Oracle 2009 Annual Report Download - page 206
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DEFERRED REVENUES
DEFERRED REVENUES
(USD $)
12 Months Ended
05/31/2010
DEFERRED REVENUES 10. DEFERRED REVENUES
Deferred revenues consisted of the following:
May 31,
(in millions) 2010 2009
Software license updates and product support $ 4,618 $ 4,158
Hardware systems support 537 —
Services 376 243
New software licenses 330 191
Hardware systems products 39 —
Deferred revenues, current 5,900 4,592
Deferred revenues, non-current (in other non-current liabilities) 388 204
Total deferred revenues $ 6,288 $ 4,796
Deferred software license updates and product support revenues and deferred hardware systems support revenues represent
customer payments made in advance for annual support contracts. Software license updates and product support contracts and
hardware systems support contracts are typically billed on a per annum basis in advance and revenues are recognized ratably over
the support periods. Deferred services revenues include prepayments for consulting, On Demand and education services. Revenue
for these services is recognized as the services are performed. Deferred new software license revenues typically result from
undelivered products or specified enhancements, customer specific acceptance provisions, software license transactions that cannot
be segmented from consulting services, amongst other reasons. Deferred hardware systems product revenues typically result from
sales to customers, including channel partners and resellers, where revenue recognition criteria have not been met, transactions
involving customer specific acceptance provisions or transactions that cannot be segmented from consulting services.
In connection with the purchase price allocations related to our acquisitions, we have estimated the fair values of the support
obligations assumed. The estimated fair values of the support obligations assumed were determined using a cost build-up approach.
The cost build-up approach determines fair value by estimating the costs relating to fulfilling the obligations plus a normal profit
margin. The sum of the costs and operating profit approximates, in theory, the amount that we would be required to pay a third party
to assume the support obligations. These fair value adjustments reduce the revenues recognized over the support contract term of
our acquired contracts.
Source: ORACLE CORP, 10-K, July 01, 2010 Powered by Morningstar® Document Research℠