America Online 2009 Annual Report Download - page 77

Table of Contents
With respect to uncertain tax positions, AOL recognized in the consolidated financial statements those tax positions determined to be "more likely than
not" of being sustained upon examination, based on the technical merits of the positions. The Company adjusts its estimated liabilities for uncertain tax
positions periodically because of ongoing examinations by, and settlements with, the various taxing authorities, as well as changes in tax laws, regulations and
interpretations. The consolidated tax provision for any given year includes adjustments to prior year income tax accruals that are considered appropriate and
any related estimated interest. The estimated liability for uncertain income tax positions as of December 31, 2008 was included in long-term obligations to
Time Warner in the consolidated balance sheet, as these liabilities related to positions taken by AOL while included in Time Warner's consolidated tax return.
The Company's policy is to recognize, when applicable, interest and penalties on uncertain tax positions as part of income tax expense. Effective with the
spin-off, the Company and Time Warner entered into the Second Tax Matters Agreement, which generally provides that Time Warner shall indemnify AOL
for consolidated income taxes relating to any pre-distribution period. Accordingly, $368.1 million of liabilities for uncertain tax positions were reversed on the
separation date, with an offsetting increase to equity. As of December 31, 2009, the remaining liabilities for uncertain tax positions (which relate either to pre-
distribution periods or foreign returns and are therefore not retained by Time Warner) are included in other long-term liabilities in the consolidated balance
sheet. For further information, see "Note 6: Income Taxes" and "Note 13: Related Party Transactions".
Certain Risks and Concentrations
The Company's financial instruments include primarily cash and equivalents, accounts receivable, accounts payable, accrued expenses and other current
liabilities. Due to the short-term nature of these assets and liabilities, their carrying amounts approximate their fair value. Financial instruments that
potentially subject the Company to concentrations of credit risk are primarily cash and accounts receivable.
The Company maintains its cash balances in the form of money market accounts and overnight deposits. The Company maintains cash deposits with
banks that at times exceed applicable insurance limits. The Company reduces its exposure to credit risk by maintaining such deposits with high quality
financial institutions that management believes are creditworthy.
The Company's exposure to customer credit risk relates primarily to advertising customers and individual subscribers to AOL's subscription access
service, and is dispersed among many different counterparties, with no single customer having a receivable balance in excess of 10% of total net receivables
at December 31, 2009 or 2008.
For each of the periods presented herein, the Company has had a contractual relationship with Google whereby Google provides paid text-based search
advertising and contextual advertising on AOL Properties. For the years ended December 31, 2009, 2008 and 2007, the revenues associated with the Google
relationship (substantially all of which were search and contextual revenues generated on AOL Properties), were $556.7 million, $677.9 million and
$642.1 million, respectively.
Property and equipment, net located outside the United States, which represent less than 1% of total assets, are not material. Revenues in different
geographical areas are as follows (in millions):
Revenues for the Years Ended December 31, (a)
2009 2008 2007
United States $ 2,863.6 $ 3,623.6 $ 4,535.0
United Kingdom 169.5 257.6 283.0
Germany 59.2 82.2 187.2
France 70.3 82.0 57.1
Canada 35.7 48.0 51.8
Other international 59.1 72.4 66.6
Total international 393.8 542.2 645.7
Total $ 3,257.4 $ 4,165.8 $ 5,180.7
(a) Revenues are attributed to countries based on the location of customers.
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