Oracle 2010 Annual Report Download - page 170

the business combination. A liability for a cost associated with an exit or disposal activity
is recognized and measured at its fair value in our consolidated statement of operations in
the period in which the liability is incurred. When estimating the fair value of facility
restructuring activities, assumptions are applied regarding estimated sub-lease payments
to be received, which can differ materially from actual results. This may require us to
revise our initial estimates which may materially affect our results of operations and
financial position in the period the revision is made.
For a given acquisition, we generally identify certain pre-acquisition contingencies as of
the acquisition date and may extend our review and evaluation of these pre-acquisition
contingencies throughout the measurement period in order to obtain sufficient
information to assess whether we include these contingencies as a part of the purchase
price allocation and, if so, to determine the estimated amounts.
If we determine that a pre-acquisition contingency (non-income tax related) is probable in
nature and estimable as of the acquisition date, we record our best estimate for such a
contingency as a part of the preliminary purchase price allocation. We often continue to
gather information for and evaluate our pre-acquisition contingencies throughout the
measurement period and if we make changes to the amounts recorded or if we identify
additional pre-acquisition contingencies during the measurement period, such amounts
will be included in the purchase price allocation during the measurement period and,
subsequently, in our results of operations.
In addition, uncertain tax positions and tax related valuation allowances assumed in
connection with a business combination are initially estimated as of the acquisition date.
We reevaluate these items quarterly with any adjustments to our preliminary estimates
being recorded to goodwill provided that we are within the measurement period.
Subsequent to the measurement period or our final determination of the tax allowance’s
or contingency’s estimated value, whichever comes first, changes to these uncertain tax
positions and tax related valuation allowances will affect our provision for income taxes
in our consolidated statement of operations and could have a material impact on our
results of operations and financial position.
Marketable and Non-Marketable Securities
In accordance with ASC 320, Investments—Debt and Equity Securities, and based on our
intentions regarding these instruments, we classify substantially all of our marketable
debt and equity securities as available-for-sale. Marketable debt and equity securities are
reported at fair value, with all unrealized gains (losses) reflected net of tax in
stockholders’ equity. If we determine that an investment has an other than temporary
decline in fair value, we recognize the investment loss in non-operating income
(expense), net in the accompanying consolidated statements of operations. We
periodically evaluate our investments to determine if impairment charges are required.
We hold investments in certain non-marketable equity securities in which we do not have
a controlling interest or significant influence. These equity securities are recorded at cost
and included in other assets in the accompanying consolidated balance sheets. If based on
the terms of our ownership of these non-marketable securities we determine that we
exercise significant influence on the entity to which these non-marketable securities
relate, we apply the requirements of ASC 323, Investments—Equity Method and Joint
Ventures to account for such investments. Our non-marketable securities are subject to
periodic impairment reviews.
Fair Value of Financial Instruments
We apply the provisions of ASC 820, Fair Value Measurements and Disclosures, to our
financial instruments that we are required to carry at fair value pursuant to other
accounting standards, including our investments in marketable debt and equity securities
and our derivative financial instruments.
The additional disclosures regarding our fair value measurements are included in Note 4.
Allowances for Doubtful Accounts
We record allowances for doubtful accounts based upon a specific review of all
significant outstanding invoices. For those invoices not specifically reviewed, provisions
are provided at differing rates, based upon the age of the receivable, the collection history
associated with the geographic region that the receivable was recorded in and current
economic trends. We write-off a receivable and charge it against its recorded allowance
when we have exhausted our collection efforts without success.
Concentrations of Credit Risk
Financial instruments that are potentially subject to concentrations of credit risk consist
primarily of cash and cash equivalents, marketable securities and trade receivables. Our
cash and cash equivalents are generally held with a number of large, diverse financial
institutions worldwide to reduce the amount of exposure to any single financial
institution. Investment policies have been implemented that limit purchases of marketable
debt securities to investment grade securities. We generally do not require collateral to
secure accounts receivable. The risk with respect to trade receivables is mitigated by
credit evaluations we perform on our customers, the short duration of our payment terms
for the significant majority of our customer contracts and by the diversification of our
customer base. No single customer accounted for 10% or more of our total revenues in
fiscal 2011, 2010 or 2009.
Inventories
Inventories are stated at the lower of cost or market value. Cost is computed using
standard cost, which approximates actual cost, on a first-in, first-out basis. We evaluate
our ending inventories for estimated excess quantities and obsolescence. This evaluation
includes analysis of sales levels by product and projections of future demand within
specific time horizons (generally six months or less). Inventories in excess of future
demand are written down and charged to hardware systems products expenses. In
addition, we assess the impact of changing technology to our inventories and we write
Source: ORACLE CORP, 10-K, June 28, 2011 Powered by Morningstar® Document Research℠