Oracle 2006 Annual Report Download - page 82

Table of Contents
ORACLE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
May 31, 2007
into United States dollars using weighted-average exchange rates while assets and liabilities of operations
outside the United States are translated into United States dollars using year-end exchange rates. The effects
of foreign currency translation adjustments are included in stockholders’ equity as a component of
accumulated other comprehensive income in the accompanying consolidated balance sheets. Foreign currency
transaction gains (losses) are included in non-operating income, net in our consolidated statements of
operations and were $45 million, $39 million and $(14) million in fiscal 2007, 2006 and 2005, respectively.
Stock-Based Compensation
On June 1, 2006, we adopted FASB Statement No. 123R, Share-Based Payment, under the modified
prospective method. Statement 123R generally requires share-based payments to employees, including grants
of employee stock options and purchases under employee stock purchase plans, to be recognized in our
consolidated statements of operations based on their fair values. Under the modified prospective method,
prior period financial statements are not restated.
Prior to June 1, 2006, we accounted for our stock-based compensation plans under the intrinsic value method
of accounting as defined by Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees and applied the disclosure provisions of FASB Statement No. 123, Accounting for Stock-Based
Compensation, as amended. Under Opinion 25, we generally did not recognize any compensation expense for
stock options granted to employees or outside directors as the exercise price of our options was equivalent to
the market price of our common stock on the date of grant. However, we recorded stock-based compensation
for the intrinsic value associated with unvested options assumed in connection with acquisitions. For pro
forma disclosures of stock-based compensation prior to June 1, 2006, the estimated fair values for options
granted and options assumed were amortized using the accelerated expense attribution method. In addition,
we reduced pro forma stock-based compensation expense for actual forfeitures in the periods they occurred.
In March 2005, the United States Securities and Exchange Commission issued Staff Accounting Bulletin
(SAB) No. 107, which provides supplemental implementation guidance for Statement 123R. We have applied
the provisions of SAB 107 in our adoption of Statement 123R. See Note 7 for information on the impact of
our adoption of Statement 123R and the assumptions we use to calculate the fair value of share-based
employee compensation.
Advertising
All advertising costs are expensed as incurred. Advertising expenses, which are included within sales and
marketing expenses, were $91 million, $106 million and $67 million in fiscal 2007, 2006 and 2005,
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 and the minority interest
share in the net profits of Oracle Japan and i-flex solutions limited (see Note 2).
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Source: ORACLE CORP, 10-K, June 29, 2007 Powered by Morningstar® Document Research℠