Oracle 2015 Annual Report Download - page 50

Table of Contents
Our cloud SaaS and PaaS offerings generally provide customers access to certain of our software within a cloud-based IT environment that we manage, host and
support and offer to customers on a subscription basis. Revenues for our cloud SaaS and PaaS offerings are generally recognized ratably over the contract term
commencing with the date the service is made available to customers and all other revenue recognition criteria have been satisfied.
Our cloud IaaS offerings provide infrastructure cloud services and also include deployment and management offerings for software and hardware and related IT
infrastructure. Our cloud IaaS offerings are generally sold on a subscription basis and revenues for these cloud IaaS offerings are generally recognized ratably over
the contract term commencing with the date the service is made available to customers and all other revenue recognition criteria have been satisfied.
Revenues from the sale of hardware products represent amounts earned primarily from the sale of our Oracle Engineered Systems, computer servers, storage,
networking and industry-specific hardware and are recognized upon the delivery of the hardware product to the customer provided all other revenue recognition
criteria have been satisfied.
Our hardware support offerings generally provide customers with software updates for the software components that are essential to the functionality of our
hardware products and can also include product repairs, maintenance services and technical support services. Hardware support contracts are generally priced as a
percentage of the net hardware products fees. Hardware support contracts are entered into at the customer’s option and are recognized ratably over the contractual
term of the arrangements, which is typically one year, provided all other revenue recognition criteria have been satisfied.
RevenueRecognitionforMultiple-ElementArrangements—CloudSaaS,PaaSandIaaSOfferings,HardwareProducts,HardwareSupportandRelatedServices
(Non-softwareArrangements)
We enter into arrangements with customers that purchase non-software related products and services from us at the same time, or within close proximity of one
another (referred to as non-software multiple-element arrangements). Each element within a non-software multiple-element arrangement is accounted for as a
separate unit of accounting provided the following criteria are met: the delivered products or services have value to the customer on a standalone basis; and for an
arrangement that includes a general right of return relative to the delivered products or services, delivery or performance of the undelivered product or service is
considered probable and is substantially controlled by us. We consider a deliverable to have standalone value if the product or service is sold separately by us or
another vendor or could be resold by the customer. Further, our revenue arrangements generally do not include a general right of return relative to the delivered
products. Where the aforementioned criteria for a separate unit of accounting are not met, the deliverable is combined with the undelivered element(s) and treated
as a single unit of accounting for the purposes of allocation of the arrangement consideration and revenue recognition. For those units of accounting that include
more than one deliverable but are treated as a single unit of accounting, we generally recognize revenues over the contractual period of the arrangement, or in the
case of our cloud offerings, we generally recognize revenues over the contractual term of the cloud software subscription. For the purposes of revenue classification
of the elements that are accounted for as a single unit of accounting, we allocate revenue to the respective revenue line items within our consolidated statements of
operations based on a rational and consistent methodology utilizing our best estimate of relative selling prices of such elements.
For our non-software multiple-element arrangements, we allocate revenue to each element based on a selling price hierarchy at the arrangement’s inception. The
selling price for each element is based upon the following selling price hierarchy: VSOE if available, third-party evidence (TPE) if VSOE is not available, or
estimated selling price (ESP) if neither VSOE nor TPE are available (a description as to how we determine VSOE, TPE and ESP is provided below). If a tangible
hardware product includes software, we determine whether the tangible hardware product and the software work together to deliver the product’s essential
functionality and, if so, the entire product is treated as a non-software deliverable. The total arrangement consideration is allocated to each separate unit of
accounting for each of the non-software deliverables using the relative selling prices of each unit based on the aforementioned selling price hierarchy. We limit the
amount of revenue recognized for delivered elements to an amount that is not contingent upon future delivery of additional products or services or meeting of any
specified performance conditions.
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