




---



##### 



PercentageNine Months Ended
    
    Percentage
    
    IncreaseIncrease
    
    (Decrease)May 31,
    
    May 31,
    
    (Decrease)
    
    Local(in millions, except for percentages)
    
    2004
    
    2003
    
    US$
    
    CurrencyRevenues:Americas
    
    $
    4,630
    
    
    $
    4,187
    
    
    
    11
    %
    
    
    9
    %EMEA (1)
    
    
    4,910
    
    
    
    4,021
    
    
    
    22
    
    
    
    8Asia/Pacific
    
    
    710
    
    
    
    593
    
    
    
    20
    
    
    
    8Total revenues before reimbursements
    
    
    10,250
    
    
    
    8,801
    
    
    
    16
    %
    
    
    8
    %Reimbursements
    
    
    1,057
    
    
    
    1,134Total
    
    $
    11,307
    
    
    $
    9,935Revenues as a percentage of total:Americas
    
    
    41
    %
    
    
    42
    %EMEA (1)
    
    
    43
    
    
    
    41Asia/Pacific
    
    
    6
    
    
    
    6Total revenues before reimbursements
    
    
    91
    
    
    
    89Reimbursements
    
    
    9
    
    
    
    11Total
    
    
    100
    %
    
    
    100
    %
   (1)
    
    EMEA includes Europe, the Middle East and Africa Revenues by Type of Work The following table presents revenues before reimbursements by types of
services. PercentageThree Months Ended
    
    Percentage
    
    IncreaseIncrease
    
    (Decrease)May 31,
    
    May 31,
    
    (Decrease)
    
    Local(in millions, except for percentages)
    
    2004
    
    2003
    
    US$
    
    CurrencyConsulting
    
    $
    2,327
    
    
    $
    2,052
    
    
    
    13
    %
    
    
    5
    %Outsourcing
    
    
    1,360
    
    
    
    993
    
    
    
    37
    
    
    
    29Revenues before reimbursements
    
    
    3,687
    
    
    
    3,045
    
    
    
    21
    %
    
    
    13
    %Reimbursements
    
    
    363
    
    
    
    373Revenues
    
    $
    4,050
    
    
    $
    3,418
   Note:
    
    For the three months ended May 31, 2003, $81 million of revenues
before reimbursements previously classified as Other have been
reclassified to Consulting or Outsourcing type of work to conform to
the current presentation. PercentageNine Months Ended
    
    Percentage
    
    IncreaseIncrease
    
    (Decrease)May 31,
    
    May 31,
    
    (Decrease)
    
    Local(in millions, except for percentages)
    
    2004
    
    2003
    
    US$
    
    CurrencyConsulting
    
    $
    6,448
    
    
    $
    6,129
    
    
    
    5
    %
    
    
    (3
    )%Outsourcing
    
    
    3,802
    
    
    
    2,672
    
    
    
    42
    
    
    
    34Revenues before reimbursements
    
    
    10,250
    
    
    
    8,801
    
    
    
    16
    %
    
    
    8
    %Reimbursements
    
    
    1,057
    
    
    
    1,134Revenues
    
    $
    11,307
    
    
    $
    9,935
   Note:
    
    For the nine months ended May 31, 2003, $229 million of revenues
before reimbursements previously classified as Other have been
reclassified to Consulting or Outsourcing type of work to conform to
the current presentation. 24




---



##### 



Three Months Ended May 31, 2004 Compared to Three Months Ended May 31, 2003 Revenues Revenues for the three months ended May 31, 2004 were $4,050 million, an
increase of $632 million, or 18%, over the three months ended May 31, 2003.
Revenues before reimbursements for the three months ended May 31, 2004 were
$3,687 million, an increase of $642 million, or 21%, over the three months
ended May 31, 2003 in U.S. dollars. In local currency terms, revenues before
reimbursements for the three months ended May 31, 2004 increased 13% over the
three months ended May 31, 2003. These increases reflect strong revenue growth
in consulting and outsourcing engagements across most operating groups, as well
as favorable currency translation, reflecting the strengthening of the Euro and
British pound. We experienced revenue growth in all major areas in which we
operate and in all our operating groups. Our Communications & High Tech operating group achieved revenues before
reimbursements of $1,018 million for the three months ended May 31, 2004, an
increase of 23% over the three months ended May 31, 2003, due to revenue growth
in our Communications industry group and in North America. Our Financial Services operating group achieved revenues before
reimbursements of $753 million for the three months ended May 31, 2004, an
increase of 24% over the three months ended May 31, 2003. Revenue growth in
our Capital Markets and Insurance industry groups, work from clients in the
United Kingdom and particularly strong growth in outsourcing engagements
contributed to this growth. Our Government operating group achieved revenues before reimbursements of
$548 million for the three months ended May 31, 2004, an increase of 31% over
the three months ended May 31, 2003, reflecting growth across all geographic
areas, particularly from U.S. Federal government clients and clients in the
United Kingdom and Asia Pacific region. Our Products operating group achieved revenues before reimbursements of
$812 million for the three months ended May 31, 2004, an increase of 19% over
the three months ended May 31, 2003, reflecting revenue growth across all
industry groups, particularly in our Retail & Consumer and Pharmaceuticals &
Medical Products industry groups. Our Resources operating group achieved revenues before reimbursements of
$555 million for the three months ended May 31, 2004, an increase of 8% over
the three months ended May 31, 2003, as a result of growth across all industry
groups, particularly our Utilities and Energy industry groups and Natural
Resources, comprised of our Forest Products and Metals and Mining industry
groups. Operating Expenses Operating expenses for the three months ended May 31, 2004 were $3,477
million, an increase of $463 million, or 15%, over the three months ended May
31, 2003, and decreased as a percentage of revenues from 88% to 86% over the
period. As a percentage of revenues before reimbursements, operating expenses
before reimbursable expenses decreased from 87% to 84% over this period. This
decrease was primarily due to lower sales and marketing expense and general and
administrative costs as a percentage of revenues before reimbursements. The
strengthening of various currencies against the U.S. dollar also increased
reported operating expenses for the three months ended May 31, 2004 compared to
the same three-month period last year, partially offsetting corresponding
increases in reported revenues. Cost of Services Cost of services was $2,743 million for the three months ended May 31,
2004, an increase of $431 million, or 19%, over the three months ended May 31,
2003, and remained constant as a percentage of revenues at 68%. Cost of
services before reimbursable expenses was $2,380 million for the three months
ended May 31, 2004, an increase of $441 million, or 23%, over the three months
ended May 31, 2003. The strengthening of various currencies against the U.S.
dollar contributed to the $441 million increase in cost of services. Cost of
services before reimbursable expenses increased slightly as a percentage of
revenues before reimbursements from 64% to 65% over this period. Gross margins
(revenues less cost of services) in the three months ended May 31, 2004
decreased to 35% of revenues before reimbursements from 36% in the three months
ended May 31, 2003. 25




---



##### 



The primary drivers of the increase in cost of services and the decrease
in total gross margins were the shift in our mix of business toward outsourcing
and higher variable compensation expense, partly offset by lower severance
costs and higher consulting margins. The improvement in our consulting gross margins was
due to an increase in workdays over last years quarter and to modest pricing
improvements. Sales and Marketing Sales and marketing expense was $391 million for the three months ended
May 31, 2004, an increase of $28 million, or 8%, over the three months ended
May 31, 2003, and decreased as a percentage of revenues before reimbursements
from 12% to 11% over this period. Key drivers of the increase in sales and
marketing expense were variable compensation, an increase in market development
activities, as well as the effect of currency translation, partly offset by
lower business development costs. General and Administrative Costs General and administrative costs were $341 million for the three months
ended May 31, 2004, an increase of $1 million over the three months ended May
31, 2003, and decreased as a percentage of revenues before reimbursements from
11% to 9%. The slight increase in costs includes a $17 million increase in
business protection costs and the effect of currency translation, partly offset
by a $15 million decrease in geographic facility and technology costs. Operating Income Operating income was $573 million for the three months ended May 31, 2004,
an increase of $169 million, or 42%, over the three months ended May 31, 2003.
Operating income increased as a percentage of revenues before reimbursements
from 13.3% to 15.5% over this period. The $169 million increase reflects
increases in operating income of $79 million, $36 million, $25 million, $25
million and $4 million in our Communications & High Tech, Financial Services,
Government, Products and Resources operating groups, respectively, resulting
from increases in revenues before reimbursements across all operating groups.
The increase in Communications & High Tech operating income also reflects
cost-containment efforts and improved profitability on consulting engagements.
The increase in Financial Services also reflects lower severance costs and
cost-containment efforts. The increases in revenues before reimbursements in
the Government and Product operating groups were partly offset by lower margins
resulting from the shift in type of work from consulting to outsourcing. The
increase in Resources operating income was also due to higher chargeability
and savings from cost-management initiatives. Other Income (Expense) Other expense for the three months ended May 31, 2004 was $19 million,
which primarily consists of foreign currency losses resulting from the Euro and
British pound strengthening against the U.S. dollar. Provision for Taxes The effective tax rate for the three months ended May 31, 2004 was 34.8%.
We expect our effective tax rate for fiscal 2004 to be 34.8%. The decrease in
reorganization liabilities during the three months ended November 30, 2003
reduced the 2004 projected annual effective tax rate by 1.8 percentage points.
The decrease in reorganization liabilities has the effect of increasing pre-tax
income in fiscal 2004 without a corresponding increase in the provision for
income taxes. The effective tax rate for the three months ended May 31, 2003 was 32.9%.
This rate includes the effect of the reduction in the projected 2003 annual
effective tax rate from 38.0% to 36.3% primarily as a result of the reversal of
previously accrued taxes upon favorable settlement of certain prior-year
non-U.S. income tax liabilities. The actual effective tax rate for the fiscal
year ended August 31, 2003 was 35.1%. The 2003 annual effective tax rate
declined from 36.3% to 35.1% as a result of lower-than-estimated non-U.S.
withholding tax requirements. 26




---



##### 



Nine Months Ended May 31, 2004 Compared to Nine Months Ended May 31, 2003 Revenues Revenues for the nine months ended May 31, 2004 were $11,307 million, an
increase of $1,372 million, or 14%, over the nine months ended May 31, 2003.
Revenues before reimbursements for the nine months ended May 31, 2004 were
$10,250 million, an increase of $1,449 million, or 16%, over the nine months
ended May 31, 2003 in U.S. dollars. In local currency terms, revenues before
reimbursements for the nine months ended May 31, 2004 increased 8% over the
nine months ended May 31, 2003. These increases reflect strong revenue growth
in both consulting and outsourcing engagements across most of our operating
groups, as well as favorable currency translation, primarily reflecting the
strengthening of the Euro and the British pound. Our Communications & High Tech operating group achieved revenues before
reimbursements of $2,828 million for the nine months ended May 31, 2004, an
increase of 16% over the nine months ended May 31, 2003, reflecting growth
across all geographic areas and in our Communications industry group. Our Financial Services operating group achieved revenues before
reimbursements of $2,046 million for the nine months ended May 31, 2004, an
increase of 15% over the nine months ended May 31, 2003. Revenue growth in our
Capital Markets industry group and work for clients in the United Kingdom
contributed to this growth. Our Government operating group achieved revenues before reimbursements of
$1,494 million for the nine months ended May 31, 2004, an increase of 31% over
the nine months ended May 31, 2003, reflecting growth across all geographic
areas, particularly from U.S. Federal government clients, and clients in the
United Kingdom and Asia Pacific region. Our Products operating group achieved revenues before reimbursements of
$2,228 million for the nine months ended May 31, 2004, an increase of 13% over
the nine months ended May 31, 2003, as a result of growth across most industry
groups, partly offset by a slight decrease in our Transportation & Travel
Services industry group. Our Resources operating group achieved revenues before reimbursements of
$1,648 million for the nine months ended May 31, 2004, an increase of 13% over
the nine months ended May 31, 2003, as strong growth in outsourcing and
favorable currency translation more than offset a slight decrease in our
consulting revenues. Growth in our Utilities and Energy industry groups more
than offset declines in our Chemicals industry group. Operating Expenses Operating expenses for the nine months ended May 31, 2004 were $9,919
million, an increase of $1,186 million, or 14%, over the nine months ended May
31, 2003, and remained constant as a percentage of revenues at 88%. As a
percentage of revenues before reimbursements, operating expenses before
reimbursable expenses remained constant at 86%. For the nine months ended May
31, 2004, operating expenses included restructuring costs of $107 million
relating to the Companys global consolidation of office space and a benefit of
$84 million primarily resulting from final determinations of certain
reorganization liabilities established in connection with our transition to a
corporate structure in 2001. The restructuring cost of $107 million and
reorganization benefit of $84 million increased operating expenses before
reimbursable expenses as a percentage of revenues before reimbursements by 0.2
percentage points. The strengthening of various currencies against the U.S.
dollar increased reported operating expenses for the nine months ended May 31,
2004 compared to the same nine-month period last year, partially offsetting
corresponding increases in reported revenues. Cost of Services Cost of services was $7,800 million for the nine months ended May 31,
2004, an increase of $1,136 million, or 17%, over the nine months ended May 31,
2003, and increased as a percentage of revenues from 67% to 69% over this
period. Cost of services before reimbursable expenses was $6,743 million for
the nine months ended May 31, 2004, an increase of $1,213 million, or 22%, over
the nine months ended May 31, 2003. Cost of services before reimbursable
expenses increased as a percentage of revenues before reimbursements from 63%
to 66% over this period. The primary drivers of the increase in cost of
services were the shift in our mix of business toward outsourcing and higher
variable compensation expense. The strengthening of various currencies against
the U.S. dollar contributed to the $1,213 million increase. 27




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##### 



Gross margins (revenues less cost of services) in the nine months ended
May 31, 2004 decreased to 34% of revenues before reimbursements from 37% in the
nine months ended May 31, 2003. This decrease resulted from the continuing
shift in our mix of business toward outsourcing; ongoing pricing pressures; and
increased variable compensation expense Sales and Marketing Sales and marketing expense was $1,100 million for the nine months ended
May 31, 2004, an increase of $12 million, or 1%, over the nine months ended May
31, 2003, and decreased as a percentage of revenues before reimbursements from
12% to 11% over this period. Key drivers of the increase were an increase in
market development activities, variable compensation, higher advertising costs
and the effect of currency translation, largely offset by lower business
development costs. General and Administrative Costs General and administrative costs were $996 million for the nine months
ended May 31, 2004, unchanged from the nine months ended May 31, 2003, and
decreased as a percentage of revenues before reimbursements from 11% to 10%
over this period. Decreases of $17 million in geographic facility and
technology costs and $16 million in technology initiatives were offset by a $41
million increase in business protection costs as well as the effect of currency
translation. Restructuring and Reorganization Costs (Benefit) During the nine months ended May 31, 2004, we recorded restructuring costs
of $107 million relating to our global consolidation of office space, primarily
in the United States and the United Kingdom. These costs include losses on
operating leases and writedowns of related assets such as leasehold
improvements resulting from abandoned office space. During this same period,
the Company recorded income of $84 million primarily resulting from final
determinations of certain reorganization liabilities established in connection
with our transition to a corporate structure in 2001. During the nine months ended May 31, 2003, we recorded a benefit of $15
million resulting primarily from a decrease in certain reorganization
liabilities established in connection with our transition to a corporate
structure in 2001. Operating Income Operating income was $1,388 million for the nine months ended May 31,
2004, an increase of $187 million, or 16%, over the nine months ended May 31,
2003. Operating income decreased slightly as a percentage of revenues before
reimbursements from 13.6% to 13.5% over this period. For the nine months ended
May 31, 2004, operating income included restructuring costs of $107 million and
a reorganization benefit of $84 million as discussed above, which reduced
operating income as a percentage of revenues before reimbursements by 0.2
percentage points. Lower gross margins and higher variable compensation expense
offset savings in sales and marketing, general and administrative costs, and
favorable currency translation due to strengthening of various currencies
against the U.S. dollar. Operating income for each of the operating groups is as follows (in
millions): Nine Months EndedMay 31,
    
    May 31,
    
    IncreaseOperating Income
    
    2004
    
    2003
    
    (Decrease)Communications & High Tech
    
    $
    280
    
    
    $
    250
    
    
    $
    30Financial Services
    
    
    272
    
    
    
    244
    
    
    
    28Government
    
    
    248
    
    
    
    206
    
    
    
    42Products
    
    
    371
    
    
    
    346
    
    
    
    25Resources
    
    
    217
    
    
    
    155
    
    
    
    62Total
    
    $
    1,388
    
    
    $
    1,201
    
    
    $
    187
 Restructuring costs and reorganization benefit for the nine months ended
May 31, 2004 and 2003 were allocated to the operating groups, affecting their
operating income by the following amounts (in millions): 28




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##### 



Nine Months EndedIncrease (Decrease) to
    
    May 31,
    
    May 31,
    
    IncreaseOperating Income
    
    2004
    
    2003
    
    (Decrease)Communications & High Tech
    
    $
    (6
    )
    
    $
    4
    
    
    $
    10Financial Services
    
    
    (5
    )
    
    
    3
    
    
    
    8Government
    
    
    (3
    )
    
    
    2
    
    
    
    5Products
    
    
    (5
    )
    
    
    3
    
    
    
    8Resources
    
    
    (4
    )
    
    
    3
    
    
    
    7Total
    
    $
    (23
    )
    
    $
    15
    
    
    $
    38
 Excluding the restructuring costs and reorganization benefit, operating
income for the nine months ended May 31, 2004 would have increased by $225
million over the nine months ended May 31, 2003. This $225 million increase
reflects increases of $40 million, $36 million, $47 million, $33 million and
$69 million in the Communications & High Tech, Financial Services, Government,
Products, and Resources operating groups, respectively. The increases in
Communications & High Tech and Financial Services operating income were driven
by a 16% and 15%, respectively, increase in revenues before reimbursements, as
well as savings from cost-management initiatives. Government operating income
increased primarily due to a 31% increase in revenues before reimbursements,
partly offset by higher business development costs in support of large
contracts. Products operating income increased primarily due to a 13% increase
in revenues before reimbursements, partly offset by lower gross margins,
reflecting the shift in the mix of our business toward outsourcing. The
increase in Resources operating income was driven by a 13% increase in revenues
before reimbursements, improved chargeability and savings from cost-management
initiatives. Other Income (Expense) Other income for the nine months ended May 31, 2004 was $1 million, a
decrease of $25 million, or 98%, from the nine months ended May 31, 2003,
resulting from lower currency exchange gains. Provision for Taxes The effective tax rate for the nine months ended May 31, 2004 was 34.8%.
We expect our effective tax rate for fiscal 2004 to be 34.8%. The decrease in
reorganization liabilities during the nine months ended May 31, 2004 reduced
the 2004 annual effective tax rate by 1.8 percentage points. The decrease in
reorganization liabilities has the effect of increasing pre-tax income in
fiscal 2004 without a corresponding increase in the provision for income taxes. The effective tax rate for the nine months ended May 31, 2003 was 36.3%,
while the effective tax rate for the fiscal year ended August 31, 2003 was
35.1%. The 2003 rate declined from 36.3% to 35.1% as a result of
lower-than-estimated non-U.S. withholding tax requirements. The decrease from 36.3% for the nine months ended May 31, 2003 to 34.8%
for the nine months ended May 31, 2004 resulted from the tax effect of the
reduction in reorganization liabilities and a reduction of prior-year income
tax liabilities as a result of a favorable settlement of a non-U.S. tax audit
in fiscal 2004. Liquidity and Capital Resources Our primary sources of liquidity are cash flows from operations, debt
capacity available under various credit facilities, and available cash
reserves. Cash flow generated by operating activities for the nine months ended
May 31, 2004 totaled $1,363 million. At May 31, 2004, cash and cash equivalents
totaled $3,515 million, while total debt was $60 million. After giving effect
to our use of the proceeds on June 3, 2004 from the April 29, 2004 offering of
Accenture Ltd Class A common shares, cash and cash equivalents combined with
$608 million of liquid fixed-income securities, which were classified as
investments on our Consolidated Balance Sheet, totaled $3,135 million at May
31, 2004. We may also raise additional funds through public or private debt or
equity financings in order to:  
    
    take advantage of opportunities, including more rapid expansion;
    
    acquire complementary businesses or technologies; 29




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##### 




    
    develop new services and solutions;
    
    respond to competitive pressures; or
    
    facilitate share dispositions by our partners, former partners and
their permitted transferees pursuant to our Share Management Plan and
certain purchases from our other employees. For a more detailed description of our Share Management Plan, see Certain
Transaction and Relationships  Share Management Plan in our Annual Report on
Form 10-K for the fiscal year ended August 31, 2003. Net cash provided by operating activities was $1,363 million for the nine
months ended May 31, 2004, an increase of $284 million over the nine months
ended May 31, 2003. This increase was primarily attributable to an increase in
accrued payroll and related benefits, which was partly offset by a $120 million
increase in net client balances (receivables, unbilled services and deferred
revenues combined). Net cash used in investing activities was $798 million for the nine months
ended May 31, 2004, an increase of $776 million over the nine months ended May
31, 2003. The increase was primarily due to purchases of marketable securities
and increased capital spending on property and equipment. Net cash provided by financing activities was $592 million for the nine
months ended May 31, 2004, as compared to net cash used in financing activities
of $456 million for the nine months ended May 31, 2003. Net cash provided by
financing activities includes $988 million of proceeds from a secondary
offering, which was subsequently disbursed on June 3, 2004 to redeem Accenture
SCA Class I common shares. As of May 31, 2004, we had two $537.5 million syndicated facilities,
including one 364-day facility and one three-year facility, providing
unsecured, revolving borrowing capacity for general working capital purposes,
including, in the case of the three-year facility, the issuance of letters of
credit on behalf of Accenture affiliates. Financing was provided under these
facilities at the prime rate or at the London Interbank Offered Rate plus a
spread, and bid option financing was available. These facilities required us
to: (1) limit liens placed on our assets to (a) liens incurred in the ordinary
course of business (subject to certain limitations) and (b) other liens
securing aggregate amounts not in excess of 30% of our total assets; and (2)
maintain a debt-to-cash-flow ratio not exceeding 1.75 to 1.00. We continue to
be in compliance with these terms. As of May 31, 2004, we had no borrowings
under either facility and $86 million in letters of credit outstanding under
the three-year facility. On June 18, 2004, we replaced the two existing $537.5 million syndicated
loan facilities with a single five-year, $1,500 million facility, with terms
and conditions similar to those in the previous arrangements. All letters of
credit outstanding under the prior three-year facility were incorporated into
the new facility. We also maintain four separate bilateral, uncommitted, unsecured
multicurrency revolving credit facilities. As of May 31, 2004, these facilities
provided for up to $251 million of local currency financing in countries where
we cannot readily access our syndicated facilities. We also maintain local
guaranteed and non-guaranteed lines of credit. As of May 31, 2004, amounts
available under these facilities totaled $216 million. At May 31, 2004, we had
$37 million outstanding under these various facilities and $9 million of other
short-term borrowings. Interest rate terms on the bilateral revolving
facilities and local lines of credit are at market rates prevailing in the
relevant local markets. During the nine months ended May 31, 2004 and 2003, we invested
$180 million and $134 million, respectively, in capital expenditures, primarily
for technology assets, furniture and equipment, and leasehold improvements to
support our operations. We expect that our capital expenditures will be in the
range of $300 million to $350 million in fiscal 2004. In limited circumstances, we agree to extend financing to clients. The
terms vary by engagement, but generally we contractually link payment for
services to the achievement of specified performance milestones. We finance
these client obligations primarily with existing working capital and bank
financing in the country of origin. As of May 31, 2004 and August 31, 2003,
$417 million and $336 million were outstanding for 38 and 35 clients,
respectively. As of May 31, 2004 and August 31, 2003, $245 million and $203
million, respectively, were included in current unbilled services and $172
million and $133 million, respectively, were included in non-current unbilled
services on our Consolidated Balance Sheet. 30




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##### 



Share Purchases and Redemptions Open-Market Repurchases On December 19, 2003, the Accenture Stock Employee Compensation Trust was
terminated. A subsidiary of Accenture Ltd that is not a subsidiary of Accenture
SCA created a new Share Employee Compensation Trust (SECT). Substantially all
treasury shares purchased by the predecessor trust that had not been used to
fund employee share awards were transferred to the new SECT. In a series of open-market purchases during the three and nine months
ended May 31, 2004, the SECT and its predecessor trust acquired 1,800,000 and
7,113,050 Accenture Ltd Class A common shares, respectively, at aggregate
purchase prices of $44 million and $166 million, respectively, for use in
conjunction with employee equity awards. At May 31, 2004, the SECT had $66
million of previously authorized contributions available for share purchases. Share Management Plan and RSU Sell Back Program Transactions During the three and nine months ended May 31, 2004, Accenture purchased
68,635 and 408,648, respectively, Accenture Ltd Class A common shares delivered
pursuant to restricted share units for approximately $2 million and $10
million, respectively. At May 31, 2004, the amount available for future share redemptions and
purchases by Accenture under the Share Management Plan and RSU Sell Back
Program was $402 million. On May 4, 2004, as part of its Share Management Plan, Accenture closed an
underwritten public offering of Accenture Ltd Class A common shares. The
offering was comprised of 35,761,232 such shares newly issued by Accenture Ltd
and 14,238,768 of such shares offered by Accenture partners, former partners
and their permitted transferees. The price to the public was $23.50 per share and the price net of
the underwriters' discount of 2.8% was $22.84. Accenture Ltd received $817 million as the result of
the issuance of 35,761,232 shares newly issued by Accenture Ltd. On May 4,
2004, the underwriters, in connection with the underwritten public offering,
exercised their option to purchase an additional 7,500,000 newly issued Class A
common shares at the same price per share. On May 4, 2004, Accenture Ltd
received $171 million as a result of the issuance of the additional 7,500,000
newly issued shares. Accenture Ltd remitted proceeds from the offering to
Accenture SCA in exchange for Accenture SCA Class I common shares. As a result of
these transactions, Accenture Ltds ownership interest in Accenture SCA
increased from 55% to 57%. All proceeds from the secondary offering that
concluded on May 4, 2004, and exercise of the related underwriters' option, as
well as $57 million of the $600 million previously authorized for acquisitions
from partners, former partners and their permitted transferees, were used
to redeem or purchase Accenture SCA Class I common shares and Accenture Canada Holdings
Inc. exchangeable shares on June 3, 2004. For
further discussion on the Accenture SCA tender offer see Subsequent Event
section below. Other Redemptions and Purchases Additionally, we continue to redeem or purchase certain Accenture SCA
Class I common shares in isolated transactions conducted outside of our Share
Management Plan in accordance with the redemption provisions applicable to the
Accenture SCA Class I common shares pursuant to their terms or in purchase
transactions on comparable terms. These transactions do not require further
approval by the Accenture Ltd board of directors, and funds used in these
transactions do not reduce other specific authorizations made by the Accenture
Ltd board of directors for various share purchase or reduction activities. To
date, these transactions have consisted primarily of redemptions or purchases
of shares held by the beneficiaries and estates of deceased partners and former
partners and, to a lesser extent, by charitable foundations. During the three
and nine months ended May 31, 2004, $15 million and $56 million, respectively,
was used for these purposes. Subsequent Event On June 3, 2004, Accenture SCA and one of its controlled subsidiaries
redeemed or purchased an aggregate of 45,087,451 Accenture SCA Class I common
shares at a price of $23.50 per share less transaction fees as a result of a
tender offer made to Accenture SCA Class I shareholders on April 29, 2004. At
the same time, a subsidiary of Accenture SCA purchased 654,344 Accenture Canada
Holdings Inc. exchangeable shares at a price of $23.50 per share less
transaction fees. The total
cash outlay for these transactions was $1,075 million. As a result of this
transaction Accenture Ltds ownership interest in Accenture SCA increased from
57% to 60%. 31




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Obligations and Commitments As of May 31, 2004, we had the following obligations and commitments to
make future payments under contracts, contractual obligations and commercial
commitments: Payments due by periodLess thanContractual Cash Obligations
    
    Total
    
    1 year
    
    1-3 years
    
    4-5 years
    
    After 5 years(in millions)Long-term debt
    
    $
    15
    
    
    $
    12
    
    
    $
    3
    
    
    $
    
    
    
    $
    Operating leases
    
    
    2,043
    
    
    
    229
    
    
    
    389
    
    
    
    313
    
    
    
    1,112Training facility services agreement
    
    
    74
    
    
    
    32
    
    
    
    40
    
    
    
    2
    
    
    
    Retirement obligations (1)
    
    
    307
    
    
    
    32
    
    
    
    72
    
    
    
    39
    
    
    
    164Other purchase commitments (2)
    
    
    1,693
    
    
    
    1,226
    
    
    
    371
    
    
    
    84
    
    
    
    12Total
    
    $
    4,132
    
    
    $
    1,531
    
    
    $
    875
    
    
    $
    438
    
    
    $
    1,288
   1)
    
    This represents projected payments under our Basic Retirement Benefit and
Early Retirement Plans. Both of these plans are unfunded and as such we
pay these benefits directly. These plans were eliminated for active
partners after May 15, 2001.2)
    
    Other purchase commitments include a $958 million commitment to redeem or
purchase Accenture SCA Class I common shares pursuant to a tender offer
made on April 29, 2004 that closed on June 3, 2004. Other purchase
commitments also include, among other things, information technology,
software support and maintenance obligations as well as 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. Amounts
shown do not include recourse we may have to recover termination fees or
penalties from clients. Off-Balance Sheet Arrangements We have various agreements by which we may be obligated to indemnify the
other party with respect to certain matters. Generally, these indemnification
provisions are included in contracts arising in the normal course of business
under which we customarily agree to hold the indemnified party harmless against
losses arising from a breach of representations related to such matters as
title to assets sold and licensed or certain intellectual property rights.
Payments by us under such indemnification clauses are generally conditioned on
the other party making a claim. Such claims are generally subject to challenge
by us and to dispute resolution procedures specified in the particular
contract. Further, our obligations under these arrangements may be limited in
terms of time and/or amount and, in some instances, we may have recourse
against third parties for certain payments made by us. It is not possible to
predict the maximum potential amount of future payments under these
indemnification agreements due to the conditional nature of our obligations and
the unique facts of each particular agreement. Historically, the Company has
not made any payments under these agreements that have been material
individually or in the aggregate. As of May 31, 2004, we were not aware of any
obligations under such indemnification agreements that would require material
payments. From time to time, Accenture enters into contracts with clients whereby it
has joint and several liability with other participants and third parties
providing related services and products to the client. Under these
arrangements, Accenture and other parties may assume some responsibility to the
client for the performance of others under the terms and conditions of the
contract with or for the benefit of the client. In some arrangements, the
extent of Accentures obligations for the performance of others is not
expressly specified. As of May 31, 2004, Accenture estimates it had assumed an
aggregate potential liability of approximately $404 million to its clients for
the performance of others under arrangements described in this paragraph. These
contracts typically provide recourse provisions that would allow Accenture to
recover from the other parties all but approximately $40 million if Accenture
is obligated to make payments to the clients that are the consequence of a
performance default by the other parties. In some of these contracts, the
guarantee is contractually given to the client by one of the other parties
providing services to the client. In the event of Accentures performance
default, Accenture could be responsible for repayment to the other party. To
date, Accenture has not been required to make any payments under any of the
contracts described in this paragraph; and we believe that, if we were to incur
a loss in the future in connection with any one of these arrangements, such a
loss should not have a material effect on Accentures financial condition or
results of operations. 32




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##### 



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK For a discussion of our market risk associated with foreign currency risk,
interest rate risk and equity price risk as of August 31, 2003, see
Quantitative and Qualitative Disclosures about Market Risk in Part II, Item
7A, of Accenture SCAs Annual Report on Form 10-K for the fiscal year ended August 31, 2003.
During the nine months ended May 31, 2004, there were no material changes in
our market risk exposure. ITEM 4. CONTROLS AND PROCEDURES Based on their evaluation as of a date as of the end of the period covered
by this Quarterly Report on Form 10-Q, the chief executive officer and the
chief financial officer of Accenture Ltd have concluded that Accenture SCAs
disclosure controls and procedures (as defined in Rule 13a-15(e) under the
Exchange Act) are effective to ensure that information required to be disclosed
by Accenture SCA in the reports that it files or submits under the Exchange Act
is recorded, processed, summarized and reported within the time periods
specified in the SECs rules and forms. There has been no change in Accenture SCAs internal control over
financial reporting that occurred during the three months ended May 31, 2004
that has materially affected, or is reasonably likely to materially affect,
Accenture SCAs internal control over financial reporting. Implementation of the transition of certain of our business and financial
systems to new platforms is ongoing. We continue to monitor resource and
personnel requirements to ensure that our internal controls are not adversely
affected during this transition. PART IIOTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS We are involved in a number of judicial and arbitration proceedings
concerning matters arising in the ordinary course of our business. We do not
expect that any of these matters, individually or in the aggregate, will have a
material impact on our results of operations or financial condition. As previously reported in July 2003, we became aware of an incident of
possible noncompliance with the Foreign Corrupt Practices Act and/or with
Accentures internal controls in connection with certain of Accentures
operations in the Middle East. We have voluntarily reported the incident to the
appropriate authorities in the United States. The SEC has advised us it will be
undertaking an informal investigation of this incident, which is also under
review by the U.S. Department of Justice. We do not believe that this incident
will have any material impact on our results of operations or financial
condition. We currently maintain the types and amounts of insurance customary in the
industries and countries in which we operate, including coverage for
professional liability, general liability and management liability. We consider
our insurance coverage to be adequate both as to the risks and amounts for the
businesses we conduct. 33




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##### 



ITEM 2. CHANGES IN
SECURITIES AND USE OF PROCEEDS Recent Sales of
Unregistered Securities On
April 2, April 23, April 28, May 3 and
May 4, 2004, Accenture SCA and its subsidiaries transferred an
aggregate of 49,621,258 Class I common shares to Accenture Ltd
in connection with the issuance by Accenture Ltd of 49,621,258 of its
Class A common shares. These Class I common shares were transferred in reliance on the exemption
from registration contained in Section 4(2) of the Securities Act of 1933, as amended, on the basis that the
transaction did not involve any public offering. Repurchases of Common
Stock The following table provides information relating to the Companys
acquisition of Class I Common Shares for the third quarter of fiscal 2004. For
further discussion of Accentures share repurchase activity including the
purchase of Accenture Ltd Class A shares, see Liquidity and Capital Resources
in Managements Discussion and Analysis within this Quarterly Report on Form
10-Q. Total Number of
    
    ApproximateShares
    
    Dollar Value ofTotal Number
    
    Average
    
    Purchased as
    
    Shares that Mayof Shares
    
    Price Paid
    
    Part of Publicly
    
    Yet Be PurchasedPeriod
    
    Purchased
    
    per Share
    
    Announced Plan
    
    Under the PlanMarch 1,
2004  March 31, 2004Class I common shares
    
    
    11,803,861
    
    
    $
    22.98
    
    
    
    
    
    
    
    April 1, 2004  April 30, 2004Class I common shares
    
    
    1,596,584
    
    
    $
    24.87
    
    
    
    
    
    
    
    May 1, 2004  May 31, 2004Class I common shares
    
    
    800,000
    
    
    $
    24.23
    
    
    
    
    
    
    
    TotalClass I common shares (1)
    
    
    14,200,445
    
    
    $
    23.26
    
    
    
    
    
    
    
    
   (1)
    
    During the third fiscal quarter, Accenture SCA redeemed or purchased
14,200,445 Class I common shares in transactions unrelated to publicly
announced purchase programs. Of this amount, 11,803,861 shares were
redeemed or purchased pursuant to an issuer tender offer and the balance of
2,396,584 shares were primarily redemptions and purchases made at the
request of former partners or the estates of deceased partners in
transactions on terms similar to those provided for in the Accenture SCA Articles of
Association. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibit Index:  31.1
    
    Certification of the Chief Executive Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 (filed herewith).31.2
    
    Certification of the Chief Financial Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 (filed herewith).32.1
    
    Certification of the Chief Executive Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 (filed herewith).32.2
    
    Certification of the Chief Financial Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 (filed herewith). (b) Reports on Form 8-K: During the quarter ended May 31, 2004, the following reports on Form 8-K
were filed by the Registrant. Current Report on Form 8-K dated April 8, 2004, with respect to the
Registrants announcement that William D. Green will become the companys new
chief executive officer effective September 1, 2004. Current Report on Form 8-K dated April 23, 2004, with respect to the
Registrants announcement that it planned a public offering of approximately 50
million of its Class A common shares, and the expected participation of certain of its executives in connection with such offerings. 34




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##### 



SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf on July 9,
2004 by the undersigned, thereunto duly authorized. ACCENTURE SCA, represented by its general partner, Accenture Ltd, itself
represented by its duly authorized signatory.By:
    /s/    HARRY L. YOUHarry L. YouChief Financial Officer of Accenture Ltd, General Partner of
Accenture SCA
(principal financial and accounting officer) 35