Oracle 2012 Annual Report Download - page 54

changes to these uncertain tax positions and tax related valuation allowances will affect our provision for income
taxes in our consolidated statement of operations and could have a material impact on our results of operations
and financial position.
Goodwill and Intangible Assets—Impairment Assessments
We review goodwill for impairment annually and whenever events or changes in circumstances indicate its
carrying value may not be recoverable in accordance with ASC 350, Intangibles—Goodwill and Other. Effective
fiscal 2012, we opted to perform a qualitative assessment to test a reporting unit’s goodwill for impairment.
Based on our qualitative assessment, if we determine that the fair value of a reporting unit is more likely than not
(i.e., a likelihood of more than 50 percent) to be less than its carrying amount, the two step impairment test will
be performed. In the first step, we compare the fair value of each reporting unit to its carrying value. If the fair
value of the reporting unit exceeds the carrying value of the net assets assigned to that unit, goodwill is not
considered impaired and we are not required to perform further testing. If the carrying value of the net assets
assigned to the reporting unit exceeds the fair value of the reporting unit, then we must perform the second step
of the impairment test in order to determine the implied fair value of the reporting unit’s goodwill. If the carrying
value of a reporting unit’s goodwill exceeds its implied fair value, then we would record an impairment loss
equal to the difference. Our reporting units are consistent with our operating segments identified in Note 16 of
Notes to Consolidated Financial Statements included elsewhere in this Annual Report.
Determining the fair value of a reporting unit involves the use of significant estimates and assumptions. These
estimates and assumptions include revenue growth rates and operating margins used to calculate projected future
cash flows, risk-adjusted discount rates, future economic and market conditions and determination of appropriate
market comparables. We base our fair value estimates on assumptions we believe to be reasonable but that are
unpredictable and inherently uncertain. Actual future results may differ from those estimates. In addition, we
make certain judgments and assumptions in allocating shared assets and liabilities to determine the carrying
values for each of our reporting units. Our most recent annual goodwill impairment analysis, which was
performed during the fourth quarter of fiscal 2012, did not result in a goodwill impairment charge, nor did we
record any goodwill impairment in fiscal 2011 or 2010.
We make judgments about the recoverability of purchased finite lived intangible assets whenever events or
changes in circumstances indicate that an impairment may exist. Each period we evaluate the estimated
remaining useful lives of purchased intangible assets and whether events or changes in circumstances warrant a
revision to the remaining periods of amortization. Recoverability of finite lived intangible assets is measured by
comparison of the carrying amount of the asset to the future undiscounted cash flows the asset is expected to
generate. We review indefinite lived intangible assets for impairment annually and whenever events or changes
in circumstances indicate the carrying value may not be recoverable. Recoverability of indefinite lived intangible
assets is measured by comparison of the carrying amount of the asset to its fair value. If the asset is considered to
be impaired, the amount of any impairment is measured as the difference between the carrying value and the fair
value of the impaired asset.
Assumptions and estimates about future values and remaining useful lives of our intangible and other long-lived
assets are complex and subjective. They can be affected by a variety of factors, including external factors such as
industry and economic trends and internal factors such as changes in our business strategy and our internal
forecasts. Although we believe the historical assumptions and estimates we have made are reasonable and
appropriate, different assumptions and estimates could materially impact our reported financial results. We did
not recognize any intangible asset impairment charges in fiscal 2012, 2011 or 2010.
Accounting for Income Taxes
Significant judgment is required in determining our worldwide income tax provision. In the ordinary course of a
global business, there are many transactions and calculations where the ultimate tax outcome is uncertain. Some
of these uncertainties arise as a consequence of revenue sharing and cost reimbursement arrangements among
related entities, the process of identifying items of revenues and expenses that qualify for preferential tax
treatment and segregation of foreign and domestic earnings and expenses to avoid double taxation. Although we
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