Oracle 2007 Annual Report Download - page 78

Table of Contents
ORACLE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
May 31, 2008
additional charge or are substantially discounted; or (4) where the software license payment is tied to the
performance of consulting services.
On Demand is comprised of Oracle On Demand, CRM On Demand and Advanced Customer Services. Oracle On
Demand provides multi-featured software and hardware management and maintenance services for our database,
middleware and applications software. CRM On Demand is a service offering that provides our customers with our
CRM Software functionality delivered via a hosted solution that we manage. Advanced Customer Services provide
customers configuration and performance analysis, personalized support and annual on-site technical services.
Revenues from On Demand services are recognized over the term of the service period, which is generally one year
or less.
Education revenues include instructor-led, media based and internet based training in the use of our products.
Education revenues are recognized as the classes or other education offerings are delivered.
For arrangements with multiple elements, we allocate revenues to each element of a transaction based upon its fair
value as determined by “vendor specific objective evidence.” Vendor specific objective evidence of fair value for all
elements of an arrangement is based upon the normal pricing and discounting practices for those products and
services when sold separately and for software license updates and product support services is also measured by the
renewal rate offered to the customer. We may modify our pricing practices in the future, which could result in
changes in our vendor specific objective evidence of fair value for these undelivered elements. As a result, our future
revenue recognition for multiple element arrangements could differ significantly from our historical results.
We defer revenues for any undelivered elements, and recognize revenues when the product is delivered or over the
period in which the service is performed, in accordance with our revenue recognition policy for such element. If we
cannot objectively determine the fair value of any undelivered element included in bundled software and service
arrangements, we defer revenue until all elements are delivered and services have been performed, or until fair value
can objectively be determined for any remaining undelivered elements. When the fair value of a delivered element
has not been established, we use the residual method to record revenue if the fair value of all undelivered elements is
determinable. Under the residual method, the fair value of the undelivered elements is deferred and the remaining
portion of the arrangement fee is allocated to the delivered elements and is recognized as revenues.
Substantially all of our software license arrangements do not include acceptance provisions. However, if acceptance
provisions exist as part of public policy, for example in agreements with government entities when acceptance
periods are required by law, or within previously executed terms and conditions that are referenced in the current
agreement and are short-term in nature, we generally recognize revenues upon delivery provided the acceptance
terms are perfunctory and all other revenue recognition criteria have been met. If acceptance provisions are not
perfunctory (for example, acceptance provisions that are long-term in nature or are not included as standard terms of
an arrangement), revenues are recognized upon the earlier of receipt of written customer acceptance or expiration of
the acceptance period.
We also evaluate arrangements with governmental entities containing “fiscal funding” or “termination for
convenience” provisions, when such provisions are required by law, to determine the probability of possible
cancellation. We consider multiple factors, including the history with the customer in similar transactions, the
“essential use” of the software licenses and the planning, budgeting and approval processes undertaken by the
governmental entity. If we determine upon execution of these arrangements that the likelihood of cancellation is
remote, we then recognize revenues once all of the criteria described above have been met. If such a determination
cannot be made, revenues are recognized upon the earlier of cash receipt or approval of the applicable funding
provision by the governmental entity.
We assess whether fees are fixed or determinable at the time of sale and recognize revenues if all other revenue
recognition requirements are met. Our standard payment terms are net 30; however, terms may vary based on the
country in which the agreement is executed. Payments that are due within six months are generally deemed to be
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Source: ORACLE CORP, 10-K, July 02, 2008 Powered by Morningstar® Document Research℠