Oracle 2015 Annual Report Download - page 100

Table of Contents
ORACLE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
May 31, 2016
Costs to exit or restructure certain activities of an acquired company or our internal operations are accounted for as termination and exit costs pursuant to ASC 420,
ExitorDisposalCostObligations, and are accounted for separately from the business combination. A liability for costs associated with an exit or disposal activity
is recognized and measured at its fair value in our consolidated statement of operations in the period in which the liability is incurred. When estimating the fair
value of facility restructuring activities, assumptions are applied regarding estimated sub-lease payments to be received, which can differ materially from actual
results. This may require us to revise our initial estimates which may materially affect our results of operations and financial position in the period the revision is
made.
For a given acquisition, we may identify certain pre-acquisition contingencies as of the acquisition date and may extend our review and evaluation of these pre-
acquisition contingencies throughout the measurement period in order to obtain sufficient information to assess whether we include these contingencies as a part of
the fair value estimates of assets acquired and liabilities assumed and, if so, to determine their estimated amounts.
If we cannot reasonably determine the fair value of a pre-acquisition contingency (non-income tax related) by the end of the measurement period, which is
generally the case given the nature of such matters, we will recognize an asset or a liability for such pre-acquisition contingency if: (1) it is probable that an asset
existed or a liability had been incurred at the acquisition date and (2) the amount of the asset or liability can be reasonably estimated. Subsequent to the
measurement period, changes in our estimates of such contingencies will affect earnings and could have a material effect on our results of operations and financial
position.
In addition, uncertain tax positions and tax related valuation allowances assumed in connection with a business combination are initially estimated as of the
acquisition date. We reevaluate these items quarterly based upon facts and circumstances that existed as of the acquisition date with any adjustments to our
preliminary estimates being recorded to goodwill if identified within the measurement period. Subsequent to the measurement period or our final determination of
the tax allowance’s or contingency’s estimated value, whichever comes first, changes to these uncertain tax positions and tax related valuation allowances will
affect our provision for income taxes in our consolidated statement of operations and could have a material impact on our results of operations and financial
position.
Marketable and Non-Marketable Securities
In accordance with ASC 320, Investments— DebtandEquitySecurities,and based on our intentions regarding these instruments, we classify substantially all of
our marketable debt and equity securities as available-for-sale. Marketable debt and equity securities classified as available-for-sale are reported at fair value, with
all unrealized gains (losses) reflected net of tax in stockholders’ equity on our consolidated balance sheets, and as a line item in our consolidated statements of
comprehensive income. If we determine that an investment has an other than temporary decline in fair value, we recognize the investment loss in non-operating
income (expense), net in the accompanying consolidated statements of operations. We periodically evaluate our investments to determine if impairment charges are
required. Substantially all of our marketable debt and equity investments are classified as current based on the nature of the investments and their availability for
use in current operations.
We hold investments in certain non-marketable equity securities in which we do not have a controlling interest or significant influence. These equity securities are
recorded at cost and included in other assets in the accompanying consolidated balance sheets. If based on the terms of our ownership of these non-marketable
securities, we determine that we exercise significant influence on the entity to which these non-marketable securities relate, we apply the requirements of ASC 323,
Investments— EquityMethodandJointVentures, to account for such investments .Our non-marketable securities are subject to periodic impairment reviews.
Fair Values of Financial Instruments
We apply the provisions of ASC 820, FairValueMeasurement(ASC 820), to our assets and liabilities that we are required to measure at fair value pursuant to
other accounting standards, including our investments in marketable debt and equity securities and our derivative financial instruments.
The additional disclosures regarding our fair value measurements are included in Note 4.
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