BASIS OF PRESENTATION, RECENT ACCOUNTING PRONOUNCEMENTS AND OTHER (Policies)

6 Months Ended

Nov. 30, 2021

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

We have prepared the condensed consolidated financial statements included herein pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP) have been condensed or omitted pursuant to such rules and regulations. However, we believe that the disclosures herein are adequate to ensure the information presented is not misleading. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the fiscal year ended May 31, 2021.

We believe that all necessary adjustments, which consisted only of normal recurring items, have been included in the accompanying financial statements to present fairly the results of the interim periods. The results of operations for the interim periods presented are not necessarily indicative of the operating results to be expected for any subsequent interim period or for our fiscal year ending May 31, 2022.

The comparability of our condensed consolidated financial statements during the second quarter and first half of fiscal 2022 compared to the corresponding prior year periods, and of our condensed consolidated balance sheets as of November 30, 2021 relative to May 31, 2021, were impacted by certain litigation related charges that are more fully described in Note 11 below.

During the first half of fiscal 2022, we adopted Accounting Standards Update (ASU) 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (ASU 2019-12); and ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, neither of which had a material impact to our condensed consolidated financial statements as of and for the six months ended November 30, 2021. There have been no changes to our significant accounting policies as disclosed in our Annual Report on Form 10-K for the fiscal year ended May 31, 2021 that had a significant impact on our condensed consolidated financial statements or notes thereto as of and for the six months ended November 30, 2021.

Cash, Cash Equivalents and Restricted Cash

Cash, Cash Equivalents and Restricted Cash

Restricted cash that was included within cash and cash equivalents as presented within our condensed consolidated balance sheets as of November 30, 2021 and May 31, 2021 and our condensed consolidated statements of cash flows for the six months ended November 30, 2021 and 2020 was nominal.

Remaining Performance Obligations from Contracts with Customers

Remaining Performance Obligations from Contracts with Customers

Trade receivables, net of allowance for doubtful accounts, and deferred revenues are reported net of related uncollected deferred revenues in our condensed consolidated balance sheets as of November 30, 2021 and May 31, 2021. The revenues recognized during the six months ended November 30, 2021 and 2020, respectively, that were included in the opening deferred revenues balances as of May 31, 2021 and 2020, respectively, were approximately $6.5 billion and $5.9 billion, respectively. Revenues recognized from performance obligations satisfied in prior periods and impairment losses recognized on our receivables were immaterial in each of the three and six months ended November 30, 2021 and 2020, respectively.  

Remaining performance obligations, as defined in Note 1 of Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended May 31, 2021, were $37.2 billion as of November 30, 2021, approximately 59% of which we expect to recognize as revenues over the next twelve months, 30% over the subsequent month 13 to month 36, and the remainder thereafter.

Sales of Financing Receivables

Sales of Financing Receivables

We offer certain of our customers the option to acquire certain of our cloud and license, hardware and services offerings through separate long-term payment contracts. We generally sell these contracts that we have financed for our customers on a non-recourse basis to financial institutions within 90 days of the contracts’ dates of execution. We record the transfers of amounts due from customers to financial institutions as sales of financing receivables because we are considered to have surrendered control of these financing receivables. Financing receivables sold to financial institutions were $351 million and $1.0 billion for the three and six months ended November 30, 2021, respectively, and $300 million and $977 million for the three and six months ended November 30, 2020, respectively.

Acquisition Related and Other Expenses

Acquisition Related and Other Expenses

Acquisition related and other expenses substantially consisted of certain litigation related charges that we generally do not expect to recur during the fiscal 2022 periods presented as further described in Note 11 below. For all of the periods presented, acquisition related and other expenses also consisted of personnel related costs for transitional and certain other employees, certain business combination adjustments including adjustments after the measurement period has ended, and certain other operating items, net.

	Three Months Ended November 30,				Six Months Ended November 30,
(in millions)	2021		2020		2021		2020
Transitional and other employee related costs	$	2	$	1	$	4	$	3
Business combination adjustments, net		1		—		4		1
Litigation related charges and other, net		4,664		75		4,679		91
Total acquisition related and other expenses	$	4,667	$	76	$	4,687	$	95

Non-Operating Income (Expenses), net

Non-Operating Income (Expenses), net

Non-operating income (expenses), net consists primarily of interest income, net foreign currency exchange losses, the noncontrolling interests in the net profits of our majority-owned subsidiaries (primarily Oracle Financial Services Software Limited and Oracle Corporation Japan) and net other income and expenses, including net realized gains and losses related to all of our investments, net unrealized gains and losses related to the small portion of our investment portfolio related to our deferred compensation plan, net unrealized gains and losses related to equity securities and non-service net periodic pension income and losses.

	Three Months Ended November 30,						Six Months Ended November 30,
(in millions)	2021			2020			2021			2020
Interest income	$	21		$	27		$	40		$	58
Foreign currency losses, net		(46	)		(16	)		(81	)		(66	)
Noncontrolling interests in income		(42	)		(43	)		(89	)		(81	)
Other, net		74			21			96			76
Total non-operating income (expenses), net	$	7		$	(11	)	$	(34	)	$	(13	)

Recent Accounting Pronouncements

Recent Accounting Pronouncements

Financial Instruments:  In March 2020, the Financial Accounting Standards Board (FASB) issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (ASU 2020-04) and also issued subsequent amendments to the initial guidance (collectively, Topic 848). Topic 848 provides optional guidance for contract modifications and certain hedging relationships associated with the transition from reference rates that are expected to be discontinued. We will adopt Topic 848 when our relevant contracts are modified upon transition to alternative reference rates and expect this to occur through December 31, 2022. We do not expect our adoption of Topic 848 to have a material impact on our consolidated financial statements.

Fair Value Measurements

We perform fair value measurements in accordance with FASB Accounting Standards Codification (ASC) 820, Fair Value Measurement. ASC 820 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required to be recorded at their fair values, we consider the principal or most advantageous market in which we would transact and consider assumptions that market participants would use when pricing the assets or liabilities, such as inherent risk, transfer restrictions and risk of nonperformance.

ASC 820 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. An asset’s or a liability’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 establishes three levels of inputs that may be used to measure fair value:

• Level 1:  quoted prices in active markets for identical assets or liabilities;

• Level 2:  inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; or

• Level 3:  unobservable inputs that are supported by little or no market activity and that are significant to the fair values of the assets or liabilities.

Segment Information

ASC 280, Segment Reporting, establishes standards for reporting information about operating segments. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance.