Oracle 2005 Annual Report Download - page 77

Table of Contents
ORACLE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
May 31, 2006
Advertising
All advertising costs are expensed as incurred. Advertising expenses, which are included within sales and marketing expenses, were $106 million, $67 million
and $68 million in fiscal 2006, 2005 and 2004, respectively.
Research and Development
All research and development costs are expensed as incurred. Costs eligible for capitalization under FASB Statement No. 86, Accounting for the Costs of
Computer Software to Be Sold, Leased, or Otherwise Marketed, were not material to our consolidated financial statements.
Non-Operating Income, net
Non-operating income, net consists primarily of interest income, net foreign currency exchange gains (losses), net investment gains related to marketable equity
securities and other investments, equity in earnings of i-flex and the minority interest share in the net profits of Oracle Japan.
Year Ended May 31,
(in millions) 2006 2005 2004
Interest income $ 170 $ 185 $ 118
Foreign currency gains (losses) 39 (14) (13)
Net investment gains related to marketable equity securities and other investments 25 2 29
Equity in earnings 14 — —
Minority interest (41) (42) (37)
Other 36 33 5
Total non-operating income, net $ 243 $ 164 $ 102
Income Taxes
We account for income taxes in accordance with FASB Statement No. 109, Accounting for Income Taxes. Deferred income taxes are recorded for the expected
tax consequences of temporary differences between the tax bases of assets and liabilities for financial reporting purposes and amounts recognized for income tax
purposes. We record a valuation allowance to reduce our deferred tax assets to the amount of future tax benefit that is more likely than not to be realized.
New Accounting Pronouncements
Share-Based Payment: On December 16, 2004, the FASB issued Statement No. 123 (revised 2004), Share-Based Payment, which is a revision of Statement 123.
Statement 123(R) supersedes Opinion 25, and amends FASB Statement No. 95, Statement of Cash Flows. Generally, the approach in Statement 123(R) is similar
to the approach described in Statement 123. However, Statement 123(R) generally requires share-based payments to employees, including grants of employee
stock options and purchases under employee stock purchase plans, to be recognized in the statement of operations based on their fair values. Pro forma disclosure
of fair value recognition is no longer an alternative.
On April 14, 2005, the Securities and Exchange Commission announced that the Statement 123(R) effective transition date would be extended to annual periods
beginning after June 15, 2005. We adopted the provisions of Statement 123(R) under the modified prospective method in our first quarter of fiscal 2007. Under
the modified prospective method, compensation cost is recognized beginning with the effective date of adoption (a) based on the requirements of Statement
123(R) for all share-based payments granted after the effective date of adoption and (b) based on the requirements of Statement 123 for all awards granted to
employees prior to the effective date of adoption that remain unvested on the date of adoption.
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Source: ORACLE CORP, 10-K, July 21, 2006 Powered by Morningstar® Document Research℠