Oracle 2014 Annual Report Download - page 47

Table of Contents
estimates, judgments and assumptions are made. These estimates, judgments and assumptions can affect the reported amounts of assets and
liabilities as of the date of the financial statements as well as the reported amounts of revenues and expenses during the periods presented. To the
extent there are differences between these estimates, judgments or assumptions and actual results, our financial statements will be affected. The
accounting policies that reflect our more significant estimates, judgments and assumptions and which we believe are the most critical to aid in
fully understanding and evaluating our reported financial results include the following:
In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require management’s
judgment in its application. There are also areas in which management
’
s judgment in selecting among available alternatives would not produce a
materially different result. Our senior management has reviewed our critical accounting policies and related disclosures with the Finance and
Audit Committee of the Board of Directors.
Revenue Recognition
Our sources of revenues include: (1) software and cloud revenues, including new software licenses revenues earned from granting licenses to use
our software products and industry specific software; cloud SaaS and PaaS revenues generated from fees for granting customers access to a
broad range of our software and related support offerings on a subscription basis in a secure, standards-based cloud computing environment;
cloud IaaS revenues generated from fees for deployment and management offerings for our software and hardware and related IT infrastructure
generally on a subscription basis; and software license updates and product support revenues (described further below); (2) hardware systems
revenues, which include the sale of hardware systems products including Oracle Engineered Systems, computer servers, storage products,
networking and data center fabric products, and industry specific hardware; and hardware systems support revenues; and (3) services, which
include software and hardware related services including consulting, advanced customer support and education revenues. Revenues generally are
recognized net of any taxes collected from customers and subsequently remitted to governmental authorities.
Revenue Recognition for Software Products and Software Related Services (Software Elements)
New software licenses revenues primarily represent fees earned from granting customers licenses to use our database, middleware and
application software and exclude cloud SaaS and PaaS revenues and revenues derived from software license updates, which are included in
software license updates and product support revenues. The basis for our new software licenses revenue recognition is substantially governed by
the accounting guidance contained in ASC 985-605, Software-Revenue Recognition. We exercise judgment and use estimates in connection with
the determination of the amount of software and software related services revenues to be recognized in each accounting period.
For software license arrangements that do not require significant modification or customization of the underlying software, we recognize new
software licenses revenues when: (1) we enter into a legally binding arrangement with a customer for the license of software; (2) we deliver the
products; (3) the sale price is fixed or determinable and free of contingencies or significant uncertainties; and (4) collection is probable.
Revenues that are not recognized at the time of sale because the foregoing conditions are not met, are recognized when those conditions are
subsequently met.
Substantially all of our software license arrangements do not include acceptance provisions. However, if acceptance provisions exist as part of
public policy, for example, in agreements with government entities where
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Revenue Recognition
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Business Combinations
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Goodwill and Intangible Assets
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Impairment Assessments
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Accounting for Income Taxes
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Legal and Other Contingencies
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Stock
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Based Compensation