Oracle 2010 Annual Report Download - page 171

down inventories that are considered obsolete. At the point of the loss recognition, a new,
lower-cost basis for that inventory is established, and subsequent changes in facts and
circumstances do not result in the restoration or increase in that newly established cost
basis.
Other Receivables
Other receivables represent value-added tax and sales tax receivables associated with the
sale of our products and services to third parties. Other receivables are included in
prepaid expenses and other current assets in our consolidated balance sheets and totaled
$876 million and $733 million at May 31, 2011 and 2010, respectively.
Property, Plant and Equipment
Property, plant and equipment is stated at the lower of cost or realizable value, net of
accumulated depreciation. Depreciation is computed using the straight-line method based
on estimated useful lives of the assets, which range from one to fifty years. Leasehold
improvements are amortized over the lesser of estimated useful lives or lease terms, as
appropriate. Property, plant and equipment is periodically reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of an
asset may not be recoverable. We did not recognize any significant property impairment
charges in fiscal 2011, 2010 or 2009.
Goodwill, Intangible Assets and Impairment Assessments
Goodwill represents the excess of the purchase price in a business combination over the
fair value of net tangible and intangible assets acquired. Intangible assets that are not
considered to have an indefinite useful life are amortized over their useful lives, which
generally range from one to ten years. Each period we evaluate the estimated remaining
useful life of purchased intangible assets and whether events or changes in circumstances
warrant a revision to the remaining period of amortization.
The carrying amounts of these assets are periodically reviewed for impairment (at least
annually for goodwill and indefinite lived intangible assets) and whenever events or
changes in circumstances indicate that the carrying value of these assets may not be
recoverable. The goodwill impairment analysis is comprised of two steps. In the first step,
we compare the fair value of each reporting unit to its carrying value. Our reporting units
are consistent with the reportable segments identified in Note 16 below. If the fair value
of the reporting unit exceeds the carrying value of the net assets assigned to that unit,
goodwill is not considered impaired and we are not required to perform further testing. If
the carrying value of the net assets assigned to the reporting unit exceeds the fair value of
the reporting unit, then we must perform the second step of the impairment test in order
to determine the implied fair value of the reporting unit’s goodwill. If the carrying value
of a reporting unit’s goodwill exceeds its implied fair value, then we would record an
impairment loss equal to the difference. Recoverability of finite lived intangible assets is
measured by comparison of the carrying amount of each asset to the future undiscounted
cash flows the asset is expected to generate. Recoverability of indefinite lived intangible
assets is measured by comparison of the carrying amount of the asset to its fair value. If
the asset is considered to be impaired, the amount of any impairment is measured as the
difference between the carrying value and the fair value of the impaired asset. We did not
recognize any goodwill or intangible asset impairment charges in fiscal 2011, 2010 or
2009.
Derivative Financial Instruments
During fiscal 2011, 2010 and 2009, we used derivative financial instruments to manage
foreign currency and interest rate risks. We account for these instruments in accordance
with ASC 815, Derivatives and Hedging, 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.
Source: ORACLE CORP, 10-K, June 28, 2011 Powered by Morningstar® Document Research℠