America Online 2011 Annual Report Download - page 70

Table of Contents
AOL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1—DESCRIPTION OF BUSINESS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business
AOL Inc. ("AOL" or the "Company") is a leading global web services company with a suite of brands and offerings and a substantial audience. AOL's
business spans online content, products and services that it offers to consumers, publishers and advertisers. AOL is focused on attracting and engaging
consumers and providing valuable online advertising services on both its owned and operated properties and third-party websites. AOL generates advertising
revenues from owned and operated content, products and services, which are referred to as "AOL Properties", through the sale of display advertising and
search and contextual advertising. AOL Properties also include co-branded websites owned or operated by third parties for which certain criteria have been
met, including that the internet traffic has been assigned to AOL. A valuable distribution channel for AOL Properties is through the AOL-brand subscription
access service, which is offered to consumers in the United States for a monthly fee. AOL also generates advertising revenues through the sale of advertising
on third-party websites, which are referred to as the "Third Party Network."
The Spin-Off
On December 9, 2009, the Company completed its legal and structural separation from Time Warner Inc. ("Time Warner") via a spin-off (the "spin-
off"). In the spin-off, Time Warner shareholders of record as of 5 p.m. on November 27, 2009, the record date for the distribution, received one share of AOL
common stock for every eleven shares of Time Warner common stock held. On December 10, 2009, AOL began trading on the New York Stock Exchange as
an independent, public company.
Basis of Presentation
Basis of Consolidation
The consolidated financial statements include 100% of the assets, liabilities, revenues, expenses and cash flows of AOL, all voting interest entities in
which AOL has a controlling voting interest ("subsidiaries"), and those variable interest entities for which AOL is the primary beneficiary in accordance with
the consolidation accounting guidance. Through the date of the spin-off, these financial statements present the historical consolidated results of operations,
financial position, and cash flows of the AOL business that now comprises the operations of the Company. Intercompany accounts and transactions between
consolidated companies have been eliminated in consolidation. Prior to the spin-off, AOL was a subsidiary of Time Warner. The financial information prior to
the spin-off may not necessarily reflect AOL's financial position, results of operations and cash flows in the future or what AOL's financial position, results of
operations and cash flows would have been had AOL been an independent, publicly-traded company. As of December 31, 2011 we did not have any
consolidated variable interest entities. For the years ended December 31, 2011 and 2010, we accounted for our interests in variable interest entities as equity
method investments, which we included in other income (loss) and other long-term assets in the consolidated statements of operations and balance sheet,
respectively.
Through the date of the spin-off, the consolidated financial statements include allocations of certain Time Warner corporate expenses. Management
believes the assumptions and methodologies underlying the allocation of general corporate overhead expenses are reasonable. However, such expenses may
not be indicative of the actual level of expense that would have been incurred by AOL if it had operated as an independent, publicly-traded company or of the
costs expected to be incurred in the future. These allocated expenses relate to various
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