Oracle 2010 Annual Report Download - page 200

total foreign net operating loss carryforwards of approximately $1.7 billion, which are subject to limitations on their utilization.
Approximately $1.5 billion of these net operating losses are not currently subject to expiration dates. The remainder, approximately $171
million, expire between fiscal 2012 and fiscal 2021. We had tax credit carryforwards of approximately $1.2 billion, which are subject to
limitations on their utilization. Approximately $361 million of these tax credit carryforwards are not currently subject to expiration dates.
The remainder, approximately $826 million, expire in various years between fiscal 2012 and fiscal 2029.
We classify our unrecognized tax benefits as either current or non-current income taxes payable in the accompanying consolidated balance
sheets. The aggregate changes in the balance of our gross unrecognized tax benefits, including acquisitions, were as follows:
Year Ended May 31,
(in millions) 2011 2010 2009
Gross unrecognized tax benefits as of June 1 $ 2,527 $ 2,262 $ 1,693
Increases related to tax positions from prior fiscal years 128 94 434
Decreases related to tax positions from prior fiscal years (102 ) (491 ) (86 )
Increases related to tax positions taken during current fiscal year 639 813 370
Settlements with tax authorities (23 ) (88 ) (41 )
Lapses of statutes of limitation (53 ) (48 ) (25 )
Other, net 44 (15 ) (83 )
Total gross unrecognized tax benefits as of May 31 $ 3,160 $ 2,527 $ 2,262
As of May 31, 2011, $2.3 billion of unrecognized benefits would affect our effective tax rate if recognized. We recognized interest and
penalties related to uncertain tax positions in our provision for income taxes line of our consolidated statements of operations of $22
million, $3 million and $142 million during fiscal 2011, 2010 and 2009, respectively. Interest and penalties accrued as of May 31, 2011 and
2010 were $669 million and $576 million, respectively.
During fiscal 2010, the provision for income taxes was reduced due to judicial decisions, including the March 2010 U.S. Court of Appeals
Ninth Circuit ruling in Xilinx v. Commissioner, and settlements with various worldwide tax authorities.
Domestically, U.S. federal and state taxing authorities are currently examining income tax returns of Oracle and various acquired entities
for years through fiscal 2010. Many issues are at an advanced stage in the examination process, the most significant of which include the
deductibility of certain royalty payments, issues related to certain capital gains and losses, extraterritorial income exemptions, domestic
production activity deductions, stewardship deductions, stock-based compensation and foreign tax credits taken. Other issues are related to
years with expiring statutes of limitation. With all of these domestic audit issues considered in the aggregate, we believe it was reasonably
possible that, as of May 31, 2011, the gross unrecognized tax benefits related to these audits could decrease (whether by payment, release,
or a combination of both) in the next 12 months by as much as $538 million ($474 million net of offsetting tax benefits). Our U.S. federal
and, with some exceptions, our state income tax returns have been examined for all years prior to fiscal 2000, and we are no longer subject
to audit for those periods.
Internationally, tax authorities for numerous non-U.S. jurisdictions are also examining returns affecting our unrecognized tax benefits. We
believe it was reasonably possible that, as of May 31, 2011, the gross unrecognized tax benefits, could decrease (whether by payment,
release, or a combination of both) by as much as
$285 million ($181 million net of offsetting tax benefits) in the next 12 months, related primarily to transfer pricing. Other issues are related
to years with expiring statutes of limitation. With some exceptions, we are generally no longer subject to tax examinations in non-U.S.
jurisdictions for years prior to fiscal 1998.
We believe that we have adequately provided for any reasonably foreseeable outcomes related to our tax audits and that any settlement will
not have a material adverse effect on our consolidated financial position or results of operations. However, there can be no assurances as to
the possible outcomes.
We previously negotiated three successive unilateral Advance Pricing Agreements with the U.S. Internal Revenue Service (IRS) that cover
many of our intercompany transfer pricing issues and preclude the IRS from making a transfer pricing adjustment within the scope of these
agreements. These agreements are effective for fiscal years through May 31, 2006. We have reached final agreement with the IRS for
renewal of this Advance Pricing Agreement for the years ending May 31, 2007 through May 31, 2013. However, these agreements do not
cover substantial elements of our transfer pricing and do not bind tax authorities outside the United States. We have finalized bilateral
Advance Pricing Agreements, which are effective for the years ending May 31, 2002 through May 31, 2006 and May 31, 2007 through
May 31, 2013.
Source: ORACLE CORP, 10-K, June 28, 2011 Powered by Morningstar® Document Research℠