Oracle 2011 Annual Report Download - page 128

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ORACLE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
May 31, 2011
$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.
16. SEGMENT INFORMATION
ASC 280, Segment Reporting, establishes standards for reporting information about operating segments.
Operating segments are defined as components of an enterprise about which separate financial information is
available that is evaluated regularly by the chief operating decision maker, or decision making group, in deciding
how to allocate resources and in assessing performance. Our chief operating decision maker is our Chief
Executive Officer. We are organized geographically and by line of business. While our Chief Executive Officer
evaluates results in a number of different ways, the line of business management structure is the primary basis for
which the allocation of resources and financial results are assessed. As a result of our acquisition of Sun in fiscal
2010, we entered into a new hardware systems business with two operating segments as described further below.
We have three businesses—software, hardware systems and services—which are further divided into seven
operating segments. Our software business is comprised of two operating segments: (1) new software licenses
and (2) software license updates and product support. Our hardware systems business is comprised of two
operating segments: (1) hardware systems products and (2) hardware systems support. Our services business is
comprised of three operating segments: (1) consulting, (2) Cloud Services, which was formerly named On
Demand, and (3) education.
The new software licenses line of business is engaged in the licensing of database and middleware software as
well as our applications software. Database and middleware software generally includes database management
software, application server software, Service-Oriented Architecture and business process management software,
data integration software, business intelligence software, identity and access management software, content
management software, portals and user interaction software, and development tools. Our database and
middleware software product offerings also include Java, which is a global software development platform used
in a wide range of computers, networks and devices. Applications software generally provides enterprise
information that enables companies to manage their business cycles and provides intelligence and includes
enterprise resource planning software, customer relationship management software, enterprise performance
management software, supply chain management software, business intelligence applications software, enterprise
portfolio project management software, web commerce software and industry-specific applications software.
The software license updates and product support line of business provides customers with rights to unspecified
software product upgrades and maintenance releases, internet access to technical content, as well as internet and
telephone access to technical support personnel during the support period.
The hardware systems products line of business consists primarily of computer server and storage product
offerings and hardware-related software, including the Oracle Solaris Operating System. Most of our computer
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