Oracle 2012 Annual Report Download - page 101

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ORACLE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
May 31, 2012
of a business combination or related to income taxes, we accrue a liability for an estimated loss if the potential
loss from any claim or legal proceeding is considered probable and the amount can be reasonably estimated. A
description of our accounting policies associated with contingencies assumed as a part of a business combination
is provided under “Business Combinations” above.
Shipping and Handling Costs
Our shipping and handling costs for hardware systems products sales are included in hardware systems products
expenses for all periods presented.
Foreign Currency
We transact business in various foreign currencies. In general, the functional currency of a foreign operation is
the local country’s currency. Consequently, revenues and expenses of operations outside the United States are
translated into U.S. Dollars using weighted average exchange rates while assets and liabilities of operations
outside the United States are translated into U.S. Dollars using exchange rates at the balance sheet date. The
effects of foreign currency translation adjustments are included in stockholders’ equity as a component of
accumulated other comprehensive income in the accompanying consolidated balance sheets. Net foreign
exchange transaction gains (losses) included in non-operating income (expense), net in the accompanying
consolidated statements of operations were $(105) million, $11 million and $(149) million in fiscal 2012, 2011
and 2010, respectively.
Stock-Based Compensation
We account for share-based payments, including grants of employee stock options, restricted stock-based awards
and purchases under employee stock purchase plans, in accordance with ASC 718, Compensation-Stock
Compensation, which requires that share-based payments (to the extent they are compensatory) be recognized in
our consolidated statements of operations based on their fair values and the estimated number of shares we
ultimately expect will vest. We recognize stock-based compensation expense on a straight-line basis over the
service period of the award, which is generally four years.
We record deferred tax assets for stock-based compensation plan awards that result in deductions on our income
tax returns based on the amount of stock-based compensation recognized and the statutory tax rate in the
jurisdiction in which we will receive a tax deduction.
Advertising
All advertising costs are expensed as incurred. Advertising expenses, which are included within sales and
marketing expenses, were $79 million, $88 million and $75 million in fiscal 2012, 2011 and 2010, respectively.
Research and Development
All research and development costs are expensed as incurred. Costs eligible for capitalization under ASC 985-20,
Software—Costs of Software to be Sold, Leased or Marketed, were not material to our consolidated financial
statements in fiscal 2012, 2011 or 2010.
Acquisition Related and Other Expenses
Acquisition related and other expenses consist of personnel related costs for transitional and certain other
employees, stock-based compensation expenses, integration related professional services, certain business
combination adjustments including adjustments after the measurement period has ended and changes in fair value
of contingent consideration payable (further discussed in Note 2 below) and certain other operating expenses, net.
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