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Notes to Consolidated Financial Statements YAHOO! INC.
one week to three years. The Company recognizes market-
Note 1 THE COMPANY AND SUMMARY OF ing services revenue related to banner advertisements as
SIGNIFICANT ACCOUNTING POLICIES ‘‘impressions’’ are delivered by the Company. ‘‘Impres-
The Company. Yahoo! Inc. (‘‘Yahoo!’’ or the ‘‘Company’’) is a sions’’ are defined as the number of times that an adver-
leading provider of comprehensive online products and tisement appears in pages viewed by users of the Yahoo!
services to consumers and businesses worldwide. The network. Sponsorship advertising agreements have longer
Company, a Delaware corporation, commenced operations terms than banner advertising agreements, typically rang-
in 1995. ing from three months to three years, and often involve
multiple element arrangements (arrangements with more
Principles of Consolidation. The consolidated financial state- than one deliverable) that may include placement on spe-
ments include the accounts of Yahoo! and its majority- cific properties, exclusivity and content integration. Spon-
owned subsidiaries. All significant intercompany accounts sorship advertisement revenue is recognized as ‘‘impres-
and transactions have been eliminated. Investments in sions’’ are delivered or ratably over the contract period,
entities in which the Company can exercise significant where applicable. Text-link and hypertext link advertise-
influence, but are less than majority owned and not other- ments, including pay-for-performance search advertise-
wise controlled by the Company, are accounted for under ments or results, are recognized in the period in which the
the equity method and are included in other assets on the ‘‘click-throughs’’ occur. ‘‘Click-throughs’’ are defined as the
balance sheet. The Company has included the results of number of times a user clicks on an advertisement or
operations of acquired companies from the date of acqui- search result. Per-query search fees are recognized based on
sition. See Note 6 – ‘‘Acquisitions.’’ the query volume in the period, and revenue from cus-
tomers who pay a fixed fee to be included in the Web
Reclassifications. Certain prior year balances have been search index are recognized over the term of the agree-
reclassified to conform to the current year presentation. ment. Transactions revenue includes service fees for facili-
tating transactions through the Yahoo! network, princi-
Revenue Recognition. The Company’s revenues are derived pally from the Company’s commerce properties.
principally from services, which include marketing ser- Transactions revenue is recognized when there is evidence
vices, fees, and listings. that the qualifying transactions have occurred.
The Company recognizes revenue on arrangements in Revenues from pay-for-performance search and rich media
accordance with Securities and Exchange Commission advertisements from the Company’s agreement with Over-
Staff Accounting Bulletin No. 104 ‘‘Revenue Recogni- ture Services, Inc. (‘‘Overture’’) are included in marketing
tion,’’ (‘‘SAB 104’’) and Emerging Issues Task Force services for the period from January 1, 2003 through
(‘‘EITF’’) Issue 00-21, ‘‘Revenue Arrangements with Mul- October 7, 2003, the date the Company acquired Over-
tiple Deliverables.’’ In all cases, revenue is recognized only ture, and for the years ended December 31, 2002 and
when the price is fixed or determinable, persuasive evi- 2001. Revenues from Overture for the period from Janu-
dence of an arrangement exists, the service is performed, ary 1, 2003 through October 7, 2003 amounted to
and collectibility of the resulting receivable is reasonably 12 percent of total revenues for the year ended Decem-
assured. ber 31, 2003. The results of operations of Overture are
included in the Company’s consolidated statements of
Marketing services revenue is primarily generated from the operations since the completion of the acquisition on
sale of rich media advertisements (banner and other media October 7, 2003. Revenues from Overture amounted to
advertisements), sponsorship and text-link advertisements, 14 percent of total revenues for the year ended Decem-
(including pay-for-performance search advertisements), ber 31, 2002. No one customer accounted for 10 percent
paid inclusion, algorithmic searches and transactions reve- or more of total revenues during 2001.
nue. Banner advertising agreements typically range from
51