Oracle 2013 Annual Report Download - page 34

Table of Contents
acquisition date fair values and, in each case, separately from goodwill. Goodwill as of the acquisition date is measured as the excess amount of
consideration transferred, which is also generally measured at fair value, and the net of the acquisition date amounts of the identifiable assets
acquired and the liabilities assumed. Our estimates of fair value are based upon assumptions believed to be reasonable but which are inherently
uncertain. After we complete an acquisition, the following factors could result in material charges and adversely affect our operating results and
may adversely affect our cash flows:
Substantially all of these costs will be accounted for as expenses that will decrease our net income and earnings per share for the periods in
which those costs are incurred. Charges to our operating results in any given period could differ substantially from other periods based on the
timing and size of our future acquisitions and the extent of integration activities. A more detailed discussion of our accounting for business
combinations and other items is presented in the “Critical Accounting Policies and Estimates” section of Management’
s Discussion and Analysis
of Financial Condition and Results of Operations (Item 7).
There are risks associated with our outstanding and future indebtedness. As of May 31, 2014, we had an aggregate of $24.2 billion of
outstanding indebtedness that will mature between the remainder of calendar 2014 and calendar 2040 and we may incur additional indebtedness
in the future. Our ability to pay interest and repay the principal for our indebtedness is dependent upon our ability to manage our business
operations, generate sufficient cash flows to service such debt and the other factors discussed in this section. There can be no assurance that we
will be able to manage any of these risks successfully.
We may also need to refinance a portion of our outstanding debt as it matures. There is a risk that we may not be able to refinance existing debt
or that the terms of any refinancing may not be as favorable as the terms of our existing debt. Furthermore, if prevailing interest rates or other
factors at the time of refinancing result in higher interest rates upon refinancing, then the interest expense relating to that refinanced indebtedness
would increase. Should we incur future increases in interest expense, our ability to utilize certain of our foreign tax credits to reduce our U.S.
federal income tax could be limited, which could unfavorably affect our provision for income taxes and effective tax rate. In addition, changes
by any rating agency to our outlook or credit rating could negatively affect the value of both our debt and equity securities and increase the
interest amounts we pay on outstanding or future debt. These risks could adversely affect our financial condition and results of operations.
Environmental and other related laws and regulations subject us to a number of risks and could result in significant liabilities and costs.
Some of our cloud and hardware systems operations are subject to state, federal and international laws governing protection of the environment,
proper handling and disposal of materials
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costs incurred to combine the operations of companies we acquire, such as transitional employee expenses and employee retention,
redeployment or relocation expenses;
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impairment of goodwill or intangible assets, in particular within our hardware systems products or consulting reporting units, for which
the amounts of goodwill and intangible assets that we have recorded increased in recent years and may continue to increase in the
future, and for which we have experienced revenues and/or margin declines as compared to prior years;
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amortization of intangible assets acquired;
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a reduction in the useful lives of intangible assets acquired;
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identification of or changes to assumed contingent liabilities, both income tax and non-income tax related, after our final determination
of the amounts for these contingencies or the conclusion of the measurement period (generally up to one year from the acquisition date),
whichever comes first;
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charges to our operating results to maintain certain duplicative pre-merger activities for an extended period of time or to maintain these
activities for a period of time that is longer than we had anticipated, charges to eliminate certain duplicative pre-merger activities, and
charges to restructure our operations or to reduce our cost structure;
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charges to our operating results due to expenses incurred to effect the acquisition; and
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charges to our operating results due to the expensing of certain stock awards assumed in an acquisition.