Oracle 2011 Annual Report Download - page 126

ORACLE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
May 31, 2011
The components of our deferred tax liabilities and assets were as follows:
May 31,
(in millions) 2011 2010
Deferred tax liabilities:
Unrealized gain on stock ................................................. $ (130) $ (130)
Acquired intangible assets ................................................ (1,816) (2,128)
Other ................................................................ (44) (101)
Total deferred tax liabilities .......................................... $ (1,990) $ (2,359)
Deferred tax assets:
Accruals and allowances ................................................. $ 543 $ 629
Employee compensation and benefits ....................................... 742 649
Differences in timing of revenue recognition ................................. 305 67
Depreciation and amortization ............................................ 483 357
Tax credit and net operating loss carryforwards ............................... 2,675 2,916
Other ................................................................ 119 250
Total deferred tax assets ............................................. $ 4,867 $ 4,868
Valuation allowance .................................................... $ (772) $ (649)
Net deferred tax assets ............................................... $ 2,105 $ 1,860
Recorded as:
Current deferred tax assets ............................................... $ 1,189 $ 1,159
Non-current deferred tax assets ............................................ 1,076 1,267
Current deferred tax liabilities (in other current liabilities) ...................... (101) (142)
Non-current deferred tax liabilities ......................................... (59) (424)
Net deferred tax assets ............................................... $ 2,105 $ 1,860
We provide for United States income taxes on the undistributed earnings and the other outside basis temporary
differences of foreign subsidiaries unless they are considered indefinitely reinvested outside the United States. At
May 31, 2011, the amount of temporary differences related to undistributed earnings and other outside basis
temporary differences of investments in foreign subsidiaries upon which United States income taxes have not
been provided was approximately $16.1 billion and $4.9 billion, respectively. If these undistributed earnings
were repatriated to the United States, or if the other outside basis differences were recognized in a taxable
transaction, they would generate foreign tax credits that would reduce the federal tax liability associated with the
foreign dividend or the otherwise taxable transaction. Assuming a full utilization of the foreign tax credits, the
potential deferred tax liability associated with these temporary differences of undistributed earnings and other
outside basis temporary differences would be approximately $4.6 billion and $1.6 billion, respectively.
Our net deferred tax assets were $2.1 billion and $1.9 billion as of May 31, 2011 and May 31, 2010, respectively.
We believe it is more likely than not that the net deferred tax assets will be realized in the foreseeable future.
Realization of our net deferred tax assets is dependent upon our generation of sufficient taxable income in future
years in appropriate tax jurisdictions to obtain benefit from the reversal of temporary differences, net operating
loss carryforwards, and tax credit carryforwards. The amount of deferred tax assets considered realizable is
subject to adjustment in future periods if estimates of future taxable income change.
The valuation allowance was $772 million at May 31, 2011 and $649 million at May 31, 2010. Substantially all
of the valuation allowance relates to tax assets established in purchase accounting. Any subsequent reduction of
that portion of the valuation allowance and the recognition of the associated tax benefits associated with our
acquisitions will be recorded to our provision for income taxes subsequent to our final determination of the
valuation allowance or the conclusion of the measurement period (as defined above), whichever comes first.
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