Oracle 2010 Annual Report Download - page 104

Table of Contents
ORACLE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
May 31, 2011
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.
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.
Net foreign exchange transaction gains (losses) included in non-operating income (expense), net in the accompanying consolidated statements of operations were
$11 million, $(149) million and $(65) million in fiscal 2011, 2010 and 2009, 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. We 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.
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Source: ORACLE CORP, 10-K, June 28, 2011 Powered by Morningstar® Document Research℠