Oracle 2015 Annual Report Download - page 105

Table of Contents
ORACLE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
May 31, 2016
Non-Operating Income (Expense), net
Non-operating income (expense), net consists primarily of interest income, net foreign currency exchange gains (losses), the noncontrolling interests in the net
profits of our majority-owned subsidiaries (primarily Oracle Financial Services Software Limited and Oracle Japan) and net other income (losses), including net
realized gains and losses related to all of our investments and net unrealized gains and losses related to the small portion of our investment portfolio that we classify
as trading.
Year Ended May 31,
(in millions) 2016 2015 2014
Interest income $ 538 $ 349 $ 263
Foreign currency losses, net (110) (157) (375)
Noncontrolling interests in income (116) (113) (98)
Other (loss) income, net (7) 27 69
Total non-operating income (expense), net $ 305 $ 106 $ (141)
Included in foreign currency losses, net were foreign currency remeasurement losses of $7 million, $23 million and $213 million in fiscal 2016, 2015 and 2014,
respectively, related to our Venezuelan subsidiary due to the continued “highly inflationary” designation of the Venezuelan economy in accordance with ASC 830,
ForeignCurrencyMatters(ASC 830); certain currency exchange legislation in Venezuela that created certain foreign exchange mechanisms that based upon our
specific facts and circumstances, were the most appropriate for the reporting of our Venezuelan subsidiary’s Bolivar-based transactions and net monetary assets in
U.S. Dollars; and the remeasurement of certain assets and liabilities of our Venezuelan subsidiary pursuant to such foreign exchange mechanisms with the
corresponding loss recorded to earnings as required by ASC 830.
Income Taxes
We account for income taxes in accordance with ASC 740, IncomeTaxes. Deferred income taxes are recorded for the expected tax consequences of temporary
differences between the tax bases of assets and liabilities for financial reporting purposes and amounts recognized for income tax purposes. We record a valuation
allowance to reduce our deferred tax assets to the amount of future tax benefit that is more likely than not to be realized.
A two-step approach is applied pursuant to ASC 740 in the recognition and measurement of 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. We recognize interest and penalties related to uncertain tax positions in our provision for income taxes line of our consolidated
statements of operations.
A description of our accounting policies associated with tax related contingencies and valuation allowances assumed as a part of a business combination is provided
under “Business Combinations” above.
Recent Accounting Pronouncements
Financial Instruments: In June 2016, the FASB issued ASU 2016-13, FinancialInstruments—CreditLosses(Topic326):MeasurementofCreditLosseson
FinancialInstruments(ASU 2016-13), which requires measurement and recognition of expected credit losses for financial assets held. ASU 2016-13 is effective
for us in our first quarter of fiscal 2021, and earlier adoption is permitted beginning in the first quarter of fiscal 2020. We are currently evaluating the impact of our
pending adoption of ASU 2016-13 on our consolidated financial statements.
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