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Table of Contents
European Euro Foreign Exchange Contracts
Exchange Exchange Notional
Foreign Currency Euros for Weighted Average
for Euros Foreign Currency Exchange Rate
(Euros in millions) (Notional Amount) (Notional Amount) (Market Convention)
Functional Currency:
British Pound € 33 € — 0.79
Danish Krone 3 — 7.46
Indian Rupee — 4 60.66
Israeli Shekel 2 — 5.15
Norwegian Krone 4 — 7.91
Polish Zloty 7 — 3.41
Saudi Arabian Riyal 2 — 5.86
Slovakian Koruna 1 — 30.70
South African Rand 22 — 12.33
Swedish Krona 6 — 9.35
Swiss Franc 7 — 1.62
United States Dollar 16 — 1.56
Total € 103 € 4
Net Investment Risk: We hedge the net assets of certain of our international subsidiaries (net investment
hedges) using foreign currency forward contracts to offset the translation and economic exposures related to
our investments in these subsidiaries. We measure the effectiveness of our net investment hedges by using the
changes in spot exchange rates because this method reflects our risk management strategies, the economics of
those strategies in our financial statements and better manages interest rate differentials between different
countries. Under this method, the change in fair value of the forward contract attributable to the changes in
spot exchange rates (the effective portion) is reported in stockholders’ equity to offset the translation results
on the net investments. The remaining change in fair value of the forward contract (the excluded portion and
the ineffective portion, if any) is recognized in non-operating income, net.
Net gains (losses) on investment hedges reported in stockholders’ equity, net of tax effects, were
$(53) million, $28 million and $14 million in fiscal 2008, 2007 and 2006, respectively. Net gains on
investment hedges reported in non-operating income, net were $23 million, $28 million and $24 million in
fiscal 2008, 2007 and 2006, respectively.
At May 31, 2008, we had one net investment hedge in Japanese Yen. The Yen investment hedge minimizes
currency risk arising from net assets held in Yen as a result of equity capital raised during the initial public
offering and secondary offering of our majority owned subsidiary, Oracle Japan. The fair value of our Yen
investment hedge was nominal at May 31, 2008 and 2007. As of May 31, 2008, the Yen investment hedge
had a notional amount of $633 million and an exchange rate of 104.32 Yen for each U.S. Dollar.
Item 8. Financial Statements and Supplementary Data
The response to this item is submitted as a separate section of this Annual Report. See Part IV, Item 15.
Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure
Not applicable.
59
Source: ORACLE CORP, 10-K, July 02, 2008 Powered by Morningstar® Document Research℠