Oracle 2007 Annual Report Download - page 108

Table of Contents
ORACLE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
May 31, 2008
The components of the deferred tax assets and liabilities consist of the following:
May 31,
(in millions) 2008 2007
Deferred tax liabilities:
Unrealized gain on stock $ (130) $ (130)
Unremitted earnings of foreign subsidiaries (110) (38)
Acquired intangible assets (2,143) (1,756)
Other (49) —
Total deferred tax liabilities (2,432) (1,924)
Deferred tax assets:
Accruals and allowances 436 417
Employee compensation and benefits 435 270
Differences in timing of revenue recognition 176 166
Depreciation and amortization 206 85
Tax credit and net operating loss carryforwards 1,315 935
Other — 91
Total deferred tax assets 2,568 1,964
Valuation allowance (190) (166)
Net deferred tax liability $ (54) $ (126)
Recorded as:
Current deferred tax assets $ 853 $ 968
Non-current deferred tax assets (in other assets) 360 47
Current deferred tax liabilities (in other current liabilities) (49) (20)
Non-current deferred tax liabilities (1,218) (1,121)
Net deferred tax liability $ (54) $ (126)
We provide for United States income taxes on the undistributed earnings and the other outside basis
temporary differences of foreign subsidiaries unless they are considered indefinitely reinvested outside the
United States. At May 31, 2008, the amount of temporary differences related to undistributed earnings and
other outside basis temporary differences of investments in foreign subsidiaries upon which United States
income taxes have not been provided was approximately $7.2 billion and $4.7 billion, respectively. If these
undistributed earnings were repatriated to the United States, or if the other outside basis differences were
recognized in a taxable transaction, they would generate foreign tax credits that would reduce the federal tax
liability associated with the foreign dividend or the otherwise taxable transaction. Assuming a full utilization
of the foreign tax credits, the potential deferred tax liability associated with these temporary differences of
undistributed earnings and other outside basis temporary differences would be approximately $1.7 billion and
$1.5 billion, respectively.
The valuation allowance was $190 million at May 31, 2008 and $166 million at May 31, 2007. The net
increase is primarily attributable to deferred taxes of acquired entities, principally state attributes.
Substantially all of the valuation allowance relates to tax assets established in purchase accounting. Any
subsequent reduction of that portion of the valuation allowance and the recognition of the associated tax
benefits will be applied to reduce goodwill and then to intangible assets established pursuant to the related
acquisition through fiscal 2009, and will be recorded to our provision for income taxes upon our adoption of
Statement 141(R) in fiscal 2010.
At May 31, 2008, we had federal net operating loss carryforwards of approximately $1.5 billion. These losses
expire in various years between fiscal 2014 and fiscal 2027, and are subject to limitations on their utilization.
We have state
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Source: ORACLE CORP, 10-K, July 02, 2008 Powered by Morningstar® Document Research℠