Oracle 2010 Annual Report Download - page 165

ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
(USD $)
12 Months Ended
05/31/2011
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING
POLICIES
We develop, manufacture, market, distribute and service database and middleware
software; applications software; and hardware systems, consisting primarily of computer
server and storage products. Our products are built on industry standards and are
engineered to work together or independently within existing customer information
technology (IT), including private and public cloud computing, environments.
Database and middleware software is generally used for the secure storage, retrieval and
manipulation of all forms of software-based data, and for developing and deploying
applications on the internet and on corporate intranets. Applications software is generally
used to automate business processes and to provide business intelligence. We also offer
software license updates and product support contracts that provide our customers with
rights to unspecified product upgrades and maintenance releases issued during the
support period, as well as technical support assistance.
On January 26, 2010, we completed our acquisition of Sun Microsystems, Inc. (Sun), a
provider of hardware systems, software and services, by means of a merger of one of our
wholly owned subsidiaries with and into Sun such that Sun became a wholly owned
subsidiary of Oracle. As a result of our acquisition of Sun, we entered into a new
hardware systems business. Our hardware systems business consists of two operating
segments: (1) hardware systems products, which consists primarily of computer server
and storage product offerings, and (2) hardware systems support, which provides
customers with unspecified software updates for the software components that are
essential to the functionality of our hardware systems and storage products and can
include product repairs, maintenance services and technical support services. In addition,
we enhanced our existing software and services businesses with additional offerings from
Sun. Our acquisition of Sun has added a significant amount of revenues and expenses to
our results of operations in comparison to our historical operating results.
Basis of Financial Statements
The consolidated financial statements include our accounts and the accounts of our
wholly- and majority-owned subsidiaries. Noncontrolling interest positions of certain of
our consolidated entities are reported as a separate component of consolidated equity
from the equity attributable to Oracle’s stockholders for all periods presented. The
noncontrolling interests in our net income were not significant to our consolidated results
for the periods presented and therefore have been included as a component of
non-operating income (expense), net in our consolidated statements of operations.
Intercompany transactions and balances have been eliminated. Certain other prior year
balances have been reclassified to conform to the current year presentation. Such
reclassifications did not affect total revenues, operating income or net income. General
and administrative expenses as presented in our consolidated statements of operations for
fiscal 2011 included a benefit of $120 million related to the recovery of legal costs that
reduced our expenses in this period.
Use of Estimates
Our consolidated financial statements are prepared in accordance with U.S. generally
accepted accounting principles (GAAP) as set forth in the Financial Accounting
Standards Board’s (FASB) Accounting Standards Codification (ASC) and consider the
various staff accounting bulletins and other applicable guidance issued by the U.S.
Securities and Exchange Commission (SEC). These accounting principles require us to
make certain estimates, judgments and assumptions. We believe that the estimates,
judgments and assumptions upon which we rely are reasonable based upon information
available to us at the time that these estimates, judgments and assumptions are made.
These estimates, judgments and assumptions can affect the reported amounts of assets
and liabilities as of the date of the financial statements as well as the reported amounts of
revenues and expenses during the periods presented. To the extent there are material
differences between these estimates, judgments or assumptions and actual results, our
consolidated financial statements will be affected. In many cases, the accounting
treatment of a particular transaction is specifically dictated by GAAP and does not
require management’s judgment in its application. There are also areas in which
management’s judgment in selecting among available alternatives would not produce a
materially different result.
Revenue Recognition
Our sources of revenues include: (1) software, which includes new software license
revenues and software license updates and product support revenues; (2) hardware
systems, which includes the sale of hardware systems products including computer
servers and storage products, and hardware systems support revenues; and (3) services,
which include software and hardware related services including consulting, Cloud
Services and education revenues.
Revenue Recognition for Software Products and Software Related Services (Software
Elements)
New software license revenues represent fees earned from granting customers licenses to
use our database, middleware and applications software, and exclude revenues derived
from software license updates, which are included in software license updates and
Source: ORACLE CORP, 10-K, June 28, 2011 Powered by Morningstar® Document Research℠