Yahoo 2001 Annual Report Download - page 27

Foreign Currency. The functional currency of the Company’s international subsidiaries is the local currency.
The financial statements of these subsidiaries are translated to United States dollars using period-end
rates of exchange for assets and liabilities, and average rates of exchange for the year for revenues and
expenses. Translation gains (losses) are recorded in accumulated other comprehensive income as a com-
ponent of stockholders’ equity. Net gains and losses resulting from foreign exchange transactions are
included in other income (loss), net and were not significant during the periods presented.
Basic and Diluted Net Income (Loss) per Share. Basic net income (loss) per share is computed using the
weighted average number of common shares outstanding during the period. Diluted net income (loss) per
share is computed using the weighted average number of common and, if dilutive, potential common
shares outstanding during the period. Potential common shares consist of the incremental common shares
issuable upon conversion of convertible preferred stock (using the if-converted method) and shares
issuable upon the exercise of stock options and warrants (using the treasury stock method). For 2001,
potential common shares of approximately 26.8 million shares were not included in the computation
because they were antidilutive. For 2000 and 1999, potential common shares related to shares issuable
upon the exercise of stock options and warrants approximated 60.0 million and 83.3 million shares,
respectively. Net income (loss) for 1999 was adjusted to reflect accretion related to mandatorily
redeemable convertible preferred stock in the amount of $0.3 million in computing basic and diluted net
loss per share.
Use of Estimates. The preparation of consolidated financial statements in conformity with generally
accepted accounting principles requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of
the financial statements, and the reported amounts of revenues and expenses during the reported period.
On an on-going basis, the Company evaluates its estimates, including those related to uncollectible receiv-
ables, investment values, intangible assets, income taxes, restructuring costs, and contingencies. The
Company bases its estimates on historical experience and on various other assumptions that are believed
to be reasonable under the circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from other sources. Actual
results may differ from these estimates under different assumptions or conditions.
Comprehensive Income. Comprehensive income as defined includes all changes in equity (net assets) dur-
ing a period from non-owner sources. Accumulated other comprehensive income, as presented on the
accompanying consolidated balance sheets, consists of the net unrealized gains on available-for-sale secu-
rities, net of tax, and the cumulative foreign currency translation adjustment.
Recent Accounting Pronouncements. In July 2001, the Financial Accounting Standards Board (“FASB”)
issued Statement of Financial Accounting Standards No. 141 (“SFAS 141”), “Business Combinations”
which supercedes Accounting Principles Board Opinion No. 16, “Business Combinations.” SFAS 141
requires the purchase method of accounting for business combinations initiated after June 30, 2001 and
eliminates the pooling-of-interests method. In addition, SFAS 141 establishes specific criteria for the
recognition of intangible assets separately from goodwill and requires unamortized negative goodwill to
be written off immediately as an extraordinary gain, instead of being deferred and amortized. The provi-
sions of SFAS 141 have been adopted as of July 1, 2001. The adoption of SFAS 141 has not changed the
method of accounting used in previous business combinations initiated prior to July 1, 2001, including
those the Company accounted for under the pooling-of-interests method.
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In July 2001, the FASB also issued Statement of Financial Accounting Standards No. 142 (“SFAS
142”), “Goodwill and Other Intangible Assets,” which is effective for fiscal years beginning after December
15, 2001. Certain provisions also apply to acquisitions initiated subsequent to June 30, 2001. SFAS 142
supercedes APB Opinion No. 17 “Intangible Assets” and requires, among other things, the discontinuance
of amortization related to goodwill and indefinite lived intangible assets. These assets will then be sub-
ject to an impairment test at least annually. In addition, the statement includes provisions upon adoption
for the reclassification of certain existing recognized intangibles as goodwill, the identification of report-
ing units for the purpose of assessing potential future impairments of goodwill, the reassessment of the
useful lives of existing recognized intangibles and reclassification of certain intangibles out of previously
reported goodwill.
The Company will adopt SFAS 142 effective January 1, 2002, which will result, among other items,
in the Company no longer amortizing its existing goodwill. At December 31, 2001 and 2000, goodwill
approximated $193.0 million and $74.8 million, respectively, and goodwill amortization approximated
$53.2 million, $19.7 million, and $9.8 million for 2001, 2000, and 1999. The Company expects that
approximately $50 million to $100 million of its goodwill will be impaired upon the adoption of SFAS 142
in connection with the transition impairment tests which are required to be completed no later than
December 31, 2002. The impairment resulting from these transition tests will be recorded as of January
1, 2002 and will be recognized as the cumulative effect of a change in accounting principle. The Company
expects to complete the impairment loss measurement by March 31, 2002.
In October 2001, the FASB issued Statement of Financial Accounting Standards No. 144 (“SFAS
144”), “Accounting for the Impairment or Disposal of Long-Lived Assets,” which supercedes Statement of
Financial Accounting Standards No. 121 (“SFAS 121”), “Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of” and certain provisions of APB Opinion No. 30,
“Reporting Results of Operations – Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions.” SFAS 144 requires that long-
lived assets to be disposed of by sale, including discontinued operations, be measured at the lower of car-
rying amount or fair value less cost to sell, whether reported in continuing operations or in discontinued
operations. SFAS 144 also broadens the reporting requirements of discontinued operations to include all
components of an entity that have operations and cash flows that can be clearly distinguished, opera-
tionally and for financial reporting purposes, from the rest of the entity. The provisions of SFAS 144 are
effective for fiscal years beginning after December 15, 2001. Management is evaluating the effect of this
statement on the Company’s results of operations and financial position.