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Table of Contents
ORACLE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
May 31, 2006
The provision for income taxes differs from the amount computed by applying the federal statutory rate to our income before provision for income taxes as
follows:
Year Ended May 31,
(in millions) 2006 2005 2004
Tax provision at statutory rate $ 1,684 $ 1,418 $ 1,381
Foreign earnings at other than United States rates (426) (380) (260)
State tax expense, net of federal benefit 68 66 81
Dividend pursuant to American Jobs Creation Act of 2004 — 121 —
Settlement of audits and expiration of statutes — (131) —
Other 103 71 62
Provision for income taxes $ 1,429 $ 1,165 $ 1,264
The components of the deferred tax assets and liabilities consist of the following:
May 31,
(in millions) 2006 2005
Deferred tax liabilities:
Unrealized gain on stock $ (130) $ (130)
Unremitted earnings of foreign subsidiaries (51) (27)
Acquired intangibles (1,340) (1,251)
Other (30) (10)
Total deferred tax liabilities (1,551) (1,418)
Deferred tax assets:
Accruals and allowances 602 343
Employee compensation and benefits 137 215
Depreciation and amortization 78 56
Tax credit and net operating loss carryforwards 823 264
Differences in timing of revenue recognition and other 250 80
Total deferred tax assets 1,890 958
Valuation allowance (189) (44)
Net deferred tax asset (liability) $ 150 $ (504)
Recorded as:
Current deferred tax assets $ 714 $ 486
Non-current deferred tax assets (in other non-current assets) 16 32
Current deferred tax liabilities (in other current liabilities) (16) (12)
Non-current deferred tax liabilities (564) (1,010)
Net deferred tax asset (liability) $ 150 $ (504)
We provide for United States income taxes on the earnings of foreign subsidiaries unless they are considered indefinitely reinvested outside the United States. At
May 31, 2006, the cumulative earnings upon which United States income taxes have not been provided for were approximately $3.0 billion. If these earnings
were repatriated in the United States, they would generate foreign tax credits that would reduce the federal tax liability associated with the foreign dividend.
Assuming a full utilization of the foreign tax credits, the potential deferred tax liability for these earnings would be approximately $550 million. In fiscal 2005,
we repatriated $3.1 billion of the earnings of foreign subsidiaries in accordance with the American Jobs Creation Act of 2004 and recorded a federal tax expense
of $118 million and a state tax expense (net of federal tax benefit) of $3 million. We repatriated the maximum amount available for repatriation under the
American Jobs Creation Act of 2004.
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Source: ORACLE CORP, 10-K, July 21, 2006 Powered by Morningstar® Document Research℠