Oracle 2010 Annual Report Download - page 169

financing transactions. We have generally sold receivables financed through our
financing division on a non-recourse basis to third party financing institutions within 90
days of the contracts’ dates of execution and we classify the proceeds from these sales as
cash flows from operating activities in our consolidated statements of cash flows. We
account for the sales of these receivables as “true sales” as defined in ASC 860, Transfers
and Servicing, as we are considered to have surrendered control of these financing
receivables. During fiscal 2011, $1.5 billion of our financing receivables were sold to
financial institutions.
In addition, we enter into arrangements with leasing companies for sale of our hardware
systems products. These leasing companies, in turn, lease our products to end-users. The
leasing companies generally have no recourse to us in the event of default by the end-user
and we recognize revenue upon delivery, if all the other revenue recognition criteria have
been met.
Our customers include several of our suppliers and occasionally, we have purchased
goods or services for our operations from these vendors at or about the same time that we
have sold our products to these same companies (Concurrent Transactions). Software
license agreements or sales of hardware systems that occur within a three-month time
period from the date we have purchased goods or services from that same customer are
reviewed for appropriate accounting treatment and disclosure. When we acquire goods or
services from a customer, we negotiate the purchase separately from any sales
transaction, at terms we consider to be at arm’s length, and settle the purchase in cash.
We recognize new software license revenues or hardware systems product revenues from
Concurrent Transactions if all of our revenue recognition criteria are met and the goods
and services acquired are necessary for our current operations.
Business Combinations
In fiscal 2010, we adopted ASC 805, Business Combinations, which revised the
accounting guidance that we were required to apply for our acquisitions in comparison to
prior fiscal years. The underlying principles are similar to the previous guidance and
require that we recognize separately from goodwill the assets acquired and the liabilities
assumed, generally at their acquisition date fair values. Goodwill as of the acquisition
date is measured as the excess of consideration transferred and the net of the acquisition
date fair values of the assets acquired and the liabilities assumed. While we use our best
estimates and assumptions as a part of the purchase price allocation process to accurately
value assets acquired and liabilities assumed at the acquisition date, our estimates are
inherently uncertain and subject to refinement. As a result, during the measurement
period, which may be up to one year from the acquisition date, we record adjustments to
the assets acquired and liabilities assumed with the corresponding offset to goodwill.
Upon the conclusion of the measurement period or final determination of the values of
assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments
are recorded to our consolidated statements of operations.
As a result of adopting the revised accounting guidance provided for by ASC 805 as of
the beginning of fiscal 2010, certain of our policies differ when accounting for
acquisitions in fiscal 2010 and prospective periods in comparison to the accounting for
acquisitions in fiscal 2009 and prior periods, including:
• the fair value of in-process research and development is recorded as an
indefinite-lived intangible asset until the underlying project is completed, at
which time the intangible asset is amortized over its estimated useful life, or
abandoned, at which time the intangible asset is expensed (prior to fiscal
2010, in-process research and development was expensed at the acquisition
date);
• the direct transaction costs associated with the business combination are
expensed as incurred (prior to fiscal 2010, direct transaction costs were
included as a part of the purchase price);
• the costs to exit or restructure certain activities of an acquired company are
accounted for separately from the business combination (prior to fiscal 2010,
these restructuring and exist costs were included as a part of the assumed
obligations in deriving the purchase price allocation); and
• any changes in estimates associated with income tax valuation allowances or
uncertain tax positions after the measurement period are generally recognized
as income tax expense with application of this policy also applied
prospectively to all of our business combinations regardless of the acquisition
date (prior to fiscal 2010, any such changes were generally included as a part
of the purchase price allocation indefinitely).
Costs to exit or restructure certain activities of an acquired company or our internal
operations are accounted for as one-time termination and exit costs pursuant to ASC 420,
Exit or Disposal Cost Obligations, and, as noted above, are accounted for separately from
Source: ORACLE CORP, 10-K, June 28, 2011 Powered by Morningstar® Document Research℠