Oracle 2007 Annual Report Download - page 81

Table of Contents
ORACLE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
May 31, 2008
remaining useful life of purchased intangible assets and whether events or changes in circumstances warrant a
revision to the remaining period of amortization.
The carrying amounts of these assets are periodically reviewed for impairment (at least annually for goodwill)
whenever events or changes in circumstances indicate that the carrying value of these assets may not be
recoverable. Recoverability of these assets is measured by comparison of the carrying amount of each asset to
the future undiscounted cash flows the asset is expected to generate. If the asset is considered to be impaired,
the amount of any impairment is measured as the difference between the carrying value and the fair value of
the impaired asset. We did not recognize any goodwill or intangible asset impairment charges in fiscal 2008,
2007 or 2006.
Derivative Financial Instruments
We hold derivative financial instruments to manage foreign currency and interest rate risks. We account for
these instruments in accordance with FASB Statement No. 133, Accounting for Derivative Instruments and
Hedging Activities, as amended, which requires that every derivative instrument be recorded on the balance
sheet as either an asset or liability measured at its fair value as of the reporting date. Statement 133 also
requires that changes in our derivatives’ fair values be recognized in earnings, unless specific hedge
accounting and documentation criteria are met (i.e. the instruments are accounted for as hedges). We record
the effective portions of our derivative financial instruments that are designated as cash flow hedges or net
investment hedges in accumulated other comprehensive income in the accompanying consolidated balance
sheets. Any ineffective or excluded portion of a designated cash flow hedge or net investment hedge is
recognized in earnings.
Fair Value of Financial Instruments
The carrying value of our cash, cash equivalents and short-term borrowings approximates fair value due to the
short period of time to maturity. We record changes in fair value for our marketable securities, foreign
currency forward contracts, interest rate swaps and investment hedge based on quoted market prices. Based
on the trading prices of our $11.25 billion and $6.25 billion senior notes outstanding as of May 31, 2008 and
2007, respectively, and the interest rates we could obtain for other borrowings with similar terms at those
dates, the estimated fair value of our borrowings at May 31, 2008 and 2007 was $11.26 billion and
$6.16 billion, respectively.
Legal Contingencies
We are currently involved in various claims and legal proceedings. Quarterly, we review the status of each
significant matter and assess our potential financial exposure. If the potential loss from any claim or legal
proceeding is considered probable and the amount can be reasonably estimated, we accrue a liability for the
estimated loss.
Foreign Currency
We transact business in various foreign currencies. In general, the functional currency of a foreign operation
is the local country’s currency. Consequently, revenues and expenses of operations outside the United States
are translated into U.S. Dollars using weighted average exchange rates while assets and liabilities of
operations outside the United States are translated into U.S. Dollars using exchange rates at the balance sheet
date. 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 are included in non-operating income, net in our consolidated statements
of operations and were $40 million, $45 million and $39 million in fiscal 2008, 2007 and 2006, respectively.
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Source: ORACLE CORP, 10-K, July 02, 2008 Powered by Morningstar® Document Research℠