Oracle 2013 Annual Report Download - page 52

Table of Contents
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 2014, 2013 or 2012.
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 believe that our
estimates are reasonable, the final tax outcome of these matters could be different from that which is reflected in our historical income tax
provisions and accruals. Such differences could have a material effect on our income tax provision and net income in the period in which such
determination is made.
Our effective tax rate includes the impact of certain undistributed foreign earnings for which no U.S. taxes have been provided because such
earnings are planned to be indefinitely reinvested outside the United States. Remittances of foreign earnings to the United States are planned
based on projected cash flow, working capital and investment needs of our foreign and domestic operations. Based on these assumptions, we
estimate the amount that will be distributed to the United States and provide U.S. federal taxes on these amounts. Material changes in our
estimates as to how much of our foreign earnings will be distributed to the United States or tax legislation that limits or restricts the amount of
undistributed foreign earnings that we consider indefinitely reinvested outside the United States could materially impact our income tax
provision and effective tax rate.
We record a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be realized. In order for us to
realize our deferred tax assets, we must be able to generate sufficient taxable income in those jurisdictions where the deferred tax assets are
located. We consider future growth, forecasted earnings, future taxable income, the mix of earnings in the jurisdictions in which we operate,
historical earnings, taxable income in prior years, if carryback is permitted under the law and prudent and feasible tax planning strategies in
determining the need for a valuation allowance. In the event we were to determine that we would not be able to realize all or part of our net
deferred tax assets in the future, an adjustment to the deferred tax assets valuation allowance would be charged to earnings in the period in which
we make such a determination, or goodwill would be adjusted at our final determination of the valuation allowance related to an acquisition
within the measurement period. If we later determine that it is more likely than not that the net deferred tax assets would be realized, we would
reverse the applicable portion of the previously provided valuation allowance as an adjustment to earnings at such time.
We calculate our current and deferred tax provision based on estimates and assumptions that could differ from the actual results reflected in
income tax returns filed during the subsequent year. Adjustments based on filed returns are generally recorded in the period when the tax returns
are filed and the global tax implications are known, which can materially impact our effective tax rate.
The amount of income tax we pay is subject to ongoing audits by federal, state and foreign tax authorities, which often result in proposed
assessments. Our estimate of the potential outcome for any uncertain tax issue is highly
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