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Table of Contents
ORACLE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
May 31, 2008
Stock-Based Compensation
We account for share-based payments, including grants of employee stock awards and purchases under
employee stock purchase plans, in accordance with FASB Statement No. 123 (revised 2004), Share-Based
Payment, which requires that share-based payments (to the extent they are compensatory) be recognized in
our consolidated statements of operations based on their fair values and the estimated number of shares we
ultimately expect will vest. In addition, we have applied the provisions of the SEC’s Staff Accounting
Bulletin No. 107 in our accounting for Statement 123(R). We recognize stock-based compensation expense
on a straight-line basis over the service period of the award, which is generally four years. The fair value of
the unvested portion of share-based payments granted prior to June 1, 2006 (our adoption date of Statement
123(R)) is recognized using the accelerated expense attribution method, net of estimated forfeitures.
Prior to June 1, 2006 (our adoption date of Statement 123(R)), 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 our 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.
Advertising
All advertising costs are expensed as incurred. Advertising expenses, which are included within sales and
marketing expenses, were $81 million, $91 million and $106 million in fiscal 2008, 2007 and 2006,
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 in fiscal 2008, 2007 and 2006,
respectively.
Acquisition Related and Other Expenses
Acquisition related and other expenses consist of in-process research and development expenses, personnel
related costs for transitional employees, stock-based compensation expenses, integration related professional
services, certain business combination contingency adjustments after the purchase price allocation period has
ended, and certain other operating expenses (income), net. Stock-based compensation included in acquisition
related and other expenses resulted from unvested options assumed from acquisitions whose vesting was
accelerated upon termination of the employees pursuant to the terms of those options.
77
Source: ORACLE CORP, 10-K, July 02, 2008 Powered by Morningstar® Document Research℠