Oracle 2013 Annual Report Download - page 49

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(3) where significant consulting services are provided for in the software license contract or hardware systems product contract without
additional charge or are substantially discounted; or (4) where the software license or hardware systems product payment is tied to the
performance of consulting services. For the purposes of revenue classification of the elements that are accounted for as a single unit of
accounting, we allocate revenues to software and nonsoftware elements based on a rational and consistent methodology utilizing our best
estimate of the relative selling price of such elements.
We also evaluate arrangements with governmental entities containing “fiscal funding” or “termination for convenience” provisions, when such
provisions are required by law, to determine the probability of possible cancellation. We consider multiple factors, including the history with the
customer in similar transactions, the “essential use” of the software or hardware systems products and the planning, budgeting and approval
processes undertaken by the governmental entity. If we determine upon execution of these arrangements that the likelihood of cancellation is
remote, we then recognize revenues once all of the criteria described above have been met. If such a determination cannot be made, revenues are
recognized upon the earlier of cash receipt or approval of the applicable funding provision by the governmental entity.
We assess whether fees are fixed or determinable at the time of sale and recognize revenues if all other revenue recognition requirements are
met. Our standard payment terms are net 30 days. However, payment terms may vary based on the country in which the agreement is executed.
Payments that are due within six months are generally deemed to be fixed or determinable based on our successful collection history on such
arrangements, and thereby satisfy the required criteria for revenue recognition.
While most of our arrangements for sales within our businesses include short-term payment terms, we have a standard practice of providing
long-term financing to creditworthy customers primarily through our financing division. Since fiscal 1989, when our financing division was
formed, we have established a history of collection, without concessions, on these receivables with payment terms that generally extend up to
five years from the contract date. Provided all other revenue recognition criteria have been met, we recognize new software licenses revenues
and hardware systems products revenues for these arrangements upon delivery, net of any payment discounts 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 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 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 over 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 as well as contingent
consideration, where applicable, 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
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