Oracle 2009 Annual Report Download - page 186

ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
(USD $)
12 Months Ended
05/31/2010
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING
POLICIES
We develop, manufacture, market, distribute and service database and middleware
software as well as applications software designed to help our customers manage and
grow their business operations. Database and middleware software is used for the secure
storage, retrieval and manipulation of all forms of software-based data, and for
developing and deploying applications on the internet and on corporate intranets.
Applications software is used to automate business processes and to provide business
intelligence. We also offer software license updates and product support contracts that
provide our customers with rights to unspecified product upgrades and maintenance
releases issued during the support period, as well as technical support assistance.
On January 26, 2010, we completed our acquisition of Sun Microsystems, Inc. (Sun), a
provider of hardware systems, software and services, for $7.3 billion. As a result of our
acquisition of Sun, we entered into a new hardware systems business. Our hardware
systems business consists of two operating segments: (1) hardware systems products,
which consists primarily of computer server and storage product offerings, and (2)
hardware systems support, which provides customers with unspecified software updates
for the software components that are essential to the functionality of our hardware
systems and storage products and can include product repairs, maintenance services and
technical support services.
We also offer software and non-software related services including consulting, On
Demand, and education.
Basis of Financial Statements
The consolidated financial statements include our accounts and the accounts of our
wholly- and majority-owned subsidiaries. As a result of our adoption of the Financial
Accounting Standards Board's (FASB) new accounting guidance for noncontrolling
interests as contained in ASC 810, Consolidation, as of the beginning of fiscal 2010, we
retrospectively classified noncontrolling interest positions of certain of our consolidated
entities as a separate component of consolidated equity from the equity attributable to
Oracle's stockholders for all periods presented. The noncontrolling interests in our net
income were not significant to our consolidated results for the periods presented and
therefore have been included as a component of non-operating income (expense), net in
our consolidated statements of operations. Intercompany transactions and balances have
been eliminated. Certain other prior year balances have been reclassified to conform to
the current year presentation. Such reclassifications did not affect total revenues,
operating income or net income.
Use of Estimates
Our consolidated financial statements are prepared in accordance with U.S. generally
accepted accounting principles (GAAP) as set forth in the FASB's Accounting Standards
Codification (ASC) and consider the various staff accounting bulletins and other
applicable guidance issued by the U.S. Securities and Exchange Commission (SEC).
These accounting principles require us to make certain estimates, judgments and
assumptions. We believe that the estimates, judgments and assumptions upon which we
rely are reasonable based upon information available to us at the time that these
estimates, judgments and assumptions are made. These estimates, judgments and
assumptions can affect the reported amounts of assets and liabilities as of the date of the
financial statements as well as the reported amounts of revenues and expenses during the
periods presented. To the extent there are material differences between these estimates,
judgments or assumptions and actual results, our consolidated financial statements will be
affected. In many cases, the accounting treatment of a particular transaction is specifically
dictated by GAAP and does not require management's judgment in its application. There
are also areas in which management's judgment in selecting among available alternatives
would not produce a materially different result.
Revenue Recognition
Our sources of revenues include: (1) software, which includes new software license
revenues and software license updates and product support revenues; (2) hardware
systems, which includes the sale of hardware systems products including computer
servers and storage products, and hardware systems support revenues; and (3) services,
which include software and hardware related services including consulting, On Demand
and education revenues.
Revenue Recognition for Software Products and Software Related Services (Software
Elements)
New software license revenues represent fees earned from granting customers licenses to
use our database, middleware and applications software, and exclude revenues derived
from software license updates, which are included in software license updates and
product support revenues. While the basis for software license revenue recognition is
substantially governed by the accounting guidance contained in ASC 985-605,
Software-Revenue Recognition, we exercise judgment and use estimates in connection
with the determination of the amount of software and services revenues to be recognized
in each accounting period.
For software license arrangements that do not require significant modification or
customization of the underlying software, we recognize new software license revenues
when: (1) we enter into a legally binding arrangement with a customer for the license of
Source: ORACLE CORP, 10-K, July 01, 2010 Powered by Morningstar® Document Research℠