Oracle 2006 Annual Report Download - page 104

Table of Contents
ORACLE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
May 31, 2007
The components of the deferred tax assets and liabilities consist of the following:
May 31,
(in millions) 2007 2006
Deferred tax liabilities:
Unrealized gain on stock $ (130) $ (130)
Unremitted earnings of foreign subsidiaries (38) (51)
Acquired intangibles (1,756) (1,340)
Other — (30)
Total deferred tax liabilities (1,924) (1,551)
Deferred tax assets:
Accruals and allowances 417 602
Employee compensation and benefits 270 137
Differences in timing of revenue recognition 166 101
Depreciation and amortization 85 78
Tax credit and net operating loss carryforwards 935 823
Other 91 149
Total deferred tax assets 1,964 1,890
Valuation allowance (166) (189)
Net deferred tax asset (liability) $ (126) $ 150
Recorded as:
Current deferred tax assets $ 968 $ 714
Non-current deferred tax assets (in other non-current assets) 47 16
Current deferred tax liabilities (in other current liabilities) (20) (16)
Non-current deferred tax liabilities (1,121) (564)
Net deferred tax asset (liability) $ (126) $ 150
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, 2007, the amount of temporary differences
related to investments in foreign subsidiaries upon which United States income taxes have not been provided
was approximately $5.7 billion. If these amounts 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 associated with these temporary
differences would be approximately $1.4 billion. 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.
The Internal Revenue Service has examined our federal income tax returns for all years through 1999 without
any material adjustment of taxes due. The IRS is currently examining our federal income tax returns for 2000
through 2003. In addition, the Internal Revenue Service is examining taxable years after 2000 for various
acquired entities. We do not believe that the outcome of these matters will have a material adverse effect on
our consolidated financial position or results of operations. We are also under examination by numerous state
and non-US tax authorities. We believe that we have adequately provided for any reasonably foreseeable
outcome related to these audits. However, there can be no assurances as to possible outcomes.
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Source: ORACLE CORP, 10-K, June 29, 2007 Powered by Morningstar® Document Research℠