Oracle 2010 Annual Report Download - page 51

Table of Contents
For a given acquisition, we may 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 (up to one year from the acquisition date) 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 their 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 and we reevaluate these items quarterly with any adjustments to our preliminary estimates being recorded to goodwill provided that we are
within the measurement period and we continue to collect information in order to determine their estimated values. Subsequent to the measurement period or our
final determination of the uncertain tax positions’ estimated value or tax related valuation allowances, 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.
Goodwill and Intangible Assets—Impairment Assessments
We review goodwill for impairment annually and whenever events or changes in circumstances indicate its carrying value may not be recoverable in accordance
with ASC 350, Intangibles—Goodwill and Other. The provisions of ASC 350 require that a two-step impairment test be performed on goodwill. 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 Note16 of
Notes to Consolidated Financial Statements. 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.
Determining the fair value of a reporting unit involves the use of significant estimates and assumptions. These estimates and assumptions include revenue growth
rates and operating margins used to calculate projected future cash flows, risk-adjusted discount rates, future economic and market conditions and determination
of appropriate market comparables. We base our fair value estimates on assumptions we believe to be reasonable but that are unpredictable and inherently
uncertain. Actual future results may differ from those estimates. In addition, we make certain judgments and assumptions in allocating shared assets and
liabilities to determine the carrying values for each of our reporting units. Our most recent annual goodwill impairment analysis, which was performed during the
fourth quarter of fiscal 2011, did not result in an impairment charge, nor did we record any goodwill impairment in fiscal 2010 or 2009.
We make judgments about the recoverability of purchased finite lived intangible assets whenever events or changes in circumstances indicate that an impairment
may exist. Each period we evaluate the estimated remaining useful lives of purchased intangible assets and whether events or changes in circumstances warrant a
revision to the remaining periods of amortization. Recoverability of finite lived intangible assets is measured by comparison of the carrying amount of the asset
to the future undiscounted cash flows the asset is expected to generate. We review indefinite lived intangible assets for impairment annually and whenever events
or changes in circumstances indicate the carrying value may not be recoverable. 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.
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Source: ORACLE CORP, 10-K, June 28, 2011 Powered by Morningstar® Document Research℠