Oracle 2009 Annual Report Download - page 193

recognize stock-based compensation expense on a straight-line basis over the service
period of the award, which is generally four years.
We record deferred tax assets for stock-based compensation plan awards that result in
deductions on our income tax returns based on the amount of stock-based compensation
recognized and the statutory tax rate in the jurisdiction in which we will receive a tax
deduction. We have adopted and apply the alternative transition method as defined within
ASC 718 to calculate the excess tax benefits available for use in offsetting future tax
shortfalls and to determine the excess tax benefits from stock-based compensation that we
reclassify as cash flows from financing activities.
Advertising
All advertising costs are expensed as incurred. Advertising expenses, which are included
within sales and marketing expenses, were $75 million, $71 million and $81 million in
fiscal 2010, 2009 and 2008, respectively.
Research and Development
All research and development costs are expensed as incurred. Costs eligible for
capitalization under ASC 985-20, Software-Costs of Software to be Sold, Leased or
Marketed, were not material to our consolidated financial statements in fiscal 2010, 2009
or 2008.
Acquisition Related and Other Expenses
Acquisition related and other expenses consist of personnel related costs for transitional
and certain other employees, stock-based compensation expenses, integration related
professional services, certain business combination adjustments after the measurement
period or purchase price allocation period has ended, and certain other operating expenses
(income), net. Stock-based compensation included in acquisition related and other
expenses resulted from unvested options or restricted stock-based awards assumed from
acquisitions whereby vesting was accelerated upon termination of the employees pursuant
to the original terms of those options or restricted stock-based awards. As a result of our
adoption of the FASB's revised accounting guidance for business combinations as of the
beginning of fiscal 2010, certain acquisition related and other expenses are now recorded
as expenses in our statements of operations that would previously have been included as a
part of the consideration transferred and capitalized as a part of the accounting for our
acquisitions pursuant to previous accounting rules, primarily direct transaction costs such
as professional services fees.
Year Ended May 31,
(in millions) 2010 2009 2008
Transitional and other employee related costs $ 66 $ 45 $ 32
Stock-based compensation 15 15 112
Professional fees and other, net 68 35 31
Business combination adjustments, net 5 22 6
Gain on sale of property — — (57)
Total acquisition related and other expenses $ 154 $ 117 $ 124
In fiscal 2008, we sold certain of our land and buildings for $153 million in cash.
Concurrent with the sale, we leased the property back from the buyer for a period of up to
three years. We have accounted for this transaction in accordance with ASC 840, Leases
and ASC 360, Property, Plant and Equipment. We deferred $19 million of the gain on the
sale representing the present value of the operating lease commitment and recognized a
gain of approximately $57 million for fiscal 2008. The deferred portion of the gain was
recognized as a reduction of rent expense over the operating lease term.
Non-Operating Income (Expense), net
Non-operating income (expense), net consists primarily of interest income, net foreign
currency exchange gains (losses), the noncontrolling interests in the net profits of our
majority-owned subsidiaries (Oracle Financial Services Software Limited and Oracle
Japan), and net other income (losses), 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) 2010 2009 2008
Interest income $ 122 $ 279 $ 337
Foreign currency (losses) gains, net (148) (55) 40
Noncontrolling interests in income (95) (84) (60)
Other income, net 56 3 67
Total non-operating income (expense), net $ (65) $ 143 $ 384
Included in non-operating income (expense), net were net foreign currency losses in
fiscal 2010 relating to our Venezuelan subsidiary's operations. Effective December 1,
2009, we designated our Venezuelan subsidiary as “highly inflationary” in accordance
with ASC 830, Foreign Currency Matters, and began using the U.S. Dollar as the
subsidiary's new functional currency. During fiscal 2010, the Venezuelan government
devalued its currency and we recognized $81 million of foreign currency losses due to the
remeasurement of certain assets and liabilities and conversion of certain cash balances of
our Venezuelan subsidiary into U.S. Dollars.
Income Taxes
We account for income taxes in accordance with ASC 740, 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.
At the beginning of fiscal 2008, we adopted revised guidance contained in ASC 740 to
account for our uncertain tax positions. The revised guidance contains a two-step
approach to recognizing and measuring uncertain tax positions taken or expected to be
Source: ORACLE CORP, 10-K, July 01, 2010 Powered by Morningstar® Document Research℠