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Table of Contents
AOL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
incurred or Time Warner's estimate of expenses relative to the services provided to other subsidiaries of Time Warner. AOL believes that these allocations
were made on a reasonable basis, and that receiving these services from Time Warner created cost efficiencies. During the year ended December 31, 2009,
AOL incurred $20.9 million of expenses related to charges for services performed by Time Warner. These expenses were recorded as operating expenses by
AOL as incurred.
Tax Matters Agreements
In connection with Google's investment in the Company in 2006, AOL entered into a tax matters agreement with Time Warner governing AOL's
inclusion in Time Warner consolidated tax returns. Under the terms of the tax matters agreement, Time Warner prepared a pro forma AOL income tax return,
and AOL agreed to make tax payments to Time Warner generally on the basis of this pro forma consolidated AOL income tax return. Amounts payable or
receivable under the tax matters agreement were generally reported as adjustments to divisional equity.
Effective with the spin-off, the Company entered into a Second Tax Matters Agreement with Time Warner that governs the respective rights,
responsibilities and obligations of Time Warner and AOL after the spin-off with respect to all tax matters. See "Note 6" for additional information on the
Second Tax Matters Agreement.
Other
In the normal course of business, AOL historically entered into commercial transactions with other subsidiaries of Time Warner. AOL recognized $3.7
million in revenue and $22.0 million in operating expenses from transactions with other Time Warner subsidiaries for the year ended December 31, 2009.
NOTE 13—SEGMENT INFORMATION
An operating segment is defined as a component of an enterprise that engages in business activities from which it may earn revenues and incur expenses
and that has discrete financial information that is regularly reviewed by the chief operating decision maker in deciding how to allocate resources and in
assessing performance.
The Company's chief operating decision maker, its Chief Executive Officer, evaluates performance and makes operating decisions about allocating
resources based on financial data presented on a consolidated basis. There are no managers who are held accountable by AOL's chief operating decision
maker, or anyone else, for an operating measure of profit or loss for any operating unit below the consolidated unit level. Accordingly, management has
determined that the Company has one segment.
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