|3 Months Ended|
Apr. 30, 2021
|Income Tax Disclosure [Abstract]|
14. Income Taxes
Our tax provision for interim periods is determined using an estimated annual effective tax rate, adjusted for discrete items arising in the applicable quarter. In each quarter, we update the estimated annual effective tax rate and make a year-to-date adjustment to the provision. The estimated annual effective tax rate is subject to significant volatility due to several factors, including our ability to accurately predict the proportion of our pretax income in multiple jurisdictions and certain book-tax differences.
We had a provision for income taxes of $1.4 million and $0.7 million for the three months ended April 30, 2021 and 2020, respectively. Our effective tax rate was (0.6%) and (1.3%) for the three months ended April 30, 2021 and 2020, respectively. For the three months ended April 30, 2021 and 2020, the provision for income taxes differed from the U.S. federal statutory rate primarily as a result of not recognizing deferred tax assets for losses due to a full valuation allowance and due to tax rate differences between the United States and foreign countries.
The realization of tax benefits of net deferred tax assets (“DTAs”) is dependent upon future levels of taxable income, of an appropriate character, in the periods the items are expected to be deductible or taxable. Based on the available objective evidence during the three months ended April 30, 2021, we believe it is more likely than not that the tax benefits of U.S. and Romania tax losses may not be realized. Accordingly, we recorded a full valuation allowance against the U.S. and Romania tax losses. We intend to maintain the full valuation allowance on the U.S. and Romania tax losses until sufficient positive evidence exists to support a reversal of, or decrease in, the valuation allowance. As of April 30, 2021, there is no valuation allowance recorded against DTAs associated with Japan tax losses, as we believe it is more likely than not that we will realize such assets during the prescribed statutory period.
During the three months ended April 30, 2021, there were no material changes to the total amount of unrecognized tax benefits and we do not expect any significant changes in the next 12 months.
The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.
Reference 1: http://www.xbrl.org/2003/role/disclosureRef