America Online 2011 Annual Report Download - page 57

Table of Contents
AOL INC.
PART II—ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
• Purchase obligations, as used herein, refer to a purchase obligation representing an agreement to purchase goods or services that is enforceable
and legally binding on us and that specifies all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum or
variable price provisions; and the approximate timing of the transaction. We expect to receive consideration (i.e., products or services) for these
purchase obligations. The purchase obligation amounts do not represent the entire anticipated purchases in the future, but represent only those
items for which we are contractually obligated. Examples of the types of obligations included within purchase obligations include narrowband
network agreements and guaranteed royalty payments. Additionally, we also purchase products and services as needed with no firm commitment.
For this reason, the amounts presented in the table above do not provide a reliable indicator of our expected future cash outflows. For purposes of
identifying and accumulating purchase obligations, we have included all material contracts with an initial contractual term in excess of one year
meeting the definition of a purchase obligation (e.g., legally binding for a fixed or minimum amount or quantity). For those contracts involving a
fixed or minimum quantity but with variable pricing terms, we have estimated the contractual obligation based on our best estimate of the pricing
that will be in effect at the time the obligation is incurred. Additionally, we have included only the obligations represented by those contracts as
they existed at December 31, 2011, and did not assume renewal or replacement of the contracts at the end of their respective terms. See "Note 10"
in our accompanying consolidated financial statements.
• Other liabilities consist of deferred compensation arrangements associated with acquisitions made in 2010 and 2011 where our overall obligation
to the acquired employees (taken as a whole) is not contingent in nature. See "Note 4" of our accompanying consolidated financial statements.
The liability for uncertain tax positions of $0.6 million is not reflected in the above contractual obligations table as we are not able to reasonably
estimate the timing of payments in individual years due to uncertainties in the timing of audit outcomes.
Off-Balance Sheet Arrangements
As of December 31, 2011, we did not have any relationships with unconsolidated special purpose entities or financial partnerships for the purpose of
facilitating off-balance sheet arrangements.
Indemnification Obligations
In the ordinary course of business, we incur indemnification obligations of varying scope and terms to third parties, which could include, without
limitation, customers, vendors, distributors, licensors, licensees, lessors, purchasers of assets or operating subsidiaries and other parties related to certain
matters, including losses arising out of our breach of agreements or representations and warranties made by us, services, software, data or content to be
provided by us, taxes, tariffs, our use of services, software, data or content provided by third parties, the export or import of our software or data, compliance
with applicable laws and regulations, infringement of third party intellectual property or property rights or, with respect to the divestiture of assets or
operating subsidiaries, matters related to our conduct of the business and tax matters prior to the sale. It is not possible to determine the aggregate maximum
potential loss under such indemnification agreements due to the limited history of prior indemnification claims and the unique facts and circumstances
involved in each particular agreement. Historically, we have not incurred material costs as a result of claims made in connection with indemnifications
provided and, as of December 31, 2011, management concluded that the likelihood of any material amounts being paid by us under such indemnifications is
not reasonably possible. As of December 31, 2011, amounts accrued in our financial statements related to indemnification obligations are not material.
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