Oracle 2008 Annual Report Download - page 93

Table of Contents
ORACLE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
May 31, 2009
acquisition of PeopleSoft and represented a pre-acquisition contingency that we identified and assumed in
connection with our acquisition of PeopleSoft. We settled this lawsuit in October 2006, which was subsequent
to the purchase price allocation period, for approximately $98 million. Accordingly, we included the
difference between the amount accrued as of the end of the purchase price allocation period and the
settlement amount as a benefit to our consolidated statement of operations in fiscal 2007.
Non-Operating Income, net
Non-operating income, net consists primarily of interest income, net foreign currency exchange gains (losses),
the minority owners’ shares in the net profits of our majority-owned subsidiaries (Oracle Financial Services
Software Limited, formerly i-flex solutions limited, and Oracle Japan), and other income, net, including net
realized gains and losses related to all of our investments and net unrealized gains and losses related to the
small portion of our investment portfolio that we classify as trading.
Year Ended May 31,
(in millions) 2009 2008 2007
Interest income $ 279 $ 337 $ 295
Foreign currency (losses) gains, net (55) 40 45
Minority interests in income (84) (60) (71)
Other income, net 3 67 86
Total non-operating income, net $ 143 $ 384 $ 355
Income Taxes
We account for income taxes in accordance with FASB Statement No. 109, Accounting for Income Taxes.
Deferred income taxes are recorded for the expected tax consequences of temporary differences between the
tax bases of assets and liabilities for financial reporting purposes and amounts recognized for income tax
purposes. We record a valuation allowance to reduce our deferred tax assets to the amount of future tax
benefit that is more likely than not to be realized.
On June 1, 2007, we adopted FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes
(FIN 48), to account for our uncertain tax positions. FIN 48 contains a two-step approach to recognizing and
measuring uncertain tax positions taken or expected to be taken in a tax return. The first step is to determine if
the weight of available evidence indicates that it is more likely than not that the tax position will be sustained
in an audit, including resolution of any related appeals or litigation processes. The second step is to measure
the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement. We
recognize interest and penalties related to uncertain tax positions in our provision for income taxes line of our
consolidated statements of operations.
Recent Accounting Pronouncements
Transfers of Financial Assets: In June 2009, the FASB issued Statement No. 166, Accounting for Transfers
of Financial Assets, an amendment of FASB Statement No. 140. Statement 166 eliminates the concept of a
“qualifying special-purpose entity” from Statement 140 and changes the requirements for derecognizing
financial assets. We will adopt Statement 166 in fiscal 2011 and are currently evaluating the impact of its
pending adoption on our consolidated financial statements.
Variable Interest Entities: In June 2009, the FASB issued Statement No. 167, Amendments to FASB
Interpretation No. 46(R). Statement 167 amends the evaluation criteria to identify the primary beneficiary of a
variable interest entity provided by FASB Interpretation No. 46(R), Consolidation of Variable Interest
Entities—An Interpretation of ARB No. 51. Additionally, Statement 167 requires ongoing reassessments of
whether an enterprise
85
Source: ORACLE CORP, 10-K, June 29, 2009 Powered by Morningstar® Document Research℠