Oracle 2008 Annual Report Download - page 119

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Table of Contents
ORACLE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
May 31, 2009
net operating loss carryforwards of approximately $2.1 billion, which expire between fiscal 2010 and fiscal
2027, and are subject to limitations on their utilization. We have tax credit carryforwards of approximately
$179 million, which are subject to limitations on their utilization. Approximately $96 million of these tax
credit carryforwards are not currently subject to expiration dates. The remainder, approximately $83 million,
expires in various years between fiscal 2010 and fiscal 2027.
We classify our unrecognized tax benefits as non-current income taxes payable in the accompanying
consolidated balance sheet. The aggregate changes in the balance of our gross unrecognized tax benefits were
as follows:
Year Ended May 31,
(in millions) 2009 2008
Gross unrecognized tax benefits as of June 1 $ 1,693 $ 1,251
Increases related to tax positions from prior fiscal years, including
acquisitions 434 256
Decreases related to tax positions from prior fiscal years (86) (5)
Increases related to tax positions taken during current fiscal year 370 180
Settlements with tax authorities (41) (20)
Lapses of statutes of limitation (25) (24)
Other, net (83) 55
Total gross unrecognized tax benefits as of May 31 $ 2,262 $ 1,693
As of May 31, 2009, $1.4 billion of unrecognized benefits would affect our effective tax rate if recognized.
We recognized interest and penalties related to uncertain tax positions in our provision for income taxes line
of our consolidated statements of operations of $142 million during fiscal 2009. The amount of interest and
penalties accrued as of May 31, 2009 was $430 million.
Domestically, U.S. federal and state taxing authorities are currently examining income tax returns of Oracle
and various acquired entities for years through fiscal 2007. Many issues are at an advanced stage in the
examination process, the most significant of which include the deductibility of certain royalty payments,
issues related to certain capital gains and losses, Foreign Sales Corporation/Extraterritorial Income
exemptions, stewardship deductions, stock-based compensation and foreign tax credits taken. Other issues are
related to years with expiring statutes of limitation. With all of these domestic audit issues considered in the
aggregate, we believe it was reasonably possible that, as of May 31, 2009, the gross unrecognized tax benefits
related to these audits could decrease (whether by payment, release, or a combination of both) in the next
12 months by as much as $315 million ($289 million net of offsetting tax benefits). Our U.S. federal and, with
some exceptions, our state income tax returns have been examined for all years prior to fiscal 2000, and we
are no longer subject to audit for those periods.
Internationally, tax authorities for numerous non-U.S. jurisdictions are also examining returns affecting our
unrecognized tax benefits. We believe it was reasonably possible that, as of May 31, 2009, the gross
unrecognized tax benefits, could decrease (whether by payment, release, or a combination of both) by as
much as $138 million ($56 million net of offsetting tax benefits) in the next 12 months, related primarily to
transfer pricing and a technical matter of corporate restructuring, which would be affected by the possible
passage of favorable legislation. With some exceptions, we are generally no longer subject to tax
examinations in non-U.S. jurisdictions for years prior to fiscal 1998.
We believe that we have adequately provided for any reasonably foreseeable outcomes related to our tax
audits and that any settlement will not have a material adverse effect on our consolidated financial position or
results of operations. However, there can be no assurances as to the possible outcomes.
We previously negotiated three unilateral Advance Pricing Agreements with the IRS that cover many of our
intercompany transfer pricing issues and preclude the IRS from making a transfer pricing adjustment within
the scope of these agreements. These agreements are effective for fiscal years through May 31, 2006. We
have
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Source: ORACLE CORP, 10-K, June 29, 2009 Powered by Morningstar® Document Research℠