Oracle 2012 Annual Report Download - page 52

from financing transactions. We have generally sold receivables financed through our financing division on a
non-recourse basis to third party financing institutions within 90 days of the contracts’ dates of execution and we
classify the proceeds from these sales as cash flows from operating activities in our consolidated statements of
cash flows. We account for the sales of these receivables as “true sales” as defined in ASC 860, Transfers and
Servicing, as we are considered to have surrendered control of these financing receivables.
In addition, we enter into arrangements with leasing companies for the sale of our hardware systems products.
These leasing companies, in turn, lease our products to end-users. The leasing companies generally have no
recourse to us in the event of default by the end-user and we recognize revenue upon delivery, if all the other
revenue recognition criteria have been met.
Our customers include several of our suppliers and occasionally, we have purchased goods or services for our
operations from these vendors at or about the same time that we have sold our products to these same companies
(Concurrent Transactions). Software license agreements or sales of hardware systems that occur within a three-
month time period from the date we have purchased goods or services from that same customer are reviewed for
appropriate accounting treatment and disclosure. When we acquire goods or services from a customer, we
negotiate the purchase separately from any sales transaction, at terms we consider to be at arm’s length and settle
the purchase in cash. We recognize new software license revenues or hardware systems product revenues from
Concurrent Transactions if all of our revenue recognition criteria are met and the goods and services acquired are
necessary for our current operations.
Business Combinations
We apply the provisions of ASC 805, Business Combinations, in the accounting for our acquisitions. It requires
us to recognize separately from goodwill the assets acquired and the liabilities assumed at their acquisition date
fair values. Goodwill as of the acquisition date is measured as the excess of consideration transferred and the net
of the acquisition date fair values of the assets acquired and the liabilities assumed. While we use our best
estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date, our
estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which
may be up to one year from the acquisition date, we record adjustments to the assets acquired and liabilities
assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final
determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent
adjustments are recorded to our consolidated statements of operations.
Accounting for business combinations requires our management to make significant estimates and assumptions,
especially at the acquisition date including our estimates for intangible assets, contractual obligations assumed,
restructuring liabilities, pre-acquisition contingencies and contingent consideration, where applicable. Although
we believe the assumptions and estimates we have made in the past have been reasonable and appropriate, they
are based in part on historical experience and information obtained from the management of the acquired
companies and are inherently uncertain.
Examples of critical estimates in valuing certain of the intangible assets we have acquired include but are not
limited to:
• future expected cash flows from software license sales, hardware systems product sales, support
agreements, consulting contracts, other customer contracts, acquired developed technologies and
patents;
• expected costs to develop the in-process research and development into commercially viable products
and estimated cash flows from the projects when completed;
• the acquired company’s brand and competitive position, as well as assumptions about the period of
time the acquired brand will continue to be used in the combined company’s product portfolio; and
• discount rates.
Unanticipated events and circumstances may occur that may affect the accuracy or validity of such assumptions,
estimates or actual results.
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