Oracle 2009 Annual Report Download - page 191

additional pre-acquisition contingencies during the measurement period, such amounts
will be included in the purchase price allocation during the measurement period and,
subsequently, in our results of operations.
In addition, uncertain tax positions and tax related valuation allowances assumed in
connection with a business combination are initially estimated as of the acquisition date
and we reevaluate these items quarterly with any adjustments to our preliminary estimates
being recorded to goodwill provided that we are within the measurement period and we
continue to collect information in order to determine their estimated values. Subsequent
to the measurement period or our final determination of the tax allowance's or
contingency's estimated value, changes to these uncertain tax positions and tax related
valuation allowances will affect our provision for income taxes in our consolidated
statement of operations and could have a material impact on our results of operations and
financial position.
Marketable and Non-Marketable Securities
In accordance with ASC 320, Investments—Debt and Equity Securities, and based on our
intentions regarding these instruments, we classify substantially all of our marketable
debt and equity securities as available-for-sale. Marketable debt and equity securities are
reported at fair value, with all unrealized gains (losses) reflected net of tax in
stockholders' equity. If we determine that an investment has an other than temporary
decline in fair value, we recognize the investment loss in non-operating income
(expense), net in the accompanying consolidated statements of operations. We
periodically evaluate our investments to determine if impairment charges are required.
We hold investments in certain non-marketable equity securities in which we do not have
a controlling interest or significant influence. These equity securities are recorded at cost
and included in other assets in the accompanying consolidated balance sheets. If based on
the terms of our ownership of these non-marketable securities we determine that we
exercise significant influence on these non-marketable securities, we apply the
requirements of ASC 323, Investments—Equity Method and Joint Ventures to account for
such investments. Our non-marketable securities are subject to periodic impairment
reviews and we recorded impairment losses of $17 million related to non-marketable
equity securities and other investments in fiscal 2010. Losses related to non-marketable
equity securities and other investments were nominal in fiscal 2009 and 2008.
Fair Value of Financial Instruments
We apply the provisions of ASC 820, Fair Value Measurements and Disclosures, to our
financial instruments that we are required to carry at fair value pursuant to other
accounting standards, including our marketable debt and equity securities and our
derivative financial instruments. We have not applied the fair value option to those
financial instruments that we are not required to carry at fair value pursuant to other
accounting standards, including our senior notes outstanding.
The additional disclosures regarding our fair value measurements are included in Note 4.
Allowances for Doubtful Accounts
We record allowances for doubtful accounts based upon a specific review of all
significant outstanding invoices. For those invoices not specifically reviewed, provisions
are provided at differing rates, based upon the age of the receivable, the collection history
associated with the geographic region that the receivable was recorded in and current
economic trends.
Concentrations of Credit Risk
Financial instruments that are potentially subject to concentrations of credit risk consist
primarily of cash and cash equivalents, marketable securities and trade receivables. Our
cash and cash equivalents are generally held with a number of large, diverse financial
institutions worldwide to reduce the amount of exposure to any single financial
institution. Investment policies have been implemented that limit purchases of marketable
debt securities to investment grade securities. We do not require collateral to secure
accounts receivable. The risk with respect to trade receivables is mitigated by credit
evaluations we perform on our customers, the short duration of our payment terms for the
significant majority of our customer contracts and by the diversification of our customer
base. No single customer accounted for 10% or more of our total revenues in fiscal 2010,
2009 or 2008.
Inventories
Inventories are stated at the lower of cost or market value. Cost is computed using
standard cost, which approximates actual cost, on a first-in, first-out basis. We evaluate
our ending inventories for estimated excess quantities and obsolescence. This evaluation
includes analysis of sales levels by product and projections of future demand within
specific time horizons (generally six months or less). Inventories in excess of future
demand are written down and charged to the provision for inventories, which is a
component of hardware systems products expenses. In addition, we assess the impact of
changing technology to our inventories and we write down inventories that are considered
obsolete. At the point of the loss recognition, a new, lower-cost basis for that inventory is
established, and subsequent changes in facts and circumstances do not result in the
restoration or increase in that newly established cost basis.
Other Receivables
Other receivables represent value-added tax and sales tax receivables associated with the
sale of our products and services to third parties. Other receivables are included in
prepaid expenses and other current assets in our consolidated balance sheets and totaled
$733 million and $555 million at May 31, 2010 and 2009, respectively.
Property, Plant and Equipment
Property, plant and equipment is stated at the lower of cost or realizable value, net of
accumulated depreciation. Depreciation is computed using the straight-line method based
on estimated useful lives of the assets, which range from one to fifty years. Leasehold
improvements are amortized over the lesser of estimated useful lives or lease terms, as
Source: ORACLE CORP, 10-K, July 01, 2010 Powered by Morningstar® Document Research℠