Oracle 2009 Annual Report Download - page 192

appropriate. Property, plant and equipment is periodically reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of an
asset may not be recoverable. We did not recognize any significant property impairment
charges in fiscal 2010, 2009 or 2008.
Goodwill, Intangible Assets and Impairment Assessments
Goodwill represents the excess of the purchase price in a business combination over the
fair value of net tangible and intangible assets acquired. Intangible assets that are not
considered to have an indefinite useful life are amortized over their useful lives, which
range from one to ten years. Each period we evaluate the estimated remaining useful life
of purchased intangible assets and whether events or changes in circumstances warrant a
revision to the remaining period of amortization.
The carrying amounts of these assets are periodically reviewed for impairment (at least
annually for goodwill and indefinite lived intangible assets) and whenever events or
changes in circumstances indicate that the carrying value of these assets may not be
recoverable. The goodwill impairment analysis is comprised of two steps. In the first step,
we compare the fair value of each reporting unit to its carrying value. Our reporting units
are consistent with the reportable segments identified in Note 16 below. If the fair value
of the reporting unit exceeds the carrying value of the net assets assigned to that unit,
goodwill is not considered impaired and we are not required to perform further testing. If
the carrying value of the net assets assigned to the reporting unit exceeds the fair value of
the reporting unit, then we must perform the second step of the impairment test in order
to determine the implied fair value of the reporting unit's goodwill. If the carrying value
of a reporting unit's goodwill exceeds its implied fair value, then we would record an
impairment loss equal to the difference. Recoverability of finite lived intangible assets is
measured by comparison of the carrying amount of each asset to the future undiscounted
cash flows the asset is expected to generate. Recoverability of indefinite lived intangible
assets is measured by comparison of the carrying amount of the asset to the future
discounted cash flows the asset is expected to generate. If the asset is considered to be
impaired, the amount of any impairment is measured as the difference between the
carrying value and the fair value of the impaired asset. We did not recognize any
goodwill or intangible asset impairment charges in fiscal 2010, 2009 or 2008.
Derivative Financial Instruments
During fiscal 2010, 2009 and 2008, we used derivative financial instruments to manage
foreign currency and interest rate risks. We account for these instruments in accordance
with ASC 815, Derivatives and Hedging, which requires that every derivative instrument
be recorded on the balance sheet as either an asset or liability measured at its fair value as
of the reporting date. ASC 815 also requires that changes in our derivatives' fair values be
recognized in earnings, unless specific hedge accounting and documentation criteria are
met (i.e. the instruments are accounted for as hedges). We recorded the effective portions
of the gain or loss on derivative financial instruments that were designated as cash flow
hedges or net investment hedges in accumulated other comprehensive income in the
accompanying consolidated balance sheets. The offset to gain or loss on derivative
financial instruments that were designated as fair value hedges were recorded to the item
for which the risk is being hedged. Any ineffective or excluded portion of a designated
cash flow hedge or net investment hedge, and gains or losses on our fair value hedges are
recognized in earnings.
We adopted the disclosure requirements of ASC 815 during fiscal 2009 and have
provided these disclosures prospectively from the year of adoption in Note 11.
Legal Contingencies
We are currently involved in various claims and legal proceedings. Quarterly, we review
the status of each significant matter and assess our potential financial exposure. For legal
and other contingencies that are not a part of a business combination, if the potential loss
from any claim or legal proceeding is considered probable and the amount can be
reasonably estimated, we accrue a liability for the estimated loss. A description of our
accounting policies associated with contingencies assumed as a part of a business
combination is provided under “Business Combinations” above.
Shipping Costs
Our shipping and handling costs for hardware systems products sales are included in
hardware systems products expenses for all periods presented.
Foreign Currency
We transact business in various foreign currencies. In general, the functional currency of
a foreign operation is the local country's currency. Consequently, revenues and expenses
of operations outside the United States are translated into U.S. Dollars using weighted
average exchange rates while assets and liabilities of operations outside the United States
are translated into U.S. Dollars using exchange rates at the balance sheet date. The effects
of foreign currency translation adjustments are included in stockholders' equity as a
component of accumulated other comprehensive income in the accompanying
consolidated balance sheets. Foreign currency transaction (losses) gains, net which
include the effects of our derivative financial instruments, are included in non-operating
income (expenses), net in our consolidated statements of operations and were $(148)
million, $(55) million and $40 million in fiscal 2010, 2009 and 2008, respectively.
Stock-Based Compensation
We account for share-based payments, including grants of employee stock options and
restricted stock-based awards and purchases under employee stock purchase plans, in
accordance with ASC 718, Compensation-Stock Compensation, which requires that
share-based payments (to the extent they are compensatory) be recognized in our
consolidated statements of operations based on their fair values and the estimated number
of shares we ultimately expect will vest. In addition, we have applied certain of the
provisions of the SEC's Staff Accounting Bulletin No. 107 (Topic 14), as amended, that is
also made a part of ASC 718, in our accounting for stock-based compensation. We
Source: ORACLE CORP, 10-K, July 01, 2010 Powered by Morningstar® Document Research℠