Oracle 2010 Annual Report Download - page 110

Table of Contents
ORACLE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
May 31, 2011
The amortized principal amounts of our cash, cash equivalents and marketable securities approximated their fair values at May 31, 2011 and 2010. We use the
specific identification method to determine any realized gains or losses from the sale of our marketable securities classified as available-for-sale. Such realized
gains and losses were insignificant for fiscal 2011, 2010 and 2009. The following table summarizes the components of our cash equivalents and marketable
securities held, substantially all of which were classified as available-for-sale:
May 31,
(in millions) 2011 2010
Money market funds $ 3,362 $ 2,423
U.S. Treasury, U.S. government and U.S. government agency debt securities 1,150 3,010
Commercial paper, corporate debt securities and other 13,875 5,634
Total investments $ 18,387 $ 11,067
Investments classified as cash equivalents $ 5,702 $ 2,512
Investments classified as marketable securities $ 12,685 $ 8,555
Substantially all of our marketable security investments held as of May 31, 2011 mature within one year. Our investment portfolio is subject to market risk due to
changes in interest rates. As described above, we place our investments with high credit quality issuers and, by policy, limit the amount of credit exposure to any
one issuer. As stated in our investment policy, we are averse to principal loss and seek to preserve our invested funds by limiting default risk, market risk and
reinvestment risk.
4. FAIR VALUE MEASUREMENTS
We perform fair value measurements in accordance with the guidance provided by ASC 820, Fair Value Measurements and Disclosures. ASC 820 defines fair
value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the
measurement date. When determining the fair value measurements for assets and liabilities required to be recorded at their fair values, we consider the principal
or most advantageous market in which we would transact and consider assumptions that market participants would use when pricing the assets or liabilities, such
as inherent risk, transfer restrictions, and risk of nonperformance.
ASC 820 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when
measuring fair value. An asset’s or liability’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair
value measurement. ASC 820 establishes three levels of inputs that may be used to measure fair value:
• Level 1: quoted prices in active markets for identical assets or liabilities;
• Level 2: inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in active markets for similar assets or
liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be
corroborated by observable market data for substantially the full term of the assets or liabilities; or
• Level 3: unobservable inputs that are supported by little or no market activity and that are significant to the fair values of the assets or liabilities.
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Source: ORACLE CORP, 10-K, June 28, 2011 Powered by Morningstar® Document Research℠