Oracle 2009 Annual Report Download - page 213

INCOME TAXES
INCOME TAXES
(USD $)
12 Months Ended
05/31/2010
INCOME TAXES 15. INCOME TAXES
The following is a geographical breakdown of income before the provision for income taxes:
Year Ended May 31,
(in millions) 2010 2009 2008
Domestic $ 4,282 $ 3,745 $ 3,930
Foreign 3,961 4,089 3,904
Total income before provision for income taxes $ 8,243 $ 7,834 $ 7,834
The provision for income taxes consisted of the following:
Year Ended May 31,
(Dollars in millions) 2010 2009 2008
Current provision:
Federal $ 1,307 $ 1,341 $ 1,325
State 299 361 231
Foreign 1,013 934 892
Total current provision 2,619 2,636 2,448
Deferred benefit:
Federal (380) (177) (96)
State (76) (52) (24)
Foreign (55) (166) (15)
Total deferred benefit (511) (395) (135)
Total provision for income taxes $ 2,108 $ 2,241 $ 2,313
Effective income tax rate 25.6% 28.6% 29.5%
The provision for income taxes differed from the amount computed by applying the federal statutory rate to our income before provision for
income taxes as follows:
Year Ended May 31,
(in millions) 2010 2009 2008
Tax provision at statutory rate $ 2,885 $ 2,742 $ 2,742
Foreign earnings at other than United States rates (672) (673) (569)
State tax expense, net of federal benefit 161 201 135
Settlements and releases from judicial decisions and statute expirations,
net
(315) 25 (20)
Other, net 49 (54) 25
Total provision for income taxes $ 2,108 $ 2,241 $ 2,313
The components of our deferred tax liabilities and assets were as follows:
May 31,
(in millions) 2010 2009
Deferred tax liabilities:
Unrealized gain on stock $ (130) $ (130)
Unremitted earnings of foreign subsidiaries (100) (117)
Acquired intangible assets (1,748) (1,831)
Depreciation and amortization (24) —
Other — (1)
Total deferred tax liabilities $ (2,002) $ (2,079)
Deferred tax assets:
Accruals and allowances $ 629 $ 492
Employee compensation and benefits 649 401
Differences in timing of revenue recognition 67 141
Depreciation and amortization — 219
Tax credit and net operating loss carryforwards 2,916 1,201
Other 250 44
Total deferred tax assets $ 4,511 $ 2,498
Valuation allowance $ (649) $ (137)
Net deferred tax assets $ 1,860 $ 282
Recorded as:
Current deferred tax assets $ 1,159 $ 661
Non-current deferred tax assets (in other assets) 1,267 145
Current deferred tax liabilities (in other current
liabilities)
(142) (44)
Non-current deferred tax liabilities (424) (480)
Net deferred tax assets $ 1,860 $ 282
We provide for United States income taxes on the undistributed earnings and the other outside basis temporary differences of foreign
subsidiaries unless they are considered indefinitely reinvested outside the United States. At May 31, 2010, the amount of temporary
differences related to undistributed earnings and other outside basis temporary differences of investments in foreign subsidiaries upon which
United States income taxes have not been provided was approximately $13.0 billion and $4.7 billion, respectively. If these undistributed
earnings were repatriated to the United States, or if the other outside basis differences were recognized in a taxable transaction, they would
generate foreign tax credits that would reduce the federal tax liability associated with the foreign dividend or the otherwise taxable
transaction. Assuming a full utilization of the foreign tax credits, the potential deferred tax liability associated with these temporary
differences of undistributed earnings and other outside basis temporary differences would be approximately $3.6 billion and $1.5 billion,
respectively.
Our net deferred tax assets increased from $282 million as of May 31, 2009 to $1.9 billion as of May 31, 2010, primarily as a result of our
acquisition of Sun. We believe it is more likely than not that the net deferred tax assets will be realized in the foreseeable future. Realization
of our net deferred tax assets is dependent upon our generation of sufficient taxable income in future years in appropriate tax jurisdictions to
obtain benefit from the reversal of temporary differences, net operating loss carryforwards, and tax credit carryforwards. The amount of
deferred tax assets considered realizable is subject to adjustment in future periods if estimates of future taxable income change.
Source: ORACLE CORP, 10-K, July 01, 2010 Powered by Morningstar® Document Research℠