Oracle 2009 Annual Report Download - page 31

Table of Contents
There are risks associated with our outstanding indebtedness. As of May 31, 2010, we had an aggregate of $14.7 billion of outstanding indebtedness that will
mature between the remainder of calendar 2010 and calendar 2039, and we may incur additional indebtedness in the future. Our ability to pay interest and repay
the principal for our indebtedness is dependent upon our ability to manage our business operations, generate sufficient cash flows to service such debt and the
other factors discussed in this section. There can be no assurance that we will be able to manage any of these risks successfully.
We may also need to refinance a portion of our outstanding debt as it matures. There is a risk that we may not be able to refinance existing debt or that the terms
of any refinancing may not be as favorable as the terms of our existing debt. Furthermore, if prevailing interest rates or other factors at the time of refinancing
result in higher interest rates upon refinancing, then the interest expense relating to that refinanced indebtedness would increase. Should we incur future increases
in interest expense, our ability to utilize certain of our foreign tax credits to reduce our U.S. federal income tax could be limited, which could unfavorably affect
our provision for income taxes and effective tax rate. In addition, changes by any rating agency to our outlook or credit rating could negatively affect the value of
both our debt and equity securities and increase the interest amounts we pay on outstanding or future debt. These risks could adversely affect our financial
condition and results of operations.
Adverse litigation results could affect our business. We are subject to various legal proceedings. Litigation can be lengthy, expensive and disruptive to our
operations, and results cannot be predicted with certainty. An adverse decision could result in monetary damages or injunctive relief that could affect our
business, operating results or financial condition. Additional information regarding certain of the lawsuits we are involved in is discussed under Note 18 of Notes
to Consolidated Financial Statements.
We may have exposure to additional tax liabilities. As a multinational corporation, we are subject to income taxes as well as non-income based taxes, in both
the United States and various foreign jurisdictions. Significant judgment is required in determining our worldwide provision for income taxes and other tax
liabilities.
Changes in tax laws or tax rulings may have a significantly adverse impact on our effective tax rate. For example, proposals for fundamental U.S. international
tax reform, such as certain proposals by President Obama’s Administration, if enacted, could have a significant adverse impact on our effective tax rate.
In the ordinary course of a global business, there are many intercompany transactions and calculations where the ultimate tax determination is uncertain. We are
regularly under audit by tax authorities. Our intercompany transfer pricing is currently being reviewed by the IRS and by foreign tax jurisdictions and will likely
be subject to additional audits in the future. We previously negotiated three successive unilateral Advance Pricing Agreements with the IRS that cover many of
our intercompany transfer pricing issues and preclude the IRS from making a transfer pricing adjustment within the scope of the agreements. These agreements
are effective for fiscal years through May 31, 2006. We have submitted to the IRS a request for another renewal of this Advance Pricing Agreement for the years
ending May 31, 2007 through May 31, 2011. However, these agreements do not cover all elements of our transfer pricing and do not bind tax authorities outside
the United States. We have finalized two bilateral Advance Pricing Agreements, one of which was effective for the years ending May 31, 2002 through May 31,
2006 and we have submitted a request for a renewal of this agreement for the years ending May 31, 2007 through May 31, 2011. There can be no guarantee that
such negotiations will result in an agreement. The additional bilateral agreement covers the period from June 1, 2001 through January 25, 2008.
Although we believe that our tax estimates are reasonable, there is no assurance that the final determination of tax audits or tax disputes will not be different from
what is reflected in our historical income tax provisions and accruals.
We are also subject to non-income based taxes, such as payroll, sales, use, value-added, net worth, property and goods and services taxes, in both the United
States and various foreign jurisdictions. We are regularly under audit by tax authorities with respect to these non-income based taxes and may have exposure to
additional non-income based tax liabilities. Our acquisition activities have increased our non-income based tax exposures, particularly with our entry into a new
hardware systems business resulting from our acquisition of Sun, which increased the volume and complexity of laws and regulations that we are subject to and
with which we must comply.
Oracle On Demand and CRM On Demand may not be successful. We offer Oracle On Demand outsourcing services for our applications and database
technology, delivered at our data center facilities, select partner data
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Source: ORACLE CORP, 10-K, July 01, 2010 Powered by Morningstar® Document Research℠