Oracle 2007 Annual Report Download - page 97

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Table of Contents
ORACLE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
May 31, 2008
8. DEFERRED REVENUES
Deferred revenues consisted of the following:
May 31,
(in millions) 2008 2007
Software license updates and product support $ 3,939 $ 3,079
Services 333 279
New software licenses 220 134
Deferred revenues, current 4,492 3,492
Deferred revenues, non-current 262 93
Total deferred revenues $ 4,754 $ 3,585
Deferred software license updates and product support revenues represent customer payments made in advance for
annual support contracts. Software license updates and product support contracts are typically billed on a per annum
basis in advance and revenue is recognized ratably over the support period. Deferred service revenues include
prepayments for consulting, On Demand and education services. Revenue for these services is recognized as the
services are performed. Deferred new software license revenues typically result from undelivered products or
specified enhancements, customer specific acceptance provisions or software license transactions that cannot be
segmented from consulting services or certain extended payment term arrangements.
In connection with the purchase price allocations related to our acquisitions, we have estimated the fair values of the
support obligations assumed. The estimated fair values of the support obligations assumed were determined using a
cost-build up approach. The cost-build up approach determines fair value by estimating the costs relating to fulfilling
the obligations plus a normal profit margin. The sum of the costs and operating profit approximates, in theory, the
amount that we would be required to pay a third party to assume the support obligations. These fair value adjustments
reduce the revenues recognized over the support contract term of our acquired contracts and, as a result, we did not
recognize software license updates and product support revenues related to support contracts assumed from our
acquisitions in the amount of $179 million, $212 million and $391 million that would have been otherwise recorded
by our acquired businesses as independent entities in fiscal 2008, 2007 and 2006, respectively.
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Source: ORACLE CORP, 10-K, July 02, 2008 Powered by Morningstar® Document Research℠