Oracle 2014 Annual Report Download - page 96

Table of Contents
ORACLE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
May 31, 2015
Use of Estimates
Our consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP) as set forth in the
Financial Accounting Standards Board’s (FASB) Accounting Standards Codification (ASC) and we consider the various staff accounting
bulletins and other applicable guidance issued by the U.S. Securities and Exchange Commission (SEC). These accounting principles require us
to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions upon which we rely are
reasonable based upon information available to us at the time that these 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 consolidated financial statements will be affected. 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.
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 acceptance periods are required by law, or within previously executed
terms and conditions that are referenced in the current agreement and are short-term in nature, we generally recognize revenues upon delivery
provided the
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