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Microsoft Excel LibreOffice Calc

Oracle Corp. (NYSE:ORCL)


Analysis of Income Taxes

Advanced level


Accounting Policy on Income Taxes

Oracle accounts for income taxes in accordance with ASC 740, Income Taxes (ASC 740). 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. Oracle records a valuation allowance to reduce the 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. Oracle recognizes interest and penalties related to uncertain tax positions in the provision for income taxes line of the consolidated statements of operations.

During fiscal 2019, Oracle completed the analysis of the accounting policy election required with regard to the Tax Act’s Global Intangible Low-Taxed Income (GILTI) provision. The FASB allows companies to adopt a policy election to account for GILTI under one of two methods: (i) account for GILTI as a component of tax expense in the period in which a company is subject to the rules (the period cost method), or (ii) account for GILTI in a company’s measurement of deferred taxes (the deferred method). Oracle elected the deferred method, under which Oracle recorded the income tax expense impact to the consolidated financial statements during fiscal 2019.

Source: 10-K (filing date: 2019-06-21).


Income Tax Expense (Benefit)

Oracle Corp., income tax expense (benefit), continuing operations

US$ in millions

Microsoft Excel LibreOffice Calc
12 months ended May 31, 2019 May 31, 2018 May 31, 2017 May 31, 2016 May 31, 2015 May 31, 2014
Federal
State
Foreign
Current provision
Federal
State
Foreign
Deferred provision (benefit)
Provision for income taxes

Based on: 10-K (filing date: 2019-06-21), 10-K (filing date: 2018-06-22), 10-K (filing date: 2017-06-27), 10-K (filing date: 2016-06-22), 10-K (filing date: 2015-06-25), 10-K (filing date: 2014-06-26).

Item Description The company
Current provision Amount of current income tax expense (benefit) pertaining to taxable income (loss) from continuing operations. Oracle Corp.’s current provision increased from 2017 to 2018 but then decreased significantly from 2018 to 2019.
Deferred provision (benefit) Amount of deferred income tax expense (benefit) pertaining to income (loss) from continuing operations. Oracle Corp.’s deferred provision (benefit) decreased from 2017 to 2018 and from 2018 to 2019.
Provision for income taxes Amount of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations. Oracle Corp.’s provision for income taxes increased from 2017 to 2018 but then decreased significantly from 2018 to 2019.

Effective Income Tax Rate (EITR)

Oracle Corp., effective income tax rate (EITR) reconciliation

Microsoft Excel LibreOffice Calc
May 31, 2019 May 31, 2018 May 31, 2017 May 31, 2016 May 31, 2015 May 31, 2014
Federal statutory income tax rate
Effective income tax rate, before impact of the Tax Act of 2017
Effective income tax rate

Based on: 10-K (filing date: 2019-06-21), 10-K (filing date: 2018-06-22), 10-K (filing date: 2017-06-27), 10-K (filing date: 2016-06-22), 10-K (filing date: 2015-06-25), 10-K (filing date: 2014-06-26).

Item Description The company
Effective income tax rate, before impact of the Tax Act of 2017 Percentage of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations. Oracle Corp.’s effective income tax rate, before impact of the Tax Act of 2017 decreased from 2017 to 2018 and from 2018 to 2019.

Components of Deferred Tax Assets and Liabilities

Oracle Corp., components of deferred tax assets and liabilities

US$ in millions

Microsoft Excel LibreOffice Calc
May 31, 2019 May 31, 2018 May 31, 2017 May 31, 2016 May 31, 2015 May 31, 2014
Accruals and allowances
Employee compensation and benefits
Differences in timing of revenue recognition
Basis of property, plant and equipment and intangible assets
Tax credit and net operating loss carryforwards
Other
Deferred tax assets
Valuation allowance
Deferred tax assets, net
Unrealized gain on stock
Acquired intangible assets
GILTI deferred
Unremitted earnings
Basis of property, plant and equipment and intangible assets
Other
Deferred tax liabilities
Net deferred tax assets (liabilities)

Based on: 10-K (filing date: 2019-06-21), 10-K (filing date: 2018-06-22), 10-K (filing date: 2017-06-27), 10-K (filing date: 2016-06-22), 10-K (filing date: 2015-06-25), 10-K (filing date: 2014-06-26).

Item Description The company
Deferred tax assets Amount before allocation of valuation allowances of deferred tax asset attributable to deductible temporary differences and carryforwards. Oracle Corp.’s deferred tax assets decreased from 2017 to 2018 but then increased from 2018 to 2019 exceeding 2017 level.
Deferred tax assets, net Amount after allocation of valuation allowances of deferred tax asset attributable to deductible temporary differences and carryforwards. Oracle Corp.’s deferred tax assets, net decreased from 2017 to 2018 but then increased from 2018 to 2019 exceeding 2017 level.
Net deferred tax assets (liabilities) Amount, after allocation of valuation allowances and deferred tax liability, of deferred tax asset attributable to deductible differences and carryforwards, without jurisdictional netting. Oracle Corp.’s net deferred tax assets (liabilities) increased from 2017 to 2018 and from 2018 to 2019.

Deferred Tax Assets and Liabilities, Classification

Oracle Corp., deferred tax assets and liabilities, classification

US$ in millions

Microsoft Excel LibreOffice Calc
May 31, 2019 May 31, 2018 May 31, 2017 May 31, 2016 May 31, 2015 May 31, 2014
Current deferred tax assets
Non-current deferred tax assets
Current deferred tax liabilities (in Other current liabilities)
Non-current deferred tax liabilities (in Other non-current liabilities)

Based on: 10-K (filing date: 2019-06-21), 10-K (filing date: 2018-06-22), 10-K (filing date: 2017-06-27), 10-K (filing date: 2016-06-22), 10-K (filing date: 2015-06-25), 10-K (filing date: 2014-06-26).

Item Description The company
Non-current deferred tax assets Amount, after allocation of valuation allowances and deferred tax liability, of deferred tax asset attributable to deductible differences and carryforwards, with jurisdictional netting and classified as noncurrent. Oracle Corp.’s non-current deferred tax assets increased from 2017 to 2018 and from 2018 to 2019.
Non-current deferred tax liabilities (in Other non-current liabilities) Amount, after deferred tax asset, of deferred tax liability attributable to taxable differences, with jurisdictional netting and classified as noncurrent. Oracle Corp.’s non-current deferred tax liabilities (in Other non-current liabilities) decreased from 2017 to 2018 but then increased from 2018 to 2019 not reaching 2017 level.

Adjustments to Financial Statements: Removal of Deferred Taxes

Oracle Corp., adjustments to financial statements

US$ in millions

Microsoft Excel LibreOffice Calc
May 31, 2019 May 31, 2018 May 31, 2017 May 31, 2016 May 31, 2015 May 31, 2014
Adjustment to Current Assets
Current assets (as reported)
Less: Current deferred tax assets, net
Current assets (adjusted)
Adjustment to Total Assets
Total assets (as reported)
Less: Current deferred tax assets, net
Less: Noncurrent deferred tax assets, net
Total assets (adjusted)
Adjustment to Current Liabilities
Current liabilities (as reported)
Less: Current deferred tax liabilities, net
Current liabilities (adjusted)
Adjustment to Total Liabilities
Total liabilities (as reported)
Less: Current deferred tax liabilities, net
Less: Noncurrent deferred tax liabilities, net
Total liabilities (adjusted)
Adjustment to Total Oracle Corporation Stockholders’ Equity
Total Oracle Corporation stockholders’ equity (as reported)
Less: Net deferred tax assets (liabilities)
Total Oracle Corporation stockholders’ equity (adjusted)
Adjustment to Net Income
Net income (as reported)
Add: Deferred income tax expense (benefit)
Net income (adjusted)

Based on: 10-K (filing date: 2019-06-21), 10-K (filing date: 2018-06-22), 10-K (filing date: 2017-06-27), 10-K (filing date: 2016-06-22), 10-K (filing date: 2015-06-25), 10-K (filing date: 2014-06-26).


Oracle Corp., Financial Data: Reported vs. Adjusted


Adjusted Financial Ratios: Removal of Deferred Taxes (Summary)

Oracle Corp., adjusted financial ratios

Microsoft Excel LibreOffice Calc
May 31, 2019 May 31, 2018 May 31, 2017 May 31, 2016 May 31, 2015 May 31, 2014
Current Ratio
Reported current ratio
Adjusted current ratio
Net Profit Margin
Reported net profit margin
Adjusted net profit margin
Total Asset Turnover
Reported total asset turnover
Adjusted total asset turnover
Financial Leverage
Reported financial leverage
Adjusted financial leverage
Return on Equity (ROE)
Reported ROE
Adjusted ROE
Return on Assets (ROA)
Reported ROA
Adjusted ROA

Based on: 10-K (filing date: 2019-06-21), 10-K (filing date: 2018-06-22), 10-K (filing date: 2017-06-27), 10-K (filing date: 2016-06-22), 10-K (filing date: 2015-06-25), 10-K (filing date: 2014-06-26).

Financial ratio Description The company
Adjusted current ratio A liquidity ratio calculated as adjusted current assets divided by adjusted current liabilities. Oracle Corp.’s adjusted current ratio improved from 2017 to 2018 but then deteriorated significantly from 2018 to 2019.
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by total revenue. Oracle Corp.’s adjusted net profit margin ratio deteriorated from 2017 to 2018 but then improved from 2018 to 2019 exceeding 2017 level.
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Oracle Corp.’s adjusted total asset turnover ratio improved from 2017 to 2018 and from 2018 to 2019.
Adjusted financial leverage A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity.
Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.
Oracle Corp.’s adjusted financial leverage ratio increased from 2017 to 2018 and from 2018 to 2019.
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity. Oracle Corp.’s adjusted ROE deteriorated from 2017 to 2018 but then improved from 2018 to 2019 exceeding 2017 level.
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. Oracle Corp.’s adjusted ROA deteriorated from 2017 to 2018 but then improved from 2018 to 2019 exceeding 2017 level.

Oracle Corp., Financial Ratios: Reported vs. Adjusted


Adjusted Current Ratio

Microsoft Excel LibreOffice Calc
May 31, 2019 May 31, 2018 May 31, 2017 May 31, 2016 May 31, 2015 May 31, 2014
As Reported
Selected Financial Data (US$ in millions)
Current assets
Current liabilities
Liquidity Ratio
Current ratio1
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted current assets
Adjusted current liabilities
Liquidity Ratio
Adjusted current ratio2

Based on: 10-K (filing date: 2019-06-21), 10-K (filing date: 2018-06-22), 10-K (filing date: 2017-06-27), 10-K (filing date: 2016-06-22), 10-K (filing date: 2015-06-25), 10-K (filing date: 2014-06-26).

2019 Calculations

1 Current ratio = Current assets ÷ Current liabilities
= ÷ =

2 Adjusted current ratio = Adjusted current assets ÷ Adjusted current liabilities
= ÷ =

Liquidity ratio Description The company
Adjusted current ratio A liquidity ratio calculated as adjusted current assets divided by adjusted current liabilities. Oracle Corp.’s adjusted current ratio improved from 2017 to 2018 but then deteriorated significantly from 2018 to 2019.

Adjusted Net Profit Margin

Microsoft Excel LibreOffice Calc
May 31, 2019 May 31, 2018 May 31, 2017 May 31, 2016 May 31, 2015 May 31, 2014
As Reported
Selected Financial Data (US$ in millions)
Net income
Revenues
Profitability Ratio
Net profit margin1
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net income
Revenues
Profitability Ratio
Adjusted net profit margin2

Based on: 10-K (filing date: 2019-06-21), 10-K (filing date: 2018-06-22), 10-K (filing date: 2017-06-27), 10-K (filing date: 2016-06-22), 10-K (filing date: 2015-06-25), 10-K (filing date: 2014-06-26).

2019 Calculations

1 Net profit margin = 100 × Net income ÷ Revenues
= 100 × ÷ =

2 Adjusted net profit margin = 100 × Adjusted net income ÷ Revenues
= 100 × ÷ =

Profitability ratio Description The company
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by total revenue. Oracle Corp.’s adjusted net profit margin ratio deteriorated from 2017 to 2018 but then improved from 2018 to 2019 exceeding 2017 level.

Adjusted Total Asset Turnover

Microsoft Excel LibreOffice Calc
May 31, 2019 May 31, 2018 May 31, 2017 May 31, 2016 May 31, 2015 May 31, 2014
As Reported
Selected Financial Data (US$ in millions)
Revenues
Total assets
Activity Ratio
Total asset turnover1
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Revenues
Adjusted total assets
Activity Ratio
Adjusted total asset turnover2

Based on: 10-K (filing date: 2019-06-21), 10-K (filing date: 2018-06-22), 10-K (filing date: 2017-06-27), 10-K (filing date: 2016-06-22), 10-K (filing date: 2015-06-25), 10-K (filing date: 2014-06-26).

2019 Calculations

1 Total asset turnover = Revenues ÷ Total assets
= ÷ =

2 Adjusted total asset turnover = Revenues ÷ Adjusted total assets
= ÷ =

Activity ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Oracle Corp.’s adjusted total asset turnover ratio improved from 2017 to 2018 and from 2018 to 2019.

Adjusted Financial Leverage

Microsoft Excel LibreOffice Calc
May 31, 2019 May 31, 2018 May 31, 2017 May 31, 2016 May 31, 2015 May 31, 2014
As Reported
Selected Financial Data (US$ in millions)
Total assets
Total Oracle Corporation stockholders’ equity
Solvency Ratio
Financial leverage1
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted total assets
Adjusted total Oracle Corporation stockholders’ equity
Solvency Ratio
Adjusted financial leverage2

Based on: 10-K (filing date: 2019-06-21), 10-K (filing date: 2018-06-22), 10-K (filing date: 2017-06-27), 10-K (filing date: 2016-06-22), 10-K (filing date: 2015-06-25), 10-K (filing date: 2014-06-26).

2019 Calculations

1 Financial leverage = Total assets ÷ Total Oracle Corporation stockholders’ equity
= ÷ =

2 Adjusted financial leverage = Adjusted total assets ÷ Adjusted total Oracle Corporation stockholders’ equity
= ÷ =

Solvency ratio Description The company
Adjusted financial leverage A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity.
Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.
Oracle Corp.’s adjusted financial leverage ratio increased from 2017 to 2018 and from 2018 to 2019.

Adjusted Return on Equity (ROE)

Microsoft Excel LibreOffice Calc
May 31, 2019 May 31, 2018 May 31, 2017 May 31, 2016 May 31, 2015 May 31, 2014
As Reported
Selected Financial Data (US$ in millions)
Net income
Total Oracle Corporation stockholders’ equity
Profitability Ratio
ROE1
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net income
Adjusted total Oracle Corporation stockholders’ equity
Profitability Ratio
Adjusted ROE2

Based on: 10-K (filing date: 2019-06-21), 10-K (filing date: 2018-06-22), 10-K (filing date: 2017-06-27), 10-K (filing date: 2016-06-22), 10-K (filing date: 2015-06-25), 10-K (filing date: 2014-06-26).

2019 Calculations

1 ROE = 100 × Net income ÷ Total Oracle Corporation stockholders’ equity
= 100 × ÷ =

2 Adjusted ROE = 100 × Adjusted net income ÷ Adjusted total Oracle Corporation stockholders’ equity
= 100 × ÷ =

Profitability ratio Description The company
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity. Oracle Corp.’s adjusted ROE deteriorated from 2017 to 2018 but then improved from 2018 to 2019 exceeding 2017 level.

Adjusted Return on Assets (ROA)

Microsoft Excel LibreOffice Calc
May 31, 2019 May 31, 2018 May 31, 2017 May 31, 2016 May 31, 2015 May 31, 2014
As Reported
Selected Financial Data (US$ in millions)
Net income
Total assets
Profitability Ratio
ROA1
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net income
Adjusted total assets
Profitability Ratio
Adjusted ROA2

Based on: 10-K (filing date: 2019-06-21), 10-K (filing date: 2018-06-22), 10-K (filing date: 2017-06-27), 10-K (filing date: 2016-06-22), 10-K (filing date: 2015-06-25), 10-K (filing date: 2014-06-26).

2019 Calculations

1 ROA = 100 × Net income ÷ Total assets
= 100 × ÷ =

2 Adjusted ROA = 100 × Adjusted net income ÷ Adjusted total assets
= 100 × ÷ =

Profitability ratio Description The company
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. Oracle Corp.’s adjusted ROA deteriorated from 2017 to 2018 but then improved from 2018 to 2019 exceeding 2017 level.