Oracle 2010 Annual Report Download - page 178

FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS
(USD $)
12 Months Ended
05/31/2011
FAIR VALUE MEASUREMENTS 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.
Assets Measured at Fair Value on a Recurring Basis
Our assets measured at fair value on a recurring basis, excluding accrued interest components, consisted of the following
types of instruments (Level 1 and 2 inputs are defined above):
May 31, 2011 May 31, 2010
Fair Value
Measurements
Using Input Types
Fair Value
Measurements
Using Input Types
(in millions) Level 1 Level 2 Total Level 1 Level 2 Total
Assets:
Money market funds $ 3,362 $ — $ 3,362 $ 2,423 $ — $ 2,423
U.S. Treasury, U.S. government and U.S.
government agency debt securities
1,150 — 1,150 3,010 — 3,010
Commercial paper debt securities — 11,884 11,884 — 3,378 3,378
Corporate debt securities and other 106 1,885 1,991 — 2,256 2,256
Derivative financial instruments — 69 69 — 33 33
Total assets $ 4,618 $ 13,838 $ 18,456 $ 5,433 $ 5,667 $ 11,100
Our valuation techniques used to measure the fair values of our money market funds, U.S. Treasury, U.S. government and
U.S. government agency debt securities and certain other marketable securities that were classified as Level 1 in the table
above were derived from quoted market prices as substantially all of these instruments have maturity dates (if any) within
one year from our date of purchase and active markets for these instruments exist. Our valuation techniques used to
measure the fair values of all other instruments listed in the table above, generally all of which mature within one year and
the counterparties to which have high credit ratings, were derived from the following: non-binding market consensus prices
that are corroborated by observable market data, quoted market prices for similar instruments, or pricing models, such as
discounted cash flow techniques, with all significant inputs derived from or corroborated by observable market data. Our
discounted cash flow techniques used observable market inputs such as LIBOR-based yield curves, among others.
Our cash and cash equivalents, marketable securities and derivative financial instruments are recognized and measured at
fair value in our consolidated financial statements. Based on the trading prices of our $15.9 billion and $14.6 billion of
borrowings, which consisted of short-term borrowings and senior notes that were outstanding at May 31, 2011 and senior
Source: ORACLE CORP, 10-K, June 28, 2011 Powered by Morningstar® Document Research℠