Oracle 2012 Annual Report Download - page 124

ORACLE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
May 31, 2012
The components of our deferred tax liabilities and assets were as follows:
May 31,
(in millions) 2012 2011
Deferred tax liabilities:
Unrealized gain on stock ................................................. $ (130) $ (130)
Acquired intangible assets ................................................ (1,974) (1,816)
Unremitted earnings .................................................... (322) (44)
Total deferred tax liabilities .......................................... $ (2,426) $ (1,990)
Deferred tax assets:
Accruals and allowances ................................................. $ 609 $ 543
Employee compensation and benefits ....................................... 905 742
Differences in timing of revenue recognition ................................. 196 305
Depreciation and amortization ............................................ 253 483
Tax credit and net operating loss carryforwards ............................... 2,537 2,675
Other ................................................................ 50 119
Total deferred tax assets ............................................. $ 4,550 $ 4,867
Valuation allowance .................................................... $ (728) $ (772)
Net deferred tax assets ............................................... $ 1,396 $ 2,105
Recorded as:
Current deferred tax assets ............................................... $ 877 $ 1,189
Non-current deferred tax assets ............................................ 595 1,076
Current deferred tax liabilities (in other current liabilities) ...................... (28) (101)
Non-current deferred tax liabilities (in other non-current liabilities) ............... (48) (59)
Net deferred tax assets ............................................... $ 1,396 $ 2,105
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.
During the third quarter of fiscal 2012, we increased the number of foreign subsidiaries in countries with lower
statutory rates than the United States, the earnings of which we consider to be indefinitely reinvested outside the
United States. If these subsidiaries generate sufficient earnings in the future, our provision for income taxes may
continue to be favorably affected to a meaningful extent, although any such favorable effects could be
significantly reduced under a variety of circumstances. At May 31, 2012, 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 $20.9 billion and
$4.3 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 net deferred tax liability associated with these
temporary differences of undistributed earnings and other outside basis temporary differences would be
approximately $6.3 billion and $1.4 billion, respectively.
Our net deferred tax assets were $1.4 billion and $2.1 billion as of May 31, 2012 and May 31, 2011, 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 net deferred tax assets considered realizable is
subject to adjustment in future periods if estimates of future taxable income change.
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