Oracle 2014 Annual Report Download - page 55

Table of Contents
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 2015,
2014 or 2013.
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 judgmental. A description of our accounting policies
associated with tax related contingencies assumed as a part of a business combination is provided under “Business Combinations” above. For
those tax related contingencies that are not a part of a business combination, we account for these uncertain tax issues pursuant to ASC 740,
Income Taxes
, which contains a two-step approach to recognizing and measuring uncertain tax positions taken or expected to be taken in a tax
return. The first step is to determine if the weight of available evidence indicates that it is more likely than not that the tax position will be
sustained in an audit, including resolution of any related appeals or litigation processes. The second step is to measure the tax benefit as the
largest amount that is more than 50% likely to be realized upon ultimate settlement. Although we believe we have adequately reserved for our
uncertain tax positions, no assurance can be given with respect to the final outcome of these matters. We adjust reserves for our uncertain tax
positions due to changing facts and circumstances, such as the closing of a tax audit, judicial rulings, and refinement of estimates or realization
of earnings or deductions that differ from
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