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Table of Contents
ORACLE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
May 31, 2014
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 loss in the accompanying consolidated balance sheets and related periodic movements are summarized as a line item in our
consolidated statements of comprehensive income. Net foreign exchange transaction losses included in non-operating (expense) income, net in
the accompanying consolidated statements of operations were $375 million, $162 million and $105 million in fiscal 2014, 2013 and 2012,
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,
$85 million and $79 million in fiscal 2014, 2013 and 2012, respectively.
Research and Development and Software Development Costs
All research and development costs are expensed as incurred.
Software development costs required to be capitalized under ASC 985-20, Costs of Software to be Sold, Leased or Marketed, and under ASC
350-40, Internal-Use Software, were not material to our consolidated financial statements in fiscal 2014, 2013 and 2012.
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 certain other operating items, net. Stock-based compensation included in acquisition related and other expenses resulted from
unvested options and restricted stock-based awards assumed from acquisitions whereby vesting was accelerated
99