Oracle 2009 Annual Report Download - page 130

Table of Contents
ORACLE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
May 31, 2010
valuation allowance relates to tax assets established in purchase accounting. Any subsequent reduction of that portion of the valuation allowance and the
recognition of the associated tax benefits associated with our acquisitions will be recorded to our provision for income taxes subsequent to our final
determination of the valuation allowance or the conclusion of the measurement period (as defined above), whichever comes first.
At May 31, 2010, we had federal net operating loss carryforwards of approximately $1.6 billion. These losses expire in various years between fiscal 2012 and
fiscal 2029, and are subject to limitations on their utilization. We had state net operating loss carryforwards of approximately $3.8 billion, which expire between
fiscal 2011 and fiscal 2029, and are subject to limitations on their utilization. We had foreign net operating loss carryforwards of approximately $1.3 billion,
which are subject to limitations on their utilization. Approximately $1.2 billion of these net operating losses are not currently subject to expiration dates. The
remainder, approximately $90 million, expires between fiscal 2011 and fiscal 2030. We had tax credit carryforwards of approximately $1.2 billion, which are
subject to limitations on their utilization. Approximately $405 million of these tax credit carryforwards are not currently subject to expiration dates. The
remainder, approximately $791 million, expires in various years between fiscal 2011 and fiscal 2029.
We classify our unrecognized tax benefits as either current or non-current income taxes payable in the accompanying consolidated balance sheets. The aggregate
changes in the balance of our gross unrecognized tax benefits, including acquisitions, were as follows:
Year Ended May 31,
(in millions) 2010 2009 2008
Gross unrecognized tax benefits as of June 1 $ 2,262 $ 1,693 $ 1,251
Increases related to tax positions from prior fiscal years 94 434 256
Decreases related to tax positions from prior fiscal years (491) (86) (5)
Increases related to tax positions taken during current fiscal year 813 370 180
Settlements with tax authorities (88) (41) (20)
Lapses of statutes of limitation (48) (25) (24)
Other, net (15) (83) 55
Total gross unrecognized tax benefits as of May 31 $ 2,527 $ 2,262 $ 1,693
As of May 31, 2010, $1.9 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 $3 million during fiscal 2010. The amount of
interest and penalties accrued as of May 31, 2010 was $576 million.
During fiscal 2010, the provision for income taxes was reduced due to recent judicial decisions, including the March 2010 U.S. Court of Appeals Ninth Circuit
ruling in Xilinx v. Commissioner, and settlements with various worldwide tax authorities.
Domestically, U.S. federal and state taxing authorities are currently examining income tax returns of Oracle and various acquired entities for years through fiscal
2008. 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, extraterritorial income exemptions, domestic production activity deductions, 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, 2010, 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 $399 million ($353 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.
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Source: ORACLE CORP, 10-K, July 01, 2010 Powered by Morningstar® Document Research℠