Oracle 2015 Annual Report Download - page 99

Table of Contents
ORACLE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
May 31, 2016
undertaken by the governmental entity. If we determine upon execution of these arrangements that the likelihood of cancellation is remote, we then recognize
revenues once all of the criteria described above have been met. If such a determination cannot be made, revenues are recognized upon the earlier of cash receipt or
approval of the applicable funding provision by the governmental entity.
We assess whether fees are fixed or determinable at the time of sale and recognize revenues if all other revenue recognition requirements are met. Our standard
payment terms are net 30 days. However, payment terms may vary based on the country in which the agreement is executed. We evaluate non-standard payment
terms based on whether we have successful collection history on comparable arrangements (based upon similarity of customers, products, and license economics)
and, if so, generally conclude such payment terms are fixed and determinable and thereby satisfy the required criteria for revenue recognition.
While most of our arrangements for sales within our businesses include short-term payment terms, we have a standard practice of providing long-term financing to
creditworthy customers primarily through our financing division. Since fiscal 1989, when our financing division was formed, we have established a history of
collection, without concessions, on these receivables with payment terms that generally extend up to five years from the contract date. Provided all other revenue
recognition criteria have been met, we recognize new software licenses revenues and hardware products revenues for these arrangements upon delivery, net of any
payment discounts from financing transactions. We have generally sold receivables financed through our financing division on a non-recourse basis to third-party
financing institutions within 90 days of the contracts’ dates of execution and we classify the proceeds from these sales as cash flows from operating activities in our
consolidated statements of cash flows. We account for the sales of these receivables as “true sales” as defined in ASC 860, TransfersandServicing, as we are
considered to have surrendered control of these financing receivables. We sold $1.8 billion of our financing receivables to financial institutions during each of
fiscal 2016 and 2015, and $2.0 billion during fiscal 2014.
Our customers include several of our suppliers and, occasionally, we have purchased goods or services for our operations from these vendors at or about the same
time that we have sold our products to these same companies (Concurrent Transactions). Software license agreements, sales of hardware or sales of services that
occur within a three-month time period from the date we have purchased goods or services from that same customer are reviewed for appropriate accounting
treatment and disclosure. When we acquire goods or services from a customer, we negotiate the purchase separately from any sales transaction, at terms we
consider to be at arm’s length and settle the purchase in cash. We recognize revenues from Concurrent Transactions if all of our revenue recognition criteria are met
and the goods and services acquired are necessary for our current operations.
Business Combinations
We apply the provisions of ASC 805, BusinessCombinations, in accounting for our acquisitions. It requires us to recognize separately from goodwill the assets
acquired and the liabilities assumed at the acquisition date fair values. Goodwill as of the acquisition date is measured as the excess of consideration transferred
over the net of the acquisition date fair values of the assets acquired and the liabilities assumed. While we use our best estimates and assumptions to accurately
value assets acquired and liabilities assumed at the acquisition date as well as any contingent consideration, where applicable, our estimates are inherently uncertain
and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, we record adjustments to the assets
acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of
assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to our consolidated statements of operations.
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