Accenture Sca 10-Q 2006 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)
þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	FOR THE QUARTERLY PERIOD ENDED MAY 31, 2006
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:000-47913

ACCENTURE SCA

(Exact name of Registrant as specified in its charter)

Luxembourg	98-0351796
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

46A, Avenue J.F. Kennedy

L-1855 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.  Yes þ     No o

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” inRule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o           Accelerated filer o           Non-accelerated filer þ

Indicate by check mark whether the Registrant is a shell company (as defined inRule 12b-2 of the Exchange Act).  Yes o     No þ

The number of shares of the Registrant’s Class I common shares, par value €1.25 per share, outstanding as of June 23, 2006 was 257,836,603.

ACCENTURE SCA

INDEX

			Page
	Part I.	Financial Information		3
	Item 1.	Financial Statements		3
		Consolidated Balance Sheets as of May 31, 2006 (unaudited) and August 31, 2005		3
		Consolidated Income Statements (unaudited) for the three and nine months ended May 31, 2006 and 2005		4
		Consolidated Shareholders’ Equity and Comprehensive Income Statements (unaudited) for the nine months ended May 31, 2006		5
		Consolidated Cash Flows Statements (unaudited) for the nine months ended May 31, 2006 and 2005		6
		Notes to Consolidated Financial Statements (unaudited)		7
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		22
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk		39
	Item 4.	Controls and Procedures		39
	Part II.	Other Information		39
	Item 1.	Legal Proceedings		39
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds; Issuer Purchases of Equity Securities		40
	Item 3.	Defaults upon Senior Securities		42
	Item 4.	Submission of Matters to a Vote of Security Holders		42
	Item 5.	Other Information		42
	Item 6.	Exhibits		42
Signatures				43

2

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ACCENTURE SCA

CONSOLIDATED BALANCE SHEETS
May 31, 2006 and August 31, 2005
(In thousands of U.S. dollars, except share and per share amounts)

	May 31,			August 31,
	2006			2005
	(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	2,793,716		$	2,483,990
Short-term investments		192,399			463,460
Receivables from clients, net of allowances of $46,312 and $40,821		2,001,091			1,752,937
Unbilled services, net of contract loss provision of $90,000 and $0		1,329,774			1,353,676
Deferred income taxes, net		103,988			121,386
Other current assets		502,194			509,818
Total current assets		6,923,162			6,685,267
NON-CURRENT ASSETS:
Unbilled services, net of contract loss provision of $358,700 and $0		117,659			472,430
Investments		148,806			262,873
Property and equipment, net of accumulated depreciation of $1,454,698 and $1,268,658		739,489			693,710
Goodwill		469,480			378,488
Deferred income taxes, net		445,674			291,033
Other non-current assets		166,901			173,551
Total non-current assets		2,088,009			2,272,085
TOTAL ASSETS	$	9,011,171		$	8,957,352
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Short-term bank borrowings	$	3,091		$	13,681
Current portion of long-term debt		21,713			17,391
Accounts payable		803,711			807,317
Deferred revenues		1,609,103			1,284,303
Accrued payroll and related benefits		1,553,316			1,430,998
Income taxes payable		913,726			831,399
Deferred income taxes, net		79,384			42,609
Other accrued liabilities		736,931			503,435
Total current liabilities		5,720,975			4,931,133
NON-CURRENT LIABILITIES:
Long-term debt		25,589			44,116
Retirement obligation		778,126			753,558
Deferred income taxes, net		7,202			5,621
Other non-current liabilities		277,014			545,051
Total non-current liabilities		1,087,931			1,348,346
COMMITMENTS AND CONTINGENCIES
MINORITY INTEREST		72,563			62,070
SHAREHOLDERS’ EQUITY:
Class I common shares, par value 1.25 euros per share, 10,000,000,000 shares authorized, 257,836,603 and 316,573,074 shares issued and outstanding as of May 31, 2006 and August 31, 2005, respectively		288,967			354,835
Class II common shares, par value 1.25 euros per share, 20,000,000,000 shares authorized, 476,273,864 and 470,958,308 shares issued as of May 31, 2006 and August 31, 2005, respectively		537,048			529,281
Class III, includingClass III-A through -N lettered sub-series common shares, par value 1.25 euros per share, 10,000,000,000 shares authorized, 719,388,904 and 654,720,380 shares issued as of May 31, 2006 and August 31, 2005, respectively		810,321			735,786
Restricted share units (related to Accenture Ltd Class A common shares)		466,550			365,708
Additional paid-in capital		3,303,771			3,017,187
Treasury shares, at cost: Class II common, 5,315,556 and zero shares at May 31, 2006 and August 31, 2005, respectively; Class III common, 178,037,453 and 128,969,153 shares at May 31, 2006 and August 31, 2005, respectively		(4,337,480	)		(3,027,009	)
Investment in Accenture Ltd shares, at cost, 11,770,770 and 2,353,924 shares at May 31, 2006 and August 31, 2005, respectively		(257,106	)		(58,314	)
Retained earnings		1,505,587			930,813
Accumulated other comprehensive loss		(187,956	)		(232,484	)
Total shareholders’ equity		2,129,702			2,615,803
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	9,011,171		$	8,957,352

The accompanying Notes are an integral part of these Consolidated Financial Statements.

3

ACCENTURE SCA

CONSOLIDATED INCOME STATEMENTS
For the Three and Nine Months Ended May 31, 2006 and 2005
(In thousands of U.S. dollars)
(Unaudited)

	Three Months Ended May 31,						Nine Months Ended May 31,
	2006			2005			2006			2005
REVENUES:
Revenues before reimbursements	$	4,408,069		$	4,078,573		$	12,680,339		$	11,622,450
Reimbursements		397,258			419,037			1,159,116			1,162,916
Revenues		4,805,327			4,497,610			13,839,455			12,785,366
OPERATING EXPENSES:
Cost of services:
Cost of services before reimbursable expenses		2,954,184			2,669,056			9,037,490			7,823,445
Reimbursable expenses		397,258			419,037			1,159,116			1,162,916
Cost of services		3,351,442			3,088,093			10,196,606			8,986,361
Sales and marketing		453,709			421,238			1,255,723			1,157,100
General and administrative costs		362,051			382,430			1,101,164			1,134,723
Reorganization benefits, net		(51,999	)		(66,099	)		(54,030	)		(94,868	)
Total operating expenses		4,115,203			3,825,662			12,499,463			11,183,316
OPERATING INCOME		690,124			671,948			1,339,992			1,602,050
Gain on investments, net		15			4,672			3,245			19,305
Interest income		31,571			29,075			86,505			77,259
Interest expense		(4,852	)		(6,373	)		(14,095	)		(18,989	)
Other expense		(4,971	)		(10,919	)		(18,113	)		(16,092	)
INCOME BEFORE INCOME TAXES		711,887			688,403			1,397,534			1,663,533
Provision for income taxes		213,088			202,392			466,777			517,359
INCOME BEFORE MINORITY INTEREST		498,799			486,011			930,757			1,146,174
Minority interest in Accenture Canada Holdings Inc.		(2,365	)		(2,442	)		(4,462	)		(5,873	)
Minority interest — other		(2,692	)		(2,054	)		(7,240	)		(5,789	)
NET INCOME	$	493,742		$	481,515		$	919,055		$	1,134,512

The accompanying Notes are an integral part of these Consolidated Financial Statements.

4

ACCENTURE SCA

CONSOLIDATED SHAREHOLDERS’ EQUITY AND COMPREHENSIVE INCOME STATEMENTS

For the Nine Months Ended May 31, 2006

(In thousands of U.S. dollars and in thousands of share amounts)

(Unaudited)

															Restricted Share
															Units
															(Related
	Class I Common						Class II Common				Class III Common				to Accenture												Investment in									Accumulated
	Shares						Shares				Shares				Ltd Class			Additional			Treasury Shares						Accenture Ltd									Other
				No.					No.				No.		A Common			Paid-in						No.						No.			Retained			Comprehensive
	$			Shares			$		Shares		$		Shares		Shares)			Capital			$			Shares			$			Shares			Earnings			Loss			Total
Balance as of August 31, 2005	$	354,835			316,573		$	529,281		470,958	$	735,786		654,721	$	365,708		$	3,017,187		$	(3,027,009	)		(128,969	)	$	(58,314	)		(2,353	)	$	930,813		$	(232,484	)	$	2,615,803
Comprehensive income:
Net income																																		919,055						919,055
Other comprehensive income:
Unrealized gains on marketable securities, net of reclassification adjustments																																					(2,272	)		(2,272	)
Foreign currency translation adjustments																																					46,599			46,599
Minimum pension liability adjustment, net of tax																																					201			201
Other comprehensive income																																					44,528
Comprehensive income																																								963,583
Income tax benefit on share-based compensation plans																			58,418																					58,418
Issuance and purchases of Class II and Class III common shares								7,767		5,316		8,667		5,932					155,369			(171,803	)		(11,248	)								(171,696	)					(171,696	)
Purchases of Accenture Ltd Class A common shares																			(9,952	)								(255,885	)		(11,705	)								(265,837	)
Transfer of shares from Investment in Accenture Ltd																												57,093			2,287									57,093
Share-based compensation expense																108,946			86,967																					195,913
Purchases/redemptions of Accenture SCA
Class I common shares		(65,868	)		(58,736	)						65,868		58,736								(1,448,645	)		(58,736	)														(1,448,645	)
Purchases/redemptions of Accenture SCA Class III common shares and Canada Holdings Inc. exchangeable shares																			(8,404	)		(161,148	)		(5,778	)														(169,552	)
Issuances of Class A common shares related to employee share programs																(21,668	)		(1,569	)		471,125			21,378									(62,744	)					385,144
Dividends																13,564																		(109,841	)					(96,277	)
Minority interest																			5,755																					5,755
Balance as of May 31, 2006	$	288,967			257,837		$	537,048		476,274	$	810,321		719,389	$	466,550		$	3,303,771		$	(4,337,480	)		(183,353	)	$	(257,106	)		(11,771	)	$	1,505,587		$	(187,956	)	$	2,129,702

The accompanying Notes are an integral part of these Consolidated Financial Statements.

5

ACCENTURE SCA

CONSOLIDATED CASH FLOWS STATEMENTS

For the Nine Months Ended May 31, 2006 and 2005

(In thousands of U.S. dollars)

(Unaudited)

	2006			2005
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	919,055		$	1,134,512
Adjustments to reconcile Net income to net cash provided by operating activities —
Depreciation and amortization (including amortization of deferred charges)		229,033			206,989
Reorganization benefits, net		(54,030	)		(94,868	)
Gains on investments, net		(3,245	)		(19,305	)
(Gains) losses on disposal of property and equipment, net		(154	)		4,268
Share-based compensation expense		200,530			61,352
Deferred income taxes, net		(98,641	)		97,622
Minority interest		11,702			11,662
Other items, net		2,436			2,608
Change in assets and liabilities, net of acquisitions (1) —
Receivables from clients, net		(166,397	)		(170,743	)
Other current assets		18,619			22,202
Unbilled services, current and non-current		426,729			(609,393	)
Other non-current assets		(12,993	)		(9,988	)
Accounts payable		(18,175	)		235,924
Deferred revenues		228,037			413,076
Accrued payroll and related benefits		87,519			(85,524	)
Income taxes payable		94,221			52,898
Other accrued liabilities		28,235			91,592
Other non-current liabilities		(34,856	)		(24,961	)
Net cash provided by operating activities		1,857,625			1,319,923
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities and sales ofavailable-for-sale investments		580,746			772,306
Purchases ofavailable-for-sale investments		(190,049	)		(852,804	)
Proceeds from sales of property and equipment		13,172			3,270
Purchases of property and equipment		(209,166	)		(186,513	)
Purchases of businesses and investments, net of cash acquired		(124,874	)		(6,865	)
Net cash provided by (used in) investing activities		69,829			(270,606	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of retirement benefits to former pre-incorporation partners		(12,886	)		(10,859	)
Proceeds from issuance of common shares		385,144			251,649
Purchases of common shares		(1,998,637	)		(1,070,798	)
Proceeds from long-term debt		13,444			5,388
Repayments of long-term debt		(19,937	)		(8,444	)
Proceeds from short-term borrowings		38,860			39,198
Repayments of short-term borrowings		(49,626	)		(51,102	)
Cash dividends paid		(96,277	)		—
Excess tax benefits from share-based payment arrangements		30,625			—
Net cash used in financing activities		(1,709,290	)		(844,968	)
Effect of exchange rate changes on cash and cash equivalents		91,562			15,724
NET INCREASE IN CASH AND CASH EQUIVALENTS		309,726			220,073
CASH AND CASH EQUIVALENTS,beginning of period		2,483,990			2,552,958
CASH AND CASH EQUIVALENTS,end of period	$	2,793,716		$	2,773,031

(1) The change in the assets and liabilities, net of acquisitions, includes the impact of the $450,000 loss provision, net of usage of $20,176, recorded by the Company during the nine months ended May 31, 2006. See Footnote 8 (Commitments and Contingencies) to these Consolidated Financial Statements.

The accompanying Notes are an integral part of these Consolidated Financial Statements.

6

ACCENTURE SCA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)

(Unaudited)

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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, the “Company”) have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for quarterly reports onForm 10-Q and do not include all of the information and note disclosures required by U.S. generally accepted accounting principles for complete financial statements. These Consolidated Financial Statements should therefore be read in conjunction with the Consolidated Financial Statements and Notes thereto for the fiscal year ended August 31, 2005, included in the Company’s Annual Report onForm 10-K filed with the SEC on November 1, 2005. The accompanying unaudited interim Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles 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, 2006 are not necessarily indicative of the results that may be expected for the fiscal year ending August 31, 2006. Certain prior-period amounts have been reclassified to conform to the current-period presentation.

Accenture Ltd (“Accenture”) is a Bermuda holding company with no material assets other than Accenture SCA Class II and Class III common shares. Accenture acts as the sole general partner of the Company and owns a majority voting interest in the Company. Information regarding various aspects of the activities of Accenture are described in these Notes as they affect the financial results and conditions of the Company.

Revenue Recognition

Revenues from contracts for technology integration consulting services where we design/redesign, build and implement new or enhanced systems applications and related processes for our clients are recognized on thepercentage-of-completion method in accordance with American Institute of Certified Public Accountants Statement of Position 81-1,“Accounting for Performance of Construction-Type and Certain Production-Type Contracts”(“SOP 81-1”).Percentage-of-completion accounting involves calculating the percentage of services provided during the reporting period compared to the total estimated services to be provided over the duration of the contract. Estimated revenues for applying thepercentage-of-completion method include estimated incentives for which achievement of defined goals is deemed probable. 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 Consolidated Financial Statements in the periods in which they are first identified. If our estimates indicate that a contract loss will occur, a loss provision is recorded in the period in which the loss first becomes probable and reasonably estimable. Contract losses are determined to be the amount by which the estimated direct and indirect costs of the contract exceed the estimated total revenues that will be generated by the contract and are included in Cost of services. During the three months ended February 28, 2006, the Company recorded a $450,000 contract loss provision associated with certain large, long-term contracts (the “NHS Contracts”) under which the Company has been engaged by the National Health Service in England (the “NHS”) to design, develop and deploy new patient administration, assessment and care systems for local healthcare providers. For information regarding the NHS Contracts, see Footnote 8 (Commitments and Contingencies) to these Consolidated Financial Statements below. Except for the loss provision recorded for the NHS Contracts, loss provisions have been insignificant.

Revenues from contracts for non-technology integration consulting services with fees based on time and materials or cost-plus are recognized as the services are performed and amounts are earned in accordance with SEC Staff Accounting Bulletin (“SAB”) No. 101,“Revenue Recognition in Financial Statements”(“SAB 101”), as

7

ACCENTURE SCA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)

(Unaudited)

amended by SAB No. 104,“Revenue Recognition”(“SAB 104”). We consider amounts to be earned once evidence of an arrangement has been obtained, services are delivered, fees are fixed or determinable, and collectibility is reasonably assured. In such contracts, our efforts, measured by time incurred, typically represent the contractual milestones or output measure, which is the contractual earnings pattern. For non-technology integration consulting contracts with fixed fees, we recognize revenues as amounts become billable in accordance with contract terms, provided the billable amounts are not contingent, are consistent with the services delivered, and are earned. Contingent or incentive revenues relating to non-technology integration consulting contracts are recognized when the contingency is satisfied and we conclude the amounts are earned.

Outsourcing contracts typically span several years and involve complex delivery, often through multiple workforces in different countries. In a number of these arrangements, we hire client employees and become responsible for certain client obligations. Revenues are recognized on outsourcing contracts as amounts become billable in accordance with contract terms, unless the amounts are billed in advance of performance of services in which case revenues are recognized when the services are performed and amounts are earned in accordance with SAB 101, as amended by SAB 104. Revenues fromtime-and-materials or cost-plus contracts are recognized as the services are performed. In such contracts, our effort, measured by time incurred, represents the contractual milestones or output measure, which is the contractual earnings pattern. Revenues from unit-priced contracts are recognized as transactions are processed based on objective measures of output. Revenues from fixed-price contracts are recognized on a straight-line basis, unless revenues are earned and obligations are fulfilled in a different pattern. Outsourcing contracts can also include incentive payments for benefits delivered to clients. Revenues relating to such incentive payments are recorded when the contingency is satisfied and we conclude the amounts are earned.

Costs related to delivering outsourcing services are expensed as incurred with the exception of certain transition costs related to theset-up of processes, personnel and systems, which are deferred during the transition period and expensed evenly over the period outsourcing services are provided. The deferred costs are specific internal costs or incremental external costs directly related to transition orset-up activities necessary to enable the outsourced services. Deferred amounts are protected in the event of early termination of the contract and are monitored regularly for impairment. Impairment losses are recorded when projected undiscounted operating cash flows of the related contract are not sufficient to recover the carrying amount of contract assets. Amounts billable to the client for transition orset-up activities are deferred and recognized as revenue evenly over the period outsourcing services are provided.

In November 2002, the Emerging Issues Task Force (“EITF”) issued a final consensus onIssue 00-21,“Accounting for Revenue Arrangements with Multiple Deliverables”(“Issue 00-21”). In May 2003, the EITF issued additional interpretive guidance regarding the application ofIssue 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, the Company adoptedIssue 00-21 on a prospective basis. The adoption ofIssue 00-21 reduced revenues by approximately $44,000 and reduced operating income by approximately $41,000 in fiscal 2004.

Revenues for contracts with multiple elements are allocated based on the relative 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, as described above. Elements qualify for separation 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

8

ACCENTURE SCA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)

(Unaudited)

separate elements require judgment, generally fair value and the separate elements are readily identifiable as we also sell those elements unaccompanied by other elements.

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. If the amount of non-contingent revenues 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.

Revenues recognized in excess of billings are recorded as Unbilled services. Billings in excess of revenues recognized are recorded as Deferred revenues until revenue recognition criteria are met.

Revenues before reimbursements include the margin earned on computer hardware and software, as well as revenues from alliance agreements. Reimbursements, including those relating to travel and otherout-of-pocket expenses, and other similar third party costs, such as the cost of hardware and software resales, are included in Revenues, and an equivalent amount of reimbursable expenses are included in Cost of services.

Other Significant Accounting Policies

For a description of the Company’s other significant accounting policies, see Footnote 1 (Summary of Significant Accounting Policies) to the Company’s Consolidated Financial Statements in the Company’s Annual Report onForm 10-K for the fiscal year ended August 31, 2005.

2.   SHARE-BASED COMPENSATION

In December 2004, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (“SFAS”) No. 123R,Share-Based Payment(“SFAS No. 123R” or the “Statement”). This Statement is a revision of SFAS No. 123,Accounting for Stock-Based Compensation(“SFAS No. 123”), and supersedes Accounting Principles Board Opinion No. 25,Accounting for Stock Issued to Employees(“APB No. 25”), and its related implementation guidance. On September 1, 2005, the Company adopted the provisions of SFAS No. 123R using the modified prospective method. SFAS No. 123R focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions. The Statement requires entities to recognize compensation expense for awards of equity instruments to employees based on the grant-date fair value of those awards (with limited exceptions). SFAS No. 123R also requires the benefits of tax deductions in excess of compensation expense to be reported as a financing cash flow, rather than as an operating cash flow as prescribed under the prior accounting rules. This requirement reduces net operating cash flows and increases net financing cash flows in periods after adoption. Total cash flow remains unchanged from what would have been reported under prior accounting rules. Upon the adoption of SFAS No. 123R, the Company recognized an immaterial one-time gain based on SFAS No. 123R’s requirement to apply an estimated forfeiture rate to unvested awards. Previously, the Company recorded forfeitures as incurred.

Prior to the adoption of SFAS No. 123R, the Company followed the intrinsic value method in accordance with APB No. 25 to account for its employee stock options and share purchase rights. Accordingly, no compensation expense was recognized for share purchase rights granted in connection with the issuance of stock options under the Accenture Ltd 2001 Share Incentive Plan (the “SIP”) and through the Accenture Ltd 2001 Employee Share Purchase Plan (the “ESPP”); however, compensation expense was recognized in connection with the issuance of restricted share units granted under the SIP. The adoption of SFAS No. 123R primarily resulted in a change in the Company’s method of recognizing the fair value of share-based compensation and estimating forfeitures for all unvested awards. Specifically, the adoption of SFAS No. 123R resulted in the recording of compensation expense for employee stock options and employee share purchase rights. The following table shows the effect of adopting

9

ACCENTURE SCA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)

(Unaudited)

SFAS No. 123R on selected reported items (“As Reported”) and what those items would have been under previous guidance under APB No. 25:

	Three Months Ended						Nine Months Ended
	May 31, 2006						May 31, 2006
				Under APB						Under APB
	As Reported			No. 25			As Reported			No. 25
Income before income taxes	$	711,887		$	740,032		$	1,397,534		$	1,468,724
Income before minority interest		498,799			517,262			930,757			977,457
Net income		493,742			512,116			919,055			965,527
Cash flows from operating activities		805,570			807,655			1,857,625			1,888,250
Cash flows from financing activities		(191,836	)		(193,921	)		(1,709,290	)		(1,739,915	)

Results for fiscal 2005 have not been restated. The Company’s employees participate in Accenture’s various share programs and the expenses and costs associated with their participation are borne by the Company. Had compensation expense for employee stock options granted under the SIP and for employee share purchase rights under the ESPP been determined based on fair value at the grant date consistent with SFAS No. 123, with stock options expensed using the accelerated expense attribution method, the Company’s Net income for the three and nine months ended May 31, 2005 would have been reduced to the pro forma amounts indicated below:

	Three Months			Nine Months
	Ended			Ended
	May 31, 2005			May 31, 2005
Net income as reported	$	481,515		$	1,134,512
Add: Share-based compensation expense already included in Net income as reported, net of tax and minority interest		21,123			55,713
Deduct: Pro forma employee compensation cost related to stock options, restricted share units and employee share purchase plan, net of tax and minority interest		(67,252	)		(159,162	)
Subtotal		(46,129	)		(103,449	)
Pro forma net income	$	435,386		$	1,031,063

Share Incentive Plan

The SIP is administered by the Compensation Committee of the Board of Directors of Accenture and provides for the grant of nonqualified share options, incentive stock options, restricted share units and other share-based awards to approved participants, including the Company’s senior executives and employees. A maximum of 375,000,000 Accenture Ltd Class A common shares are currently authorized for awards under the SIP. As of May 31, 2006, 165,780,654 shares were available for future grants under the SIP. Accenture Ltd Class A common shares covered by awards that expire, terminate or lapse will again be available for the grant of awards under the SIP.

Accenture issues new Accenture Ltd Class A common shares and shares from treasury for shares delivered under the SIP. The parameters of the share purchase and redemption activities of Accenture and the Company are not established solely with reference to the dilutive impact of deliveries made under the SIP. However, Accenture expects that, over time, share purchases will offset the dilutive impact of deliveries to be made under the SIP.

10

ACCENTURE SCA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)

(Unaudited)

A summary of information with respect to share-based compensation was as follows:

	Three Months Ended				Nine Months Ended
	May 31,				May 31,
	2006		2005		2006		2005
Total share-based compensation expense included in Net income	$	73,132	$	23,480	$	200,530	$	61,352
Income tax benefit related to share-based compensation included in Net income	$	25,107	$	2,177	$	68,813	$	5,742

Stock Options

Stock options are granted to the Company’s senior executives and other employees under the SIP. Options generally have an exercise price that is at least equal to the fair value of the Accenture Ltd Class A common shares on the date the option is granted. Options granted under the SIP are subject to cliff or graded vesting, generally ranging from three to 10 years, and generally have a contractual term of 10 years. For awards with graded vesting, compensation expense is recognized over the vesting period of each separately vesting portion. Compensation expense is recognized on a straight-line basis for awards with cliff vesting. Stock option activity for the nine months ended May 31, 2006 was as follows:

						Weighted
						Average
						Remaining
				Weighted		Contractual		Aggregate
	Number of			Average Exercise		Term		Intrinsic
	Options			Price		(In Years)		Value
Options outstanding as of August 31, 2005		73,848,900		$	18.27
Granted		425,378		$	26.19
Exercised		(13,036,206	)	$	15.90
Expired or cancelled		(447,920	)	$	19.10
Forfeited		(964,167	)	$	23.08
Options outstanding as of May 31, 2006		59,825,985		$	18.74		6.5	$	548,045
Options exercisable as of May 31, 2006		39,666,039		$	16.54		5.7	$	450,502

Other information pertaining to option activity during the three and nine months ended May 31, 2006 was as follows:

	Three Months Ended				Nine Months Ended
	May 31,				May 31,
	2006		2005		2006		2005
Weighted average grant-date fair value of stock options granted		n/a	$	10.68	$	11.10	$	11.30
Total fair value of stock options vested	$	3,234	$	6,680	$	34,701	$	33,287
Total intrinsic value of stock options exercised	$	21,354	$	10,085	$	171,800	$	54,186

     _ _

n/a No stock options were granted during the three months ended May 31, 2006.

For the nine months ended May 31, 2006, cash received from the exercise of stock options was $207,263 and the income tax benefit realized from the exercise of stock options was $54,770. As of May 31, 2006, there was $63,451 of total stock option compensation expense related to nonvested awards not yet recognized, which is expected to be recognized over a weighted average period of 1.4 years.

11

ACCENTURE SCA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)

(Unaudited)

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions:

	Nine Months Ended May 31,
	2006(1)			2005
	Senior			Senior			Other
	Executives			Executives			Employees
Expected life (in years)		7.37			6.0			5.0
Risk-free interest rate		4.13	%		4.02	%		3.52	%
Expected volatility		37	%		41	%		41	%
Expected dividend yield		1	%		0	%		0	%

(1) No stock options were granted to “Other Employees” during the nine months ended May 31, 2006.

For the three and nine months ended May 31, 2006, the expected life of each award granted was calculated using the “simplified method” in accordance with SAB No. 107,“Share-Based Payment.”For the three and nine months ended May 31, 2005, the Company used a projected expected life for each award granted based on historical experience of employees’ exercise behavior. The risk-free interest rate is based on the implied yield currently available on U.S. Treasury zero coupon issues with a remaining term equal to the expected life. Expected volatility is based on historical volatility levels of Accenture Ltd Class A common shares. Expected dividend yield is based on historical dividend payments.

Restricted Share Units

Under the SIP, participants, including the Company’s senior executives and employees, may be granted restricted share units, each of which represents an unfunded, unsecured right, which is nontransferable except in the event of death of the participant, to receive an Accenture Ltd Class A common share on the date specified in the participant’s award agreement. The restricted share units granted under this plan are subject to cliff or graded vesting, generally ranging from three to 10 years. For awards with graded vesting, compensation expense is recognized over the vesting term of each separately vesting portion. Compensation expense is recognized on a straight-line basis for awards with cliff vesting. Restricted share unit activity for the nine months ended May 31, 2006 was as follows:

				Weighted
	Number of			Average
	Restricted			Grant-Date
	Share Units			Fair Value
Nonvested balance as of August 31, 2005		18,122,113		$	26.65
Granted		18,702,051		$	25.68
Vested		(1,384,503	)	$	23.09
Forfeited		(1,162,216	)	$	21.04
Nonvested balance as of May 31, 2006		34,277,445		$	23.74

As of May 31, 2006, there was $443,702 of total restricted share unit compensation expense related to nonvested awards not yet recognized, which is expected to be recognized over a weighted average period of 2.5 years. As of May 31, 2006, there were 13,976,234 restricted share units vested but not yet delivered as Accenture Ltd Class A common shares.

12

ACCENTURE SCA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)

(Unaudited)

Employee Share Purchase Plan

The ESPP is a nonqualified plan that allows eligible employee participants of the Company to purchase Accenture Ltd Class A common shares at a discount through after-tax payroll deductions. Under this plan, eligible employees may elect to contribute 1% to 10% of their compensation during each semi-annual offering period (up to a per participant maximum of $15 per calendar year) to purchase Accenture Ltd Class A common shares. The purchase price of the Accenture Ltd Class A common shares is 85% of the end of each offering period market price. A maximum of 75,000,000 Accenture Ltd Class A common shares are currently authorized for issuance under the ESPP and, as of May 31, 2006, 32,371,514 shares were available for future issuance under the ESPP.

3.   RESTRUCTURING AND REORGANIZATION (BENEFITS) COSTS

Restructuring

In fiscal 2002, the Company recognized restructuring costs of $110,524 related to a global consolidation of office space, consisting of $67,112 to consolidate various locations and $43,412 to abandon the related fixed assets. In fiscal 2004, the Company recognized restructuring costs of $107,256, primarily in the United States and the United Kingdom, consisting of $89,331 to consolidate various locations and $17,925 to abandon the related fixed assets. The fiscal 2004 restructuring costs were allocated to the reportable operating segments as follows: $26,952 to Communications & High Tech; $23,579 to Financial Services; $15,774 to Government; $23,491 to Products; and $17,460 to Resources.

The Company’s restructuring activity was as follows:

	Three Months Ended						Nine Months Ended
	May 31,						May 31,
	2006			2005			2006			2005
Restructuring liability balance, beginning of period	$	61,746		$	87,073		$	69,919		$	102,761
Payments made		(4,984	)		(4,456	)		(16,219	)		(22,506	)
Other(1)		1,509			(5,149	)		4,571			(2,787	)
Restructuring liability, end of period	$	58,271		$	77,468		$	58,271		$	77,468

     _ _

  (1) Other primarily represents immaterial changes in lease estimates, imputed interest and foreign currency translation.

As of May 31, 2006, restructuring liabilities were $58,271, of which $17,293 was included in Other accrued liabilities and $40,978 was included in Other non-current liabilities. The recorded liabilities represent the net present value of the estimated remaining obligations related to existing operating leases.

Reorganization

In fiscal 2001, the Company accrued reorganization liabilities in connection with its transition to a corporate structure. These liabilities included certain non-income tax liabilities, such as stamp taxes, as well as liabilities for certain individual income tax exposures related to the transfer of interests in certain entities to the Company as part of the reorganization. These reorganization liabilities bear interest at regulatory rates applicable in the jurisdictions in which the Company expects to pay the taxes. Interest accruals are made based on these regulatory rates and represent the amount of interest necessary to settle these liabilities.

13

ACCENTURE SCA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)

(Unaudited)

The Company’s reorganization activity was as follows:

	Three Months Ended						Nine Months Ended
	May 31,						May 31,
	2006			2005			2006			2005
Reorganization liability balance, beginning of period	$	374,524		$	467,827		$	381,440		$	454,042
Final determinations(1)		(57,683	)		(72,552	)		(72,321	)		(114,791	)
Changes in estimates		—			—			—			—
Benefit recorded		(57,683	)		(72,552	)		(72,321	)		(114,791	)
Interest expense accrued		5,684			6,453			18,291			19,923
Payments		—			—			—			—
Benefits, net of accrued interest and payments		(51,999	)		(66,099	)		(54,030	)		(94,868	)
Foreign currency translation		21,884			(21,653	)		16,999			20,901
Reorganization liability, end of period	$	344,409		$	380,075		$	344,409		$	380,075

     _ _

  (1) Includes final agreements with tax authorities and expirations of statutes of limitations.

As of May 31, 2006, reorganization liabilities of $264,328 were included in Other accrued liabilities because expirations of statutes of limitations could occur within 12 months, and reorganization liabilities of $80,081 were included in Other non-current liabilities. The Company anticipates that reorganization liabilities will be substantially diminished by the end of fiscal 2008 because the final statutes of limitations will have expired in a number of tax jurisdictions by the end of that year. However, tax audits or litigation may delay final settlements. Final settlement will result in a payment on a final settlementand/or recording a reorganization benefit or cost in the Company’s Consolidated Income Statement.

4.   ACCUMULATED OTHER COMPREHENSIVE LOSS

The components of Accumulated other comprehensive loss were as follows:

	May 31,			August 31,
	2006			2005
Foreign currency translation adjustments	$	3,563		$	(43,036	)
Unrealized losses on marketable securities, net of reclassification adjustments		(4,491	)		(2,219	)
Minimum pension liability adjustment, net of tax		(187,028	)		(187,229	)
Accumulated other comprehensive loss	$	(187,956	)	$	(232,484	)

Comprehensive income was as follows:

	May 31,
	2006		2005
Three months ended	$	544,552	$	418,309
Nine months ended	$	963,583	$	1,134,727

14

ACCENTURE SCA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)

(Unaudited)

5.   GOODWILL

The changes in the carrying amount of goodwill by reportable operating segment for the nine months ended May 31, 2006 were as follows:

					Foreign
	Balance at				Currency		Balance at
	August 31,		Additions/		Translation		May 31,
	2005		Adjustments(1)		Adjustments		2006
Communications & High Tech	$	73,086	$	11,469	$	3,452	$	88,007
Financial Services		51,569		4,249		2,039		57,857
Government		24,933		11,730		1,427		38,090
Products		196,937		48,409		4,868		250,214
Resources		31,963		1,990		1,359		35,312
Total	$	378,488	$	77,847	$	13,145	$	469,480

(1) Additions/Adjustments primarily represent acquisitions made during the nine months ended May 31, 2006.

6.   PROFIT SHARING AND RETIREMENT PLANS

In the United States and certain other countries, the Company maintains and administers retirement plans and postretirement medical plans for certain current, retired and resigned employees of the Company. The components of net periodic pension and postretirement expense were as follows:

	Pension Benefits
	Three Months Ended May 31,
	2006						2005
Components of pension expense	U.S. Plans			Non-U.S. Plans			U.S. Plans			Non-U.S. Plans
Service cost	$	16,103		$	12,172		$	12,382		$	12,430
Interest cost		12,481			5,284			10,415			4,739
Expected return on plan assets		(13,080	)		(4,949	)		(10,723	)		(3,892	)
Amortization of loss (gain)		7,785			462			3,360			(247	)
Amortization of prior service cost		287			380			324			301
Total	$	23,576		$	13,349		$	15,758		$	13,331

	Pension Benefits
	Nine Months Ended May 31,
	2006						2005
Components of pension expense	U.S. Plans			Non-U.S. Plans			U.S. Plans			Non-U.S. Plans
Service cost	$	48,308		$	37,176		$	37,140		$	35,813
Interest cost		37,442			15,796			31,248			13,476
Expected return on plan assets		(39,239	)		(14,636	)		(32,169	)		(10,940	)
Amortization of transitional obligation		—			—			—			269
Amortization of loss (gain)		23,355			1,381			10,080			(782	)
Amortization of prior service cost		861			1,144			969			893
Special termination benefits charge		—			501			—			341
Total	$	70,727		$	41,362		$	47,268		$	39,070

15

ACCENTURE SCA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)

(Unaudited)

	Postretirement Benefits
	Three Months Ended May 31,
	2006						2005
Components of postretirement expense	U.S. Plans			Non-U.S. Plans			U.S. Plans			Non-U.S. Plans
Service cost	$	2,526		$	532		$	1,774		$	411
Interest cost		1,538			446			1,385			444
Expected return on plan assets		(355	)		—			(335	)		—
Amortization of transitional obligation		20			—			20			—
Amortization of loss		630			317			373			24
Amortization of prior service cost		(200	)		(335	)		(199	)		(65	)
Total	$	4,159		$	960		$	3,018		$	814

	Postretirement Benefits
	Nine Months Ended May 31,
	2006						2005
Components of postretirement expense	U.S. Plans			Non-U.S. Plans			U.S. Plans			Non-U.S. Plans
Service cost	$	7,577		$	1,576		$	5,319		$	1,274
Interest cost		4,613			1,323			4,152			1,367
Expected return on plan assets		(1,064	)		—			(1,002	)		—
Amortization of transitional obligation		59			—			60			—
Amortization of loss		1,889			171			1,119			70
Amortization of prior service cost		(601	)		(223	)		(600	)		(133	)
Total	$	12,473		$	2,847		$	9,048		$	2,578

7.   MATERIAL TRANSACTIONS AFFECTING SHAREHOLDERS’ EQUITY

Share Purchase Activity

Since April 2002, the Board of Directors of Accenture has authorized funding for redemptions and purchases of shares of Accenture held by certain current and former employees and their permitted transferees. The following table summarizes the application of these funds towards the Company’s share purchase activity during the nine months ended May 31, 2006:

	Shares		Amount
Available authorization as of August 31, 2005			$	1,121,113
Purchases and redemptions(1)		34,617,613		(933,350	)
Additional authorizations(2)				1,000,000
Available authorization as of May 31, 2006			$	1,187,763

(1)	Includes the following purchase activity:
	• 22,813,727 Accenture SCA Class I common shares redeemed or purchased for a total cash outlay of $674,126 and 340,187 Accenture Canada Holdings Inc. exchangeable shares purchased for a total cash outlay of $9,840;
	• 11,231,941 Accenture Ltd Class A common shares purchased by a subsidiary of the Company for an aggregate purchase price of $242,725; and

16

ACCENTURE SCA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)

(Unaudited)

• 231,758 shares purchased through the RSU Sell-Back Program whereby the Company offers to purchase Accenture Ltd Class A common shares awarded to employees pursuant to restricted share units issued in connection with its initial public offering for a total cash outlay of $6,659. The RSU Sell-Back Program was terminated, effective March 1, 2006. All remaining funding authorizations for the RSU Sell-Back Program were reallocated and made available for use in the Company’s other share purchase programs.

(2)

On March 24, 2006, an additional $1,000,000 was authorized for redemptions and purchases under the Company’s share purchase programs.

In addition, on September 14, 2005, the Company made a tender offer to Accenture SCA Class I common shareholders that resulted in the redemption and purchase on October 14, 2005 of an aggregate of 35,922,744 Accenture SCA Class I common shares at a price of $21.50 per share. The total cash outlay for this transaction was $774,519 and was separately authorized by the Board of Directors of Accenture.

During the nine months ended May 31, 2006, as authorized under its various employee equity share plans, the Company acquired 239,840 Accenture Ltd Class A common shares via share withholding for payroll tax obligations due from employees and former employees in connection with the delivery of Accenture Ltd Class A common shares under those plans.

Pursuant to the Company’s Articles of Association, all Accenture SCA Class I common shares sold or otherwise transferred to Accenture or its subsidiaries are automatically reclassified into Accenture SCA Class III common shares. The August 31, 2005 balance and share count for Accenture SCA Class I and Class III common shares have been reclassified to reflect that 270,723,520 Accenture SCA Class I common shares that were sold or otherwise transferred to Accenture or its subsidiaries on or before August 31, 2005 were reclassified into Accenture SCA Class III common shares on or before August 31, 2005.

Dividend

On November 15, 2005, a cash dividend of $0.30 per share was paid on Accenture Ltd’s Class A common shares to shareholders of record at the close of business on October 17, 2005, resulting in a cash outlay of $171,696. On November 15, 2005, a cash dividend of $0.30 per share was also paid on Accenture SCA’s Class I common shares and Accenture Canada Holdings Inc. exchangeable shares to shareholders of record at the close of business on October 12, 2005 and October 17, 2005, respectively, resulting in cash outlays of $94,972 and $1,305, respectively. The payment of the cash dividends also resulted in the issuance of an immaterial number of additional restricted share units to holders of restricted share units. Share amounts have been restated for all periods presented to reflect this issuance.

17

ACCENTURE SCA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)

(Unaudited)

Class III Common Shares

Accenture SCA Class III common shares, including the lettered sub-series of this class, have a par value of 1.25 euros per share. Information related to all Class III common shares is as follows:

			May 31, 2006				August 31, 2005
Title of Issuance	Authorized		Issued Shares		Amount		Issued Shares		Amount
Class III		9,782,549,738		501,938,642	$	565,007		437,270,118	$	490,472
Class III-A		5,000,000		5,000,000		5,435		5,000,000		5,435
Class III-B		5,000,000		5,000,000		5,435		5,000,000		5,435
Class III-C		10,000,000		10,000,000		10,870		10,000,000		10,870
Class III-D		10,000,000		10,000,000		10,870		10,000,000		10,870
Class III-E		15,000,000		15,000,000		16,304		15,000,000		16,304
Class III-F		15,000,000		15,000,000		16,304		15,000,000		16,304
Class III-G		20,000,000		20,000,000		21,739		20,000,000		21,739
Class III-H		25,000,000		25,000,000		27,174		25,000,000		27,174
Class III-I		5,000,000		5,000,000		5,435		5,000,000		5,435
Class III-J		5,000,000		5,000,000		5,435		5,000,000		5,435
Class III-K		16,050,000		16,050,000		18,074		16,050,000		18,074
Class III-L		5,025,720		5,025,720		5,540		5,025,720		5,540
Class III-M		68,626,707		68,626,707		78,398		68,626,707		78,398
Class III-N		12,747,835		12,747,835		18,301		12,747,835		18,301
Total		10,000,000,000		719,388,904	$	810,321		654,720,380	$	735,786

8.   COMMITMENTS AND CONTINGENCIES

Guarantees

As a result of its increase in ownership of Accenture HR Services from 50% to 100% in February 2002, the Company may be required to make up to $177,500 of additional purchase price payments through September 30, 2008, conditional on Accenture HR Services achieving certain levels of qualifying revenues. The remaining potential liability as of May 31, 2006 was $158,450.

The Company has various agreements in which it may be obligated to indemnify other parties 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 indemnified party harmless against losses arising from a breach of representations related to matters such as title to assets sold and licensed or certain intellectual property rights. Payments by the Company under such indemnification clauses are generally conditioned on the other party making a claim. Such claims are typically subject to challenge by the Company and to dispute resolution procedures specified in the particular contract. Further, the Company’s obligations under these agreements may be limited in terms of timeand/or amount and, in some instances, the Company 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 the Company’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, 2006, management was not aware of any obligations arising under indemnification contracts that would require material payments.

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ACCENTURE SCA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)

(Unaudited)

From time to time, the Company 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, the Company 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 the Company’s obligations for the performance of others is not expressly specified. The Company estimates that as of May 31, 2006, it had assumed an aggregate potential liability of approximately $1,312,774 to its clients for the performance of others under arrangements described in this paragraph. These contracts typically provide recourse provisions that would allow the Company to recover from the other parties all but approximately $139,927 if the Company is obligated to make payments to the clients that are the consequence of a performance default by the other parties. To date, the Company has not been required to make any payments under any of the contracts described in this paragraph.

The NHS Contracts

Under the NHS Contracts, the Company has been engaged by the NHS to design, develop and deploy new patient administration, assessment and care systems (the “Systems”) for local healthcare providers and, subsequently, to provide ongoing operational services (the “Operational Services”) through 2013 once these Systems have been deployed. For the purposes of financial reporting, these components of the NHS Contracts have been separated into two units of accounting as described below. The revenues and costs from the NHS Contracts are apportioned equally between the Government and Products operating groups.

Design, Development and Deployment of the Systems

The Company recognizes revenues in connection with the design, development and deployment of the Systems on thepercentage-of-completion method of accounting underSOP 81-1. Estimates of contract revenues and costs in connection with the design, development and deployment of the Systems are subject to underlying estimates and assumptions, including, among others, those relating to the Company’s ability to design, develop and deploy the Systems on a timely basis; the ability of the Company’s subcontractors and others involved in the program to perform adequately and on a timely basis; the level and timing of demand for the Systems from local healthcare providers; and the Company’s and the NHS’ ability to agree on detailed implementation plans and other terms of the NHS Contracts.

During the nine months ended May 31, 2006, there were several developments that significantly increased the risks and uncertainties associated with the NHS Contracts and materially impacted the Company’s estimates of the contract revenues and costs that are expected to be recorded in connection with the design, development and deployment of the Systems. Due to these revised estimates, the Company recorded a $450,000 aggregate loss provision that was reflected in cost of services of its Government and Products operating groups for the three months ended February 28, 2006. During the three months ended May 31, 2006, the accrual for the contract loss provision was adjusted for foreign currency translation of $33,531 and usage of $20,176. The May 31, 2006 balance of $463,355 is recorded in the Consolidated Balance Sheet as a reduction of $448,700 of client financing included in Current and Non-current unbilled services and as a $14,655 contract loss liability.

If the Company’s estimates of contract revenues or costs for the design, development and deployment of the Systems are further negatively affected because one or more of its underlying estimates or assumptions proves to be incorrect or changing circumstances, including a change in its approach to the NHS Contracts, require the Company to modify one or more of its underlying estimates or assumptions, the Company may determine the need for additional loss provisions that could be material to its results of operations.

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ACCENTURE SCA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)

(Unaudited)

Operational Services

The Company records costs as they are incurred and records revenues as the services are performed and amounts are earned in connection with the Operational Services. The Company has incurred annual losses in connection with the Operational Services. Further adverse developments in connection with the NHS Contracts could cause the Company to experience additional or increased levels of losses with respect to the Operational Services in the future that could be material to its results of operations. In particular, under the current billing arrangements, further delays in deployments of Systems could have a disproportionate, adverse impact on service revenue growth and, accordingly, losses.

Legal Contingencies

As of May 31, 2006, the Company or its present personnel had been named as a defendant in various litigation matters. Based on the present status of these litigation matters, the management of the Company believes these matters will not ultimately have a material effect on the results of operations, financial position or cash flows of the Company.

9.   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.

The Company’s chief operating decision maker is its Chief Executive Officer. The Company’s operating segments are managed separately because each operating segment represents a strategic business unit that provides management consulting, technology and outsourcing services to clients in different industries.

The Company’s reportable operating segments are its five operating groups, which are Communications & High Tech, Financial Services, Government, Products and Resources. Revenues before reimbursements and Operating income (loss) by reportable operating segment were as follows:

	Three Months Ended May 31,
	2006				2005
	Revenues Before				Revenues Before
	Reimbursements		Operating Income		Reimbursements		Operating Income
Communications & High Tech	$	1,079,220	$	173,516	$	1,036,972	$	222,520
Financial Services		921,676		125,542		909,421		163,218
Government		598,842		66,136		577,248		69,181
Products		1,116,766		229,951		932,680		117,381
Resources		687,412		94,979		620,564		99,648
Other		4,153		—		1,688		—
Total	$	4,408,069	$	690,124	$	4,078,573	$	671,948

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ACCENTURE SCA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)

(Unaudited)

	Nine Months Ended May 31,
	2006					2005
	Revenues Before					Revenues Before
	Reimbursements		Operating Income (Loss)			Reimbursements		Operating Income
Communications & High Tech	$	3,152,853	$	523,310		$	2,991,991	$	510,345
Financial Services		2,609,910		309,477			2,575,450		385,697
Government		1,794,648		(8,826	)		1,622,162		128,791
Products		3,138,006		265,006			2,646,272		301,240
Resources		1,976,764		251,025			1,781,449		275,977
Other		8,158		—			5,126		—
Total	$	12,680,339	$	1,339,992		$	11,622,450	$	1,602,050

10.   SUBSEQUENT EVENT

In June 2006, the Company recorded a tax benefit of approximately $140,000, as a result of an expiration of a statute of limitations. The Company’s consolidated tax provision in its fiscal fourth quarter will include the impact of this benefit.

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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-Q and in our Annual Report onForm 10-K for the year ended August 31, 2005, 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-K for the year ended August 31, 2005.

We use the terms “we,” “our Company,” “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 “fiscal 2005” or “fiscal year 2005” means the12-month period that ended on August 31, 2005. All references to quarters, unless otherwise noted, refer to the quarters of our fiscal year.

Disclosure Regarding Forward-Looking Statements

This Quarterly Report onForm 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (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 these differences include changes in general economic and political conditions, including fluctuations in currency exchange rates, and the following factors:

•  Our results of operations are materially affected by economic and political conditions, levels of business activity and rates of change in the industries we serve, as well as by the pace of technological change and the type and level of technology spending by our clients.

•  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 contracts with clients may not be profitable or may be terminated by our clients on short notice.

•  As our work with government clients increases, so does our exposure to various risks inherent in the government contracting process.

•  Our global operations involve many complex risks, some of which may be beyond our control.

•  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.

•  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 the share price of Accenture Ltd Class A common shares, which, in turn, will affect the current market value of Accenture SCA’s Class I common shares.

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•  We continue to achieve greater percentages of revenues and growth through outsourcing. This continued outsourcing growth could result in higher concentrations of revenues and contributions to income from a smaller number of our larger clients on customized outsourcing solutions or, in the case of our more-standardized business process outsourcing services, from larger numbers of clients for whom we provide these more-standardized services. As our outsourcing business continues to grow, we may continue to experience increased pressure on our overall margins, particularly during the early stages of new outsourcing contracts.

•  On certain complex contracts where we partner with third parties, our ability to perform may be adversely affected if these third parties cannot deliver their contributions in a timely manner. Clients are increasingly demanding that we guarantee the performance of these third parties, whom we do not control.

•  We may be exposed to potential risks if we are unable to maintain effective internal controls.

•  Tax legislation, future legislation and negative publicity related to Bermuda companies such as our parent, Accenture Ltd (“Accenture”), may lead to an increase in our tax burden or affect our relationships with our clients.

•  Our services or solutions may infringe upon the intellectual property rights of others.

•  We have only a limited ability to protect our intellectual property rights, which are important to our success.

•  If our alliances do not succeed, we may not be successful in implementing our growth strategy.

•  The share price of Accenture Ltd Class A common shares and, consequently, the market value of Accenture SCA Class I common shares, may be adversely affected from time to time by sales, or the anticipation of future sales, of Accenture Ltd Class A common shares held by our employees and former employees or received upon the redemption of Accenture SCA Class I common shares.

•  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 Accenture.

•  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 onForm 10-K for the year ended August 31, 2005. We undertake no obligation to update or revise any forward-looking statements.

Overview

Revenues are driven by the ability of our executives to secure new contracts 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.

Our results of operations are also affected by the economic conditions, levels of business activity and rates of change in the industries we serve, as well as by the pace of technological change and the type and level 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. The current economic environment continues to stimulate the technology spending of many companies. We are also continuing to see an increase in the number of opportunities from companies seeking revenue-generating initiatives in the global economy in addition to cost-cutting initiatives. We continue to expect that revenue growth rates across our segments for the fourth quarter of fiscal 2006 may vary from prior quarters as economic conditions vary in different industries and geographic markets.

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Revenues before reimbursements for the three and nine months ended May 31, 2006 were $4.41 billion and $12.68 billion, respectively, compared with $4.08 billion and $11.62 billion, respectively, for the three and nine months ended May 31, 2005, increases of 8% and 9%, respectively, in U.S. dollars and 11% and 12%, respectively, in local currency.

Outsourcing revenues before reimbursements for the three and nine months ended May 31, 2006 were $1.75 billion and $4.98 billion, respectively, compared with $1.58 billion and $4.44 billion, respectively, for the three and nine months ended May 31, 2005, increases of 11% and 12%, respectively, in U.S. dollars and 14% and 15%, respectively, in local currency. Outsourcing contracts typically have longer terms than consulting contracts and generally have lower gross margins than consulting contracts, particularly in the first year. Long-term relationships with many of our clients continue to contribute to our success in growing our outsourcing business. Long-term, complex outsourcing contracts, including their consulting components, require ongoing review of their terms and scope of work, in light of our clients’ evolving business needs and our performance expectations. Should the size or number of modifications to these arrangements increase, as our business continues to grow and these contracts evolve, we may experience increased variability in expected cash flows, revenues and profitability.

Consulting revenues before reimbursements for the three and nine months ended May 31, 2006 were $2.66 billion and $7.70 billion, respectively, compared with $2.50 billion and $7.18 billion, respectively, for the three and nine months ended May 31, 2005, increases of 6% and 7%, respectively, in U.S. dollars and 10% for both the three and nine months ended May 31, 2006 and 2005 in local currency.

As previously reported, we have certain large, long-term contracts under which we have been engaged by the National Health Service in England to design, develop and deploy new patient administration, assessment and care systems for local healthcare providers and, subsequently, to provide ongoing operational services through 2013 once these systems have been deployed. During the second quarter of fiscal 2006, there were several developments that significantly increased the risks and uncertainties associated with these contracts and materially impacted our estimates of the contract revenues and costs we expect to record in connection with the NHS Contracts (as defined below). To reflect our revised estimates with respect to design, development and deployment, we recorded a $450 million loss provision in the second quarter of fiscal 2006. During the third quarter of fiscal 2006, there were no significant developments affecting the loss provision estimates. In addition, in connection with the operational services, we expect losses in fiscal 2006 that are comparable to our aggregate losses on the NHS Contracts for fiscal 2005 and losses at similar levels in fiscal 2007. We expect to drive annual losses down significantly thereafter. See “— The NHS Contracts.”

As we are a global company, our revenues are denominated in multiple currencies and may be significantly affected by currency exchange-rate fluctuations. During fiscal 2005, the strengthening of various currencies versus the U.S. dollar resulted in favorable currency translation and increased our reported revenues, operating expenses and operating income. Beginning in the fourth quarter of fiscal 2005 and continuing through the nine months ended May 31, 2006, the U.S. dollar strengthened against other currencies, resulting in less-favorable currency translation and lower reported U.S. dollar revenues, operating expenses and operating income. As of the end of the third quarter of fiscal 2006, the U.S. dollar began to weaken against other currencies. If this trend continues in the fourth quarter of fiscal 2006, our U.S. dollar revenue growth may be higher than our growth in local currency terms. If the U.S. dollar strengthens in the fourth quarter of fiscal 2006, our U.S. dollar revenue growth may continue to be lower than our growth in local currency terms.

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 utilization of our client-service workforces; and the level of non-payroll costs associated with the growth of new outsourcing contracts. 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

24

changes in activity levels in our business. Operating expenses also include reorganization benefits and costs, which may vary substantially from year to year.

Effective September 1, 2005, we adopted Statement of Financial Accounting Standards (“SFAS”) No. 123R,Share-Based Payment(“SFAS No. 123R”), resulting in a change in our method of recognizing share-based compensation expense. Specifically, we now record compensation expense for employee stock options and for our employee share purchase plan. Had we expensed employee stock options and employee share purchase rights for the three and nine months ended May 31, 2005, we estimate that share-based compensation expense would have increased by $66 million and $148 million, respectively. For the nine months ended May 31, 2006, we have increased the use of restricted share units and reduced the use of stock options in our employee incentive awards, and we expect to continue to do so for the remainder of fiscal 2006, resulting in total share-based compensation expense that is comparable to our fiscal 2005 pro forma share-based compensation expense. For additional information, see Footnote 2 (Share-based Compensation) to our Consolidated Financial Statements above under Item 1, “Financial Statements.”

Gross margins (revenues before reimbursements less cost of services before reimbursements) as a percentage of revenues before reimbursements for the three and nine months ended May 31, 2006 were 33.0% and 28.7%, respectively, compared with 34.6% and 32.7%, respectively, for the three and nine months ended May 31, 2005. The decrease in gross margins as a percentage of revenues before reimbursements for the three months ended May 31, 2006 was principally due to higher share-based compensation expense as a result of the adoption of SFAS No. 123R. The decrease in gross margins as a percentage of revenues before reimbursements for the nine months ended May 31, 2006 was principally due to the $450 million loss provision associated with the NHS Contracts recorded during the second quarter of fiscal 2006 and higher share-based compensation expense as a result of adoption of SFAS No. 123R.

Our cost-management strategy is to anticipate changes in demand for our services and to identify cost-management initiatives. A primary element of this strategy is to aggressively plan and manage our payroll costs to meet the anticipated demand for our services, given that payroll costs are the most significant portion of our operating expenses.

Attrition in the third quarter of fiscal 2006 was 18%, up slightly from the second quarter of fiscal 2006, but consistent with our target and historical attrition rates. We continue to add substantial numbers of new employees and will continue to actively recruit new employees to balance our mix of skills and resources to meet current and projected future demands, replace departing employees and expand our global sourcing approach, which includes our network of delivery centers and other capabilities around the world. We have adjusted and may need to continue to adjust compensation over the course of the year in certain industry segments, skill sets and geographies in order to attract and retain appropriate numbers of qualified employees. Our margins and ability to grow our business could be adversely affected if we do not continue to manage attrition and if we do not effectively utilize and assimilate substantial numbers of new employees into our workforces.

Sales and marketing and general and administrative costs as a percentage of revenues before reimbursements were 19% for both the three and nine months ended May 31, 2006, compared with 20% for both the three and nine months ended May 31, 2005. The decreases in these costs as a percentage of revenues before reimbursements were primarily due to lower spending in geographic facilities and technology costs and favorable effects of foreign currency exchange.

Operating income as a percentage of revenues before reimbursements decreased to 15.7% and 10.6%, respectively, for the three and nine months ended May 31, 2006, from 16.5% and 13.8%, respectively, for the three and nine months ended May 31, 2005. Had we expensed employee stock options and employee share purchase rights for the three and nine months ended May 31, 2005, we estimate that operating income as a percentage of revenues before reimbursements for the three and nine months ended May 31, 2005 would have decreased by 1.6 and 1.3 percentage points, respectively. The decrease in operating income as a percentage of revenues before reimbursements for the three months ended May 31, 2006 was principally due to higher share-based compensation expense as a result of the adoption of SFAS No. 123R. The decrease in operating income as a percentage of revenues before reimbursements for the nine months ended May 31, 2006 was principally due to the $450 million loss

25

provision associated with the NHS Contracts recorded during the second quarter of fiscal 2006 and higher share-based compensation expense as a result of adoption of SFAS No. 123R.

The NHS Contracts

As previously reported, we have certain large, long-term contracts (the “NHS Contracts”) under which we have been engaged by the National Health Service in England (the “NHS”) to design, develop and deploy new patient administration, assessment and care systems (the “Systems”) for local healthcare providers and, subsequently, to provide ongoing operational services (the “Operational Services”) through 2013 once these Systems have been deployed. For the purposes of our financial reporting, we have separated these components of the NHS Contracts into two units of accounting as described below. The revenues and costs from the NHS Contracts are apportioned equally between our Government and Products operating groups.

Design, Development and Deployment of the Systems

We recognize revenues in connection with the design, development and deployment of the Systems on thepercentage-of-completion method of accounting under 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. 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 periods in which they are first identified. If our estimates at any point indicate that costs will exceed revenues, a loss provision for the full anticipated loss is recorded in the period it is first identified.

Our estimates of contract revenues and costs in connection with the design, development and deployment of the Systems are subject to underlying estimates and assumptions, including, among others, those relating to our ability to design, develop and deploy the Systems on a timely basis; the ability of our subcontractors and others involved in the program to perform adequately and on a timely basis; the level and timing of demand for the Systems from local healthcare providers; and our and the NHS’ ability to agree on detailed implementation plans and other terms of the NHS Contracts. Each of these areas presents significant risks and challenges for us.

During the second quarter of fiscal 2006, there were several developments that significantly increased the risks and uncertainties associated with the NHS Contracts and materially impacted our estimates of the contract revenues and costs that we expect to record in connection with the design, development and deployment of the Systems. These developments included, among other things, subcontractor performance issues, modification of our planned deployment approach, expectations of increased costs based upon current experience, and increased uncertainty as to timing and level of deployment demand.

Due to these developments, in the second quarter of fiscal 2006 we recorded a $450 million aggregate loss provision that was reflected in cost of services of our Government and Products operating groups. During the three months ended May 31, 2006, the accrual for the contract loss provision was adjusted for foreign currency translation of $34 million and usage of $20 million. The May 31, 2006 balance of $463 million is recorded in the Consolidated Balance Sheet as a reduction of $449 million of client financing included in Current and Non-current unbilled services and as a $15 million contract loss liability.

During the third quarter of fiscal 2006, there were no significant developments affecting the loss provision estimates. We continue to work with the NHS and others to resolve the software development and delivery issues, and to explore all options with respect to the NHS Contracts.

If our estimates of contract revenues or costs for the design, development and deployment of the Systems are further negatively affected because one or more of our underlying estimates or assumptions proves to be incorrect or changing circumstances, including a change in our approach to the NHS Contracts, require us to modify one or more of our underlying estimates or assumptions, we may determine the need for additional loss provisions that could be material to our results of operations.

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Operational Services

We record costs as they are incurred and record revenues as the services are performed and amounts are earned in connection with the Operational Services. In connection with the Operational Services, we expect losses in fiscal 2006 that are comparable to our aggregate losses on the NHS Contracts for fiscal 2005 and losses at similar levels in fiscal 2007. We expect to drive annual losses down significantly thereafter. Further adverse developments in connection with the NHS Contracts could cause us to experience additional or increased levels of losses with respect to the Operational Services in the future that could be material to our results of operations. In particular, under the current billing arrangements, further delays in deployments of Systems could have a disproportionate, adverse impact on service revenue growth and, accordingly, losses.

Bookings and Backlog

New contract bookings for the three months ended May 31, 2006 were $5,571 million, an increase of $1,607 million, or 41%, from the three months ended May 31, 2005, with consulting bookings increasing by 9%, to $2,751 million, and outsourcing bookings increasing by 97%, to $2,820 million. New contract bookings for the nine months ended May 31, 2006 were $15,437 million, an increase of $2,568 million, or 20%, over the nine months ended May 31, 2005, with consulting bookings increasing by 10%, to $8,065 million, and outsourcing bookings increasing by 33%, to $7,372 million. The increase in new contract bookings for the first nine months of fiscal 2006 was attributable to strong contract signings in all geographic regions and all types of work.

We provide information regarding our new contract 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 new contract bookings can significantly affect 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. There are no third-party standards or requirements governing the calculation of bookings. New contract bookings involve estimates and judgments regarding new contracts as well as renewals, extensions and additions to existing contracts. Subsequent cancellations, extensions and other matters may affect the amount of bookings previously reported. New contract bookings are recorded using then existing currency exchange rates and are not subsequently adjusted for currency fluctuations.

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 description of our critical accounting policies and estimates, see our Annual Report onForm 10-K for the year ended August 31, 2005.

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 revenues before reimbursements are a better indicator of operating group performance than revenues. From time to time, our operating groups work together to sell and implement certain contracts. The resulting revenues and costs from these contracts 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 economic environment and its effects on the industries served by our operating groups affect revenues and operating expenses within our operating groups to differing degrees. Decisions relating to staffing levels are not made uniformly across our operating segments, due in part to the needs of our operating groups to tailor their workforces to meet the specific needs of their businesses. The shift in mix toward outsourcing contracts is not uniform among our operating groups and, consequently, neither is

27

the impact on operating group results caused by this shift. Local currency fluctuations also tend to affect our operating groups differently, depending on the geographic concentrations and locations of their businesses.

Revenues for each of our operating groups, geographic regions and types of work were as follows:

										Percent of Total
										Revenues Before
					Percent			Percent		Reimbursements for
					Increase			Increase		the Three Months
	Three Months Ended May 31,				(Decrease)			Local		Ended May 31,
	2006		2005		US$			Currency		2006		2005
	(in millions)
OPERATING GROUPS
Communications & High Tech	$	1,079	$	1,037		4	%		7%		24%		26%
Financial Services		922		909		1	%		6%		21%		22%
Government		599		577		4	%		7%		14%		14%
Products		1,117		933		20	%		24%		25%		23%
Resources		687		621		11	%		13%		16%		15%
Other		4		2		n/m			n/m		—		—
TOTAL Revenues Before Reimbursements		4,408		4,079		8	%		11%		100%		100%
Reimbursements		397		419		(5	)%
TOTAL REVENUES	$	4,805	$	4,498		7	%
GEOGRAPHY
Americas	$	2,018	$	1,746		16	%		14%		46%		42%
EMEA(1)		2,073		2,067		0	%		7%		47%		51%
Asia Pacific		317		266		19	%		25%		7%		7%
TOTAL Revenues Before Reimbursements	$	4,408	$	4,079		8	%		11%		100%		100%
TYPE OF WORK
Consulting	$	2,657	$	2,498		6	%		10%		60%		61%
Outsourcing		1,751		1,581		11	%		14%		40%		39%
TOTAL Revenues Before Reimbursements	$	4,408	$	4,079		8	%		11%		100%		100%

n/m = not meaningful

(1) EMEA includes Europe, the Middle East and Africa.

Three Months Ended May 31, 2006 Compared to Three Months Ended May 31, 2005

Revenues

Our Communications & High Tech operating group achieved revenues before reimbursements of $1,079 million for the three months ended May 31, 2006, compared with $1,037 million for the three months ended May 31, 2005, an increase of 4% in U.S. dollars and 7% in local currency terms. The increase was primarily due to revenue growth in our Electronics & High Tech industry group across all geographic regions and consulting growth in our Asia Pacific region.

Our Financial Services operating group achieved revenues before reimbursements of $922 million for the three months ended May 31, 2006, compared with $909 million for the three months ended May 31, 2005, an increase of 1% in U.S. dollars and 6% in local currency terms. The increase was primarily driven by revenue growth in our Banking industry group across all regions and our Insurance industry group in our Asia Pacific and Americas regions. This revenue growth was partially offset by revenue declines in our Capital Markets industry group across all regions.

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Our Government operating group achieved revenues before reimbursements of $599 million for the three months ended May 31, 2006, compared with $577 million for the three months ended May 31, 2005, an increase of 4% in U.S. dollars and 7% in local currency terms. The increase was primarily due to strong outsourcing revenue growth in our Americas and Asia Pacific regions, partially offset by temporary consulting revenue declines in our Asia Pacific region.

Our Products operating group achieved revenues before reimbursements of $1,117 million for the three months ended May 31, 2006, compared with $933 million for the three months ended May 31, 2005, an increase of 20% in U.S. dollars and 24% in local currency terms. A significant portion of the increase was driven by revenues recognized in connection with a contract termination in our Retail industry group in our EMEA region. In addition, Products experienced strong revenue growth in our Americas region, particularly in our Health & Life Sciences, Consumer Goods & Services and Industrial Equipment industry groups, and in our EMEA region, particularly in our Consumer Goods & Services and Industrial Equipment industry groups.

Our Resources operating group achieved revenues before reimbursements of $687 million for the three months ended May 31, 2006, compared with $621 million for the three months ended May 31, 2005, an increase of 11% in U.S. dollars and 13% in local currency terms, with both consulting and outsourcing contributing to the growth in revenues. We experienced strong growth in our Americas and Asia Pacific regions across our Chemicals and Energy industry groups. The Americas also experienced strong growth in Natural Resources and Utilities. Our EMEA region experienced strong growth in our Energy, Natural Resources and Chemicals industry groups, offset by a revenue decline in our Utilities industry group.

Our Americas region achieved revenues before reimbursements for the three months ended May 31, 2006 of $2,018 million, compared with $1,746 million for the three months ended May 31, 2005, an increase of 16% in U.S. dollars and 14% in local currency terms. Growth was primarily due to our business in the United States, Canada and Brazil.

Our EMEA region achieved revenues before reimbursements for the three months ended May 31, 2006 of $2,073 million, compared with $2,067 million for the three months ended May 31, 2005, flat in U.S. dollars and an increase of 7% in local currency terms. A significant portion of the increase was driven by revenues recognized in connection with a contract termination in our Retail industry group and also by growth in our business in Ireland, France and Italy, partially offset by a decline in our business in the United Kingdom. The U.S. dollars results, compared with the increase in local currency, is due to the strengthening of the U.S. dollar against other currencies, resulting in less-favorable currency translation and lower reported U.S. dollar revenues.

Our Asia Pacific region achieved revenues before reimbursements for the three months ended May 31, 2006 of $317 million, compared with $266 million for the three months ended May 31, 2005, an increase of 19% in U.S. dollars and 25% in local currency terms. The increase was primarily driven by our business in Japan, China and South Korea.

Operating Expenses

Operating expenses for the three months ended May 31, 2006 were $4,115 million, an increase of $290 million, or 8%, over the three months ended May 31, 2005. Operating expenses before reimbursements as a percentage of revenues before reimbursements remained flat at 84% for the three months ended May 31, 2006, compared with the three months ended May 31, 2005. Operating expenses for the three months ended May 31, 2006 included share-based compensation expense of $73 million, or 2%, of revenues before reimbursements, compared with share-based compensation expense of $23 million, or 1% of revenues before reimbursements, for the three months ended May 31, 2005. Had we expensed employee stock options and employee share purchase rights for the three months ended May 31, 2005, we estimate that operating expenses would have included $89 million in total share-based compensation expense, or 2% of revenues before reimbursements.

Cost of Services

Cost of services for the three months ended May 31, 2006 was $3,351 million, an increase of $263 million, or 9%, over the three months ended May 31, 2005, and increased as a percentage of revenues to 70% from 69% over this period. Cost of services before reimbursable expenses for the three months ended May 31, 2006 was

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$2,954 million, an increase of $285 million, or 11%, over the three months ended May 31, 2005, and increased as a percentage of revenues before reimbursements to 67% from 65% over this period. Gross margins (revenues before reimbursements less cost of services before reimbursements) as a percentage of revenues before reimbursements decreased to 33.0% from 34.6% during this period.

The increase in Cost of services and the decrease in gross margins as a percentage of revenues before reimbursements were due primarily to higher share-based compensation expense as a result of our adoption of SFAS No. 123R.

Sales and Marketing

Sales and marketing expense for the three months ended May 31, 2006 was $454 million, an increase of $32 million, or 8%, from the three months ended May 31, 2005, and remained flat as a percentage of revenues before reimbursements at 10% for the three months ended May 31, 2006 compared with the three months ended May 31, 2005.

General and Administrative Costs

General and administrative costs for the three months ended May 31, 2006 were $362 million, a decrease of $20 million, or 5%, from the three months ended May 31, 2005, and decreased as a percentage of revenues before reimbursements to 8% from 9% during this period. The decrease is primarily due to lower geographic facilities and technology costs and favorable effects of foreign currency exchange.

Reorganization Benefits

We recorded net reorganization benefits of $52 million during the three months ended May 31, 2006, which included a $58 million reduction in reorganization liabilities offset by $6 million of interest expense associated with carrying these liabilities. At May 31, 2006, the remaining liability for reorganization costs was $344 million, of which $264 million was classified as current liabilities because expirations of statutes of limitations could occur within 12 months. During the three months ended May 31, 2005, we recorded net reorganization benefits of $66 million, which included a $73 million reduction in reorganization liabilities offset by a $7 million interest expense associated with carrying these liabilities. In both periods, the reduction in liabilities was primarily due to final determinations of certain reorganization liabilities established in connection with our transition to a corporate structure in 2001. For additional information, refer to Footnote 3 (Restructuring and Reorganization (Benefits) Costs) to our Consolidated Financial Statements above under Item 1, “Financial Statements.” We anticipate that reorganization liabilities will be substantially diminished by the end of fiscal 2008 because the final statutes of limitations will have expired in a number of tax jurisdictions by the end of that year. However, tax audits or litigation may delay final settlements. Final settlement will result in a payment on a final settlementand/or recording a reorganization benefit or cost in our Consolidated Income Statement.

Operating Income

Operating income for the three months ended May 31, 2006 was $690 million, an increase of $18 million, or 3%, from the three months ended May 31, 2005, and remained flat as a percentage of revenues before reimbursements at 16.0% during this period, compared with the prior-year period. Had we expensed employee stock options and employee share purchase rights for the three months ended May 31, 2005 and adjusted for reorganization benefits, operating income as a percentage of revenues before reimbursements for the three months

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ended May 31, 2005 would have decreased by 3.4 percentage points. Operating income for each of the operating groups was as follows:

	Three Months Ended May 31,
										Effect of
					Increase			Adjustments		Reorganization		Net Increase
	2006		2005		(Decrease)			(1)(2)		Benefits(2)(3)		(Decrease)(2)
	(in millions)
Communications & High Tech	$	173	$	223	$	(50	)	$	16	$	3	$	(31	)
Financial Services		126		163		(37	)		16		5		(16	)
Government		66		69		(3	)		8		2		7
Products		230		117		113			15		3		131
Resources		95		100		(5	)		11		2		8
Total	$	690	$	672	$	18		$	66	$	15	$	99

(1)	Adjustments represent the estimated amounts that would have been incurred had we expensed employee stock options and employee share purchase rights for the three months ended May 31, 2005.
(2)	May not total due to rounding.
(3)	Reorganization benefits recorded during the period were allocated to the reportable operating groups as follows:

	Three Months Ended May 31,
	2006(1)			2005(1)			Change(1)
	(in millions)
Communications & High Tech	$	(14	)	$	(17	)	$	3
Financial Services		(12	)		(17	)		5
Government		(9	)		(11	)		2
Products		(14	)		(17	)		3
Resources		(9	)		(11	)		2
Total	$	(58	)	$	(73	)	$	15

(1) May not total due to rounding.

The following commentary includes the effect on Operating income had we expensed employee stock options and employee share purchase rights for the three months ended May 31, 2005, and adjusting for reorganization benefits recorded during the three months ended May 31, 2006 and 2005:

•  Communications & High Tech operating income decreased due to higher sales and marketing costs, partially offset by revenue growth and improved gross margins, primarily in our Asia Pacific regions.

•  Financial Services operating income decreased due to higher general and administrative costs, partially offset by revenue growth in our Banking industry group across all regions and by revenue growth in our Insurance industry group in our Asia Pacific and Americas regions.

•  Government operating income increased, driven by strong growth in outsourcing revenue and increased profitability on existing outsourcing contracts.

•  A majority of the Products operating income increase was driven by revenue recognized in connection with a contract termination in our Retail industry group in our EMEA region during the third quarter of fiscal 2006. In addition, Products operating income increased due to strong revenue growth in our Americas region, increased profitability on both consulting and outsourcing contracts, and lower combined sales and marketing and general and administrative costs.

•  Resources operating income increased due to strong revenue growth and lower sales and marketing costs.

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Provision for Income Taxes

The effective tax rates for the three months ended May 31, 2006 and 2005 were 29.9% and 29.4%, respectively. Our expected fiscal 2006 annual effective tax rate declined to 33.4% in the third quarter of fiscal 2006 from 37.0% in the second quarter of fiscal 2006, primarily as a result of final determinations of reorganization liabilities and prior year tax liabilities during the quarter. Final determinations include final agreements with tax authorities and expirations of statutes of limitations.

The third quarter 2006 annual effective tax rate is higher than the 2005 annual effective tax rate primarily because of higher benefits related to final determinations of prior year tax liabilities and reductions in reorganization liabilities in 2005.

In June 2006, we recorded a tax benefit of approximately $140 million, as a result of an expiration of a statute of limitations. Our consolidated tax provision in our fiscal fourth quarter will include the impact of this benefit.

Nine Months Ended May 31, 2006 Compared to Nine Months Ended May 31, 2005

									Percent of Total Revenues
							Percent		Before Reimbursements for
	Nine Months Ended May 31,				Percent		Increase Local		the Nine Months Ended May 31,
	2006		2005		Increase US$		Currency		2006		2005
	(in millions)
OPERATING GROUPS
Communications & High Tech	$	3,153	$	2,992		5%		8%		25%		26%
Financial Services		2,610		2,576		1%		5%		20%		22%
Government		1,795		1,622		11%		13%		14%		14%
Products		3,138		2,646		19%		22%		25%		23%
Resources		1,976		1,781		11%		13%		16%		15%
Other		8		5		n/m		n/m		—		—
TOTAL Revenues Before Reimbursements		12,680		11,622		9%		12%		100%		100%
Reimbursements		1,159		1,163		0%
TOTAL REVENUES	$	13,839	$	12,785		8%
GEOGRAPHY
Americas	$	5,772	$	4,872		18%		17%		46%		42%
EMEA(1)		5,998		5,946		1%		7%		47%		51%
Asia Pacific		910		804		13%		18%		7%		7%
TOTAL Revenues Before Reimbursements	$	12,680	$	11,622		9%		12%		100%		100%
TYPE OF WORK
Consulting	$	7,699	$	7,183		7%		10%		61%		62%
Outsourcing		4,981		4,439		12%		15%		39%		38%
TOTAL Revenues Before Reimbursements	$	12,680	$	11,622		9%		12%		100%		100%

n/m = not meaningful

(1) EMEA includes Europe, the Middle East and Africa.

Revenues

Our Communications & High Tech operating group achieved revenues before reimbursements of $3,153 million for the nine months ended May 31, 2006, compared with $2,992 million for the nine months ended May 31, 2005, an increase of 5% in U.S. dollars and 8% in local currency terms. The increase was primarily due to revenue growth in our Electronics & High Tech industry group across all geographic regions, consulting growth in our Americas region and outsourcing growth in our EMEA and Asia Pacific regions.

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Our Financial Services operating group achieved revenues before reimbursements of $2,610 million for the nine months ended May 31, 2006, compared with $2,576 million for the nine months ended May 31, 2005, an increase of 1% in U.S. dollars and 5% in local currency terms. The increase was driven by revenue growth in our Insurance and Banking industry groups, particularly in our Americas and Asia Pacific regions, partially offset by revenue declines in our EMEA region and in our Capital Markets industry group in our Americas region.

Our Government operating group achieved revenues before reimbursements of $1,795 million for the nine months ended May 31, 2006, compared with $1,622 million for the nine months ended May 31, 2005, an increase of 11% in U.S. dollars and 13% in local currency terms. The increase was primarily due to strong outsourcing revenue growth across all geographic regions, partially offset by temporary consulting revenue declines in our Asia Pacific region.

Our Products operating group achieved revenues before reimbursements of $3,138 million for the nine months ended May 31, 2006, compared with $2,646 million for the nine months ended May 31, 2005, an increase of 19% in U.S. dollars and 22% in local currency terms, with both consulting and outsourcing contributing to the growth in revenues. The increase was primarily driven by strong revenue growth in our Americas region, particularly in our Health & Life Sciences, Retail and Consumer Goods & Services industry groups. The increase was also driven by strong growth in our Consumer Goods & Services and Industrial Equipment industry groups in our EMEA region and revenues recognized in connection with a contract termination in our Retail industry group during the third quarter of fiscal 2006.

Our Resources operating group achieved revenues before reimbursements of $1,976 million for the nine months ended May 31, 2006, compared with $1,781 million for the nine months ended May 31, 2005, an increase of 11% in U.S. dollars and 13% in local currency terms, with both consulting and outsourcing contributing to the growth in revenues. We experienced strong revenue growth in our Chemicals, Energy and Natural Resources industry groups across all geographic regions. In our Utilities industry group, strong growth in the Americas region offset revenue declines in our EMEA and Asia Pacific regions.

Our Americas region achieved revenues before reimbursements for the nine months ended May 31, 2006 of $5,772 million, compared with $4,872 million for the nine months ended May 31, 2005, an increase of 18% in U.S. dollars and 17% in local currency terms. Growth was primarily due to our business in the United States, Canada and Brazil.

Our EMEA region achieved revenues before reimbursements for the nine months ended May 31, 2006 of $5,998 million, compared with $5,946 million for the nine months ended May 31, 2005, an increase of 1% in U.S. dollars and 7% in local currency terms. The increase was primarily due to growth in our business in Italy, Ireland, France, Belgium, Netherlands and Germany, partially offset by a decline in our business in the United Kingdom.

Our Asia Pacific region achieved revenues before reimbursements for the nine months ended May 31, 2006 of $910 million, compared with $804 million for the nine months ended May 31, 2005, an increase of 13% in U.S. dollars and 18% in local currency terms. The increase in revenues was primarily driven by our business in Australia, China, South Korea and Malaysia.

Operating Expenses

Operating expenses for the nine months ended May 31, 2006 were $12,499 million, an increase of $1,316 million, or 12%, over the nine months ended May 31, 2005. Operating expenses before reimbursements as a percentage of revenues before reimbursements increased to 89% for the nine months ended May 31, 2006 from 86% for the nine months ended May 31, 2005. Operating expenses for the nine months ended May 31, 2006 included share-based compensation expense of $201 million, or 2% of revenues before reimbursements, compared with share-based compensation expense of $61 million, or 1% of revenues before reimbursements, for the nine months ended May 31, 2005. Had we expensed employee stock options and employee share purchase rights for the nine months ended May 31, 2005, we estimate that operating expenses would have included $210 million in total share-based compensation expense, or 2% of revenues before reimbursements.

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Cost of Services

Cost of services for the nine months ended May 31, 2006 was $10,197 million, an increase of $1,210 million, or 13%, over the nine months ended May 31, 2005, and increased as a percentage of revenues to 80% from 77% over this period. Cost of services before reimbursable expenses for the nine months ended May 31, 2006 was $9,037 million, an increase of $1,214 million, or 16%, over the nine months ended May 31, 2005 and increased as a percentage of revenues before reimbursements to 71% from 67% over this period. Gross margins (revenues before reimbursements less cost of services before reimbursements) as a percentage of revenues before reimbursements decreased to 28.7% from 32.7% during this period.

The increase in Cost of services and the decrease in gross margins as a percentage of revenues before reimbursements were due primarily to the $450 million loss provision associated with the NHS Contracts recorded during the second quarter of fiscal 2006, as well as higher share-based compensation expense as a result of adoption of SFAS No. 123R. See “— The NHS Contracts.”

Sales and Marketing

Sales and marketing expense for the nine months ended May 31, 2006 was $1,256 million, an increase of $99 million, or 9%, over the nine months ended May 31, 2005, and remained flat as a percentage of revenues before reimbursements at 10% for the nine months ended May 31, 2006, compared to the nine months ended May 31, 2005.

General and Administrative Costs

General and administrative costs for the nine months ended May 31, 2006 were $1,101 million, a decrease of $34 million, or 3%, over the nine months ended May 31, 2005, and decreased as a percentage of revenues before reimbursements to 9% from 10% during this period. The decrease is primarily due to favorable effects of foreign currency exchange and a decrease in geographic facilities and technology costs.

Reorganization Benefits

We recorded net reorganization benefits of $54 million during the nine months ended May 31, 2006, which included a $72 million reduction in reorganization liabilities offset by $18 million of interest expense associated with carrying these liabilities. At May 31, 2006, the remaining liability for reorganization costs was $344 million, of which $264 million was classified as current liabilities because expirations of statutes of limitations could occur within 12 months. During the nine months ended May 31, 2005, we recorded net reorganization benefits of $95 million, which included a $115 million reduction in reorganization liabilities offset by a $20 million interest expense associated with carrying these liabilities. In both periods, the reduction in liabilities was primarily due to final determinations of certain reorganization liabilities established in connection with our transition to a corporate structure in 2001. For additional information, refer to Footnote 3 (Restructuring and Reorganization (Benefits) Costs) to our Consolidated Financial Statements above under Item 1, “Financial Statements.” We anticipate that reorganization liabilities will be substantially diminished by the end of fiscal 2008 because the final statutes of limitations will have expired in a number of tax jurisdictions by the end of that year. However, tax audits or litigation may delay final settlements. Final settlement will result in a payment on a final settlementand/or recording a reorganization benefit or cost in our Consolidated Income Statement.

Operating Income

Operating income for the nine months ended May 31, 2006 was $1,340 million, a decrease of $262 million, or 16%, from the nine months ended May 31, 2005, and declined as a percentage of revenues before reimbursements to 10.6% during this period, compared with 13.8% during the prior-year period. Had we expensed employee stock options and employee share purchase rights for the nine months ended May 31, 2005 and adjusted for Reorganization benefits, operating income as a percentage of revenues before reimbursements for the nine months ended May 31, 2005 would have decreased by 2.3 percentage points. The decreases in operating income and operating income as a percentage of revenues before reimbursements were principally due to the $450 million aggregate loss provision associated with the NHS Contracts recorded by our Government and Products operating groups during the second quarter of fiscal 2006. As a result of the adverse impact of this loss provision on our results of operations,

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bonus compensation was $108 million lower than otherwise would have been recorded in the first six months of fiscal 2006 under the terms of our annual bonus plan. Accordingly, the loss provision associated with the NHS Contracts had the effect, after the impact on bonus compensation, of reducing our operating income by $342 million. See “— The NHS Contracts.” We now expect to incur annual bonus compensation expense based on our results for the second half of fiscal 2006. We accrued annual bonus compensation expense in the third quarter on that basis.

Operating income (loss) for each of the operating groups was as follows:

	Nine Months Ended May 31,
											Effect of
						Increase			Adjustments		Reorganization		Net Increase
	2006			2005		(Decrease)			(1)(2)		Benefit(2)(3)		(Decrease)(2)
	(in millions)
Communications & High Tech	$	523		$	510	$	13		$	35	$	11	$	59
Financial Services		310			386		(76	)		35		11		(30	)
Government		(9	)		129		(138	)		19		6		(113	)
Products		265			301		(36	)		35		9		8
Resources		251			276		(25	)		24		6		5
Total	$	1,340		$	1,602	$	(262	)	$	148	$	43	$	(71	)

(1)	Adjustments represent the estimated amounts that would have been incurred had we expensed employee stock options and employee share purchase rights for the nine months ended May 31, 2005.
(2)	May not total due to rounding.
(3)	Reorganization benefits recorded during the period were allocated to the reportable operating groups as follows:

	Nine Months Ended May 31,
	2006(1)			2005(1)			Change(1)
	(in millions)
Communications & High Tech	$	(17	)	$	(28	)	$	11
Financial Services		(15	)		(26	)		11
Government		(11	)		(17	)		6
Products		(18	)		(27	)		9
Resources		(11	)		(17	)		6
Total	$	(72	)	$	(115	)	$	43

(1) May not total due to rounding.

The following commentary includes the effect on Operating income (loss) had we expensed employee stock options and employee share purchase rights for the nine months ended May 31, 2005, and adjusting for reorganization benefits recorded during the nine months ended May 31, 2006 and 2005:

•  Communications & High Tech operating income increased due to revenue growth across all geographic regions and improved gross margins, primarily in our EMEA and Asia Pacific regions.

•  Financial Services operating income decreased due to delivery inefficiencies on a small number of contracts and higher combined sales and marketing and general and administrative costs, partially offset by revenue growth in our Insurance and Banking industry groups, particularly in our Americas and Asia Pacific regions.

•  Government recorded an operating loss principally due to a $225 million loss provision associated with the NHS Contracts recorded during the second quarter of fiscal 2006, which was partially offset by strong gross margins in outsourcing and increased profitability on certain consulting contracts. See “— The NHS Contracts.”

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•  Products operating income included a $225 million loss provision associated with the NHS contracts recorded during the second quarter of fiscal 2006. See “— The NHS Contracts.” Excluding the loss provision, Products experienced strong revenue growth in our Americas region, increased profitability on both consulting and outsourcing contracts, and lower combined sales and marketing and general and administrative costs. In addition, Products operating income was significantly impacted by revenues recognized in connection with a contract termination in our Retail industry group in our EMEA region during the third quarter of fiscal 2006.

•  Resources operating income increased due to strong revenue growth and lower sales and marketing costs, which were partially offset by delivery inefficiencies on a small number of contracts, planned increases in payroll costs and a temporary decline in staff utilization during the first six months of fiscal 2006.

Interest Income

Interest income for the nine months ended May 31, 2006 was $87 million, an increase of $9 million, or 12%, over the nine months ended May 31, 2005. The increase resulted primarily from an increase in interest rates and average client financing balances, which was offset by a decrease in average cash and investment balances for the nine months ended May 31, 2006, compared with the interest rates and average balances for the nine months ended May 31, 2005.

Provision for Income Taxes

The effective tax rates for the nine months ended May 31, 2006 and 2005 were 33.4% and 31.1%, respectively. Our expected fiscal 2006 annual effective tax rate declined to 33.4% in the third quarter of fiscal 2006 from 37.0% in the second quarter of fiscal 2006, primarily as a result of final determinations of reorganization liabilities and prior year tax liabilities during the quarter. Final determinations include final agreements with tax authorities and expirations of statutes of limitations.

The third quarter 2006 annual effective tax rate is higher than the 2005 annual effective tax rate primarily because of higher benefits related to final determinations of prior year tax liabilities and reductions in reorganization liabilities in 2005.

In June 2006, we recorded a tax benefit of approximately $140 million, as a result of an expiration of a statute of limitations. Our consolidated tax provision in our fiscal fourth quarter will include the impact of this benefit.

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. We may also be able to 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;

•  develop new services and solutions;

•  respond to competitive pressures; or

•  facilitate purchases, redemptions and exchanges of Accenture shares.

As of May 31, 2006, cash and cash equivalents of $2,794 million combined with $324 million of liquid fixed-income securities that are classified as investments on our Consolidated Balance Sheet totaled $3,118 million, compared with $3,185 million at August 31, 2005, a decrease of $67 million.

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Cash flows from operating, investing and financing activities, as reflected in the Consolidated Cash Flows Statements, are summarized in the following table:

	Nine Months Ended May 31,
	2006			2005			Change
	(in millions)
Net cash provided by (used in):
Operating activities	$	1,858		$	1,320		$	538
Investing activities		70			(271	)		341
Financing activities		(1,709	)		(845	)		(864	)
Effect of exchange rate changes on cash and cash equivalents		91			16			75
Net increase in cash and cash equivalents	$	310		$	220		$	90

Operating Activities.  The $538 million increase in cash provided was primarily due to increases in revenues and the related collections of billings during the first nine months of fiscal 2006 compared to the first nine months of fiscal 2005, partially offset by increased payments of accounts payable.

Investing Activities.  The $341 million increase in cash provided was primarily due to net proceeds from marketable securities in the first nine months of fiscal 2006 compared with net purchases of marketable securities in the first nine months of fiscal 2005, partially offset by an increase in purchases of businesses and investments.

Financing Activities.  The $864 million increase in cash used was primarily driven by a significant increase in purchases of common shares and the payment of $96 million in cash dividends, partially offset by a $133 million increase in cash received for Accenture Ltd Class A common shares issued under Accenture’s employee share programs. For additional information, see Footnote 7 (Material Transactions Affecting Shareholders’ Equity) to our Consolidated Financial Statements above under Item 1, “Financial Statements.”

We believe that our available cash balances and the cash flows expected to be generated from operations will be sufficient to satisfy our current and planned working capital and investment needs for the next twelve months. We also believe that our longer-term working capital and other general corporate funding requirements will be satisfied through cash flows from operations and, to the extent necessary, from our borrowing facilities and future financial market activities.

Borrowing Facilities

As of May 31, 2006, we had the following borrowing facilities, including the issuance of letters of credit, for general working capital purposes:

	Facility Amount
	(in millions)
Syndicated loan facility	$	1,500
Separate bilateral, uncommitted, unsecured multicurrency revolving credit facilities		250
Local guaranteed and non-guaranteed lines of credit		138
Total	$	1,888

As of May 31, 2006, we had $3 million and $162 million of short-term borrowings and letters of credit outstanding, respectively, and we continue to be in compliance with the terms of the above facilities.

In addition to the short-term borrowings noted above, we had total outstanding debt of $47 million as of May 31, 2006, which was primarily incurred in connection with our ownership of Accenture HR Services.

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Client Financing

In limited circumstances, we agree to extend financing to clients on technology integration consulting contracts. The terms vary by contract, 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. Imputed interest is recorded at market rates in Interest income in the Consolidated Income Statement. Information pertaining to client financing was as follows:

	May 31,			August 31,
	2006			2005
	(in millions, except number of clients)
Number of clients		26			29
Client financing included in Current unbilled services	$	199		$	262
Client financing included in Non-current unbilled services		476			472
Total client financing, current and non-current		675			734
Loss provision(1)		(449	)		—
Total client financing, net of loss provision	$	226		$	734

(1) The loss provision established during the second quarter of fiscal 2006 was associated with the NHS Contracts. See “— The NHS Contracts.”

Share Purchases and Redemptions

Set forth below is a summary of significant share purchase and redemption activity and developments during the first nine months of fiscal 2006. For a complete description of all share purchase and redemption activity for the third quarter of fiscal 2006, see Part II, Item 2, “Unregistered Sales of Equity Securities and Use of Proceeds; Issuer Purchases of Equity Securities.”

Senior Executive Trading Policy and Practices

In July 2005, we implemented a Senior Executive Trading Policy applicable to our senior executives which provides, among other things, that all shares obtained in connection with our transition to a corporate structure in July 2001 (“Founder Shares”) still held by our senior executives and available for transfer will also be subject to quarterly trading guidelines. Many of these Founder Shares still held by current and former senior executives also remain subject to significant transfer restrictions contained in the Company’s Articles of Association (the “Transfer Restrictions”).

Beginning in the first quarter of fiscal 2006, our current and former senior executives who held Founder Shares were able to individually initiate the sale or redemption of eligible securities on a daily basis. Holders of Accenture SCA Class I common shares and ACHI exchangeable shares wishing to sell or redeem these shares must sell or redeem them to Accenture. During the three and nine months ended May 31, 2006, we purchased or redeemed an aggregate of 5,796,329 and 22,813,727 Accenture SCA Class I common shares, respectively, and 99,258 and 297,948 ACHI exchangeable shares, respectively, in individual transactions initiated by current and former senior executives, for total cash outlays of $175 million and $683 million, respectively.

To the best of our knowledge, as of May 31, 2006, our current and former senior executives directly or indirectly held approximately 362 million Founder Shares (or 43% of the combined issued and outstanding Accenture Ltd Class A common shares, Accenture SCA Class I common shares and ACHI exchangeable shares). Of these Founder Shares, approximately 312 million Founder Shares remain subject to the Transfer Restrictions and approximately 193 million Founder Shares are subject to the Senior Executive Trading Policy.

Subsequent Development

In June 2006, we recorded a tax benefit of approximately $140 million, as a result of an expiration of a statute of limitations. Our consolidated tax provision in our fiscal fourth quarter will include the impact of this benefit.

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Off-Balance Sheet Arrangements

We have various agreements by which we may be obligated to indemnify other parties 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 dispute resolution procedures specified in the particular contract. Furthermore, our obligations under these arrangements may be limited in terms of timeand/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, we have not made any payments under these agreements that have been material individually or in the aggregate. As of May 31, 2006, we were not aware of any obligations arising under indemnification contracts that would require material payments.

From time to time, we enter into contracts with clients whereby we have joint and several liability with other participants and third parties providing related services and products to clients. Under these arrangements, we 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. To date, we have not been required to make any payments under any of the contracts described in this paragraph. For additional information, see Footnote 8 (Commitments and Contingencies) to our Consolidated Financial Statements above under Item 1, “Financial Statements.”

ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

During the nine months ended May 31, 2006, there were no material changes in our market risk exposure. For a discussion of our market risk associated with foreign currency risk, interest rate risk and equity price risk as of August 31, 2005, see “Quantitative and Qualitative Disclosures about Market Risk” in Part II, Item 7A, of Accenture SCA’s Annual Report onForm 10-K for the year ended August 31, 2005.

ITEM 4.   CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Based on their evaluation for the period covered by this Quarterly Report onForm 10-Q, the Chief Executive Officer and the Chief Financial Officer of Accenture Ltd, the general partner of Accenture SCA, have concluded that, as of the end of such period, our disclosure controls and procedures (as defined inRule 13a-14(c) and15d-14(c) under the Exchange Act) are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

Changes in Internal Control Over Financial Reporting

There has been no change in our internal control over financial reporting that occurred during the third quarter of fiscal 2006 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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 Actand/or with our internal controls in connection with certain of our operations in the Middle East. In 2003, we voluntarily reported the incident to the appropriate authorities in the United States promptly after its discovery. Shortly thereafter, the SEC advised us it would be undertaking an informal investigation of this incident, and the U.S. Department of Justice indicated it would also conduct a review. Since that

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time, there have been no further developments. 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.

ITEM 2.   UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS;
ISSUER PURCHASES OF EQUITY SECURITIES

Purchases and redemptions of Accenture SCA Class I common shares and Accenture Canada Holdings Inc. exchangeable shares

The following table provides additional information relating to purchases and redemptions by the Company of Accenture SCA Class I common shares and ACHI exchangeable shares during the third quarter of fiscal 2006.

						Approximate Dollar
					Total Number of Shares	Value of Shares that May
					Purchased as Part of	Yet Be Purchased Under
	Total Numberof Shares		Average Price		Publicly Announced	Publicly Announced Plans
Period	Purchased(1)		Paid per Share		Plans or Programs	or Programs
Accenture SCA
March 1, 2006 — March 31, 2006
Class I common shares		—		—	—	—
April 1, 2006 — April 30, 2006
Class I common shares		4,191,050	$	29.86	—	—
May 1, 2006 — May 31, 2006
Class I common shares		1,605,279	$	29.36	—	—
Total
Class I common shares(2)		5,796,329	$	29.72	—	—
Accenture Canada Holdings Inc.
March 1, 2006 — March 31, 2006
Exchangeable shares		—		—	—	—
April 1, 2006 — April 30, 2006
Exchangeable shares		31,126	$	29.46	—	—
May 1, 2006 — May 31, 2006
Exchangeable shares		68,132	$	29.09	—	—
Total
Exchangeable shares(2)		99,258	$	29.21	—	—

(1)

To date, the Board of Directors of Accenture has authorized an aggregate of $4.2 billion for purchases and redemptions of shares from our current and former senior executives and their permitted transferees under our Senior Executive Trading Policy and our prior Share Management Plan, including $1.0 billion authorized for use on March 24, 2006. As of May 31, 2006, an aggregate of $1.2 billion remained available for these purchases and redemptions.

(2)

During the third quarter of fiscal 2006, the Company redeemed and purchased a total of 5,796,329 Accenture SCA Class I common shares and 99,258 ACHI exchangeable shares from current and former senior executives and their permitted transferees.

Purchases and redemptions of Accenture SCA Class II and Class III common shares

Transactions involving Accenture SCA Class II and Class III common shares consist exclusively of inter-company transactions undertaken to facilitate other corporate purposes.

During the third quarter of fiscal 2006, the Company redeemed 3,491,500 Accenture SCA Class III common shares from Accenture in conjunction with Accenture’s publicly announced open-market share repurchase program. These redemptions were made in transactions unrelated to publicly announced share plans or programs.

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On four occasions during the third quarter, the Company, acting through its subsidiary Accenture International SARL, transferred an aggregate of 5,222,462 Accenture SCA Class III common shares to Accenture in connection with transactions related to Accenture’s issuance of its Class A common shares, delivered pursuant to outstanding options awards, grants of restricted share units and other issuances under Accenture’s equity compensation plans. The dates of the transfers and the number of shares transferred were as follows:

	Number of
	Shares
Date of Transfer	Transferred
March 28, 2006		657,585
April 25, 2006		883,121
May 19, 2006		2,879,493
May 31, 2006		802,263

In each case, the Accenture SCA Class III 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.

Accenture SCA Class III common shares are convertible into Accenture SCA Class II common shares by a resolution of an extraordinary meeting of the Company’s shareholders, passed in the manner provided by the Company’s Articles of Association, at a conversion ratio of 1 Accenture SCA Class III common share for 10 Accenture SCA Class II common shares.

Purchases and redemptions of Accenture Ltd Class A and Class X common shares

The following table provides information relating to the purchases by Accenture of Accenture Ltd Class A common shares and redemptions of Accenture Ltd Class X common shares for the third quarter of fiscal 2006. The Company’s management believes that the following table and footnotes provide useful information because the market value of Accenture SCA Class I common shares is based on the share price of Accenture Ltd Class A common shares, and purchases of these shares may affect the share price of Accenture Ltd Class A common shares.

							Approximate Dollar
					Total Number of Shares		Value of Shares that May
	Total Number				Purchased as Part of		Yet Be Purchased Under
	of Shares		Average Price		Publicly Announced		Publicly Announced Plans
Period	Purchased		Paid per Share		Plans or Programs(1)		or Programs(2)
							(in millions)
March 1, 2006 — March 31, 2006
Class A common shares		915,662	$	29.64		900,000	$	1,054
Class X common shares		—		—		—		—
April 1, 2006 — April 30, 2006
Class A common shares		806,428	$	29.11		801,500	$	1,031
Class X common shares		3,335,313	$	0.0000225		—		—
May 1, 2006 — May 31, 2006
Class A common shares		2,229,820	$	28.89		1,790,000	$	978
Class X common shares		2,560,274	$	0.0000225		—		—
Total
Class A common shares(1)(2)(3)(4)		3,951,910	$	29.11		3,491,500
Class X common shares(5)		5,895,587	$	0.0000225		—

(1)

Since April 2002, the Board of Directors of Accenture has authorized and periodically confirmed a publicly announced open-market share purchase program for acquiring Accenture Ltd Class A common shares. During the third quarter of fiscal 2006, an aggregate of 3,491,500 Accenture Ltd Class A common shares were purchased for an aggregate purchase price of $103 million. The Board of Directors of Accenture has authorized an aggregate of $2.1 billion for use in these open-market share purchases, including $500 million authorized for use on March 24, 2006. As of May 31, 2006, an aggregate of $978 million remained available for these open-market share purchases. The open-market purchase program does not have an expiration date.

(2)

In July 2002, we publicly announced our RSU Sell-Back Program, whereby we offer to purchase Accenture Ltd Class A common shares awarded to employees pursuant to restricted share units issued in connection with our initial public offering. The RSU Sell-Back Program was terminated effective March 1, 2006. The approximately $119 million of remaining funds authorized for purchases under this program have been made available for purchases and redemptions of shares from our current and former senior executives and their permitted transferees.

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(3)	During the third quarter of fiscal 2006, a subsidiary of the Company purchased 292,586 Accenture Ltd Class A common shares for an aggregate purchase price of $7.3 million. This transaction consisted of a purchase of Accenture shares received in connection with Accenture’s transition to a corporate structure held by a former senior executive.
(4)	During the third quarter of fiscal 2006, Accenture purchased 167,824 Accenture Ltd Class A common shares in transactions unrelated to publicly announced share plans or programs. These transactions consisted of acquisitions of Accenture Ltd Class A common shares via share withholding for payroll tax obligations due from employees and former employees in connection with the delivery of Accenture Ltd Class A common shares under the Company’s various employee equity share plans.
(5)	During the third quarter of fiscal 2006, Accenture redeemed 5,895,587 Accenture Ltd Class X common shares pursuant to its bye-laws. Accenture Ltd Class X common shares are redeemable at their par value of $0.0000225 per share.

ITEM 3.   DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

ITEM 5.   OTHER INFORMATION

(a) None.

(b) None.

ITEM 6.   EXHIBITS

Exhibit Index:

Exhibit
Number			Exhibit
	3	.1	Form of Articles of Association of Accenture SCA, consolidated and updated as of June 28, 2005 (incorporated by reference to Exhibit 10.1 to the May 31, 2005 Accenture Ltd 10-Q)
	3	.2	Form of Bye-laws of Accenture Ltd, effective as of February 2, 2005 (incorporated by reference to Exhibit 3.1 to the February 28, 2005 Accenture Ltd 10-Q)
	31	.1	Certification of the Chief Executive Officer pursuant toRule 13a-14(a) or15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	31	.2	Certification of the Chief Financial Officer pursuant toRule 13a-14(a) or15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	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
	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

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: June 30, 2006

ACCENTURE SCA
represented by its general partner, Accenture Ltd, itself represented by its duly authorized signatory

By:  /s/  Michael G. McGrath

Name: Michael G. McGrath

Title:  Chief Financial Officer of

Accenture Ltd, general partner of

Accenture SCA

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