Yahoo 2003 Annual Report Download - page 59

searches, or other metric are expensed based on the vol- by considering current factors including economic envi-
ume of the underlying activity or revenue multiplied by ronment, market conditions and operational performance
the agreed-upon price or rate. and other specific factors relating to the business underly-
ing the investment, and records reductions in carrying val-
Cash and Cash Equivalents, Short and Long-Term Investments. The ues when necessary. The fair value for privately held secu-
Company invests its excess cash in debt instruments of rities is estimated using the best available information as
the U.S. Government and its agencies, and in high-quality of the evaluation date, including the quoted market prices
corporate issuers. All highly liquid investments with an of comparable public companies, recent financing rounds
original maturity of three months or less are considered of the investee and other investee specific information, in
cash equivalents. Investments with maturities of less than accordance with Accounting Principles Board Opinion
twelve months from the balance sheet date are considered No. 18, ‘‘The Equity Method of Accounting for Invest-
short-term investments. Investments with maturities ments in Common Stock.’’
greater than twelve months from the balance sheet date
are considered long-term investments. The Company accounts for derivatives under Statement of
Financial Accounting Standards No. 133 (‘‘SFAS 133’’),
The Company’s marketable securities are classified as avail- ‘‘Accounting for Derivative Instruments and Hedging
able-for-sale and are reported at fair value, with unrealized Activities.’’ SFAS 133 establishes methods of accounting
gains and losses, net of tax, recorded in other comprehen- for derivative financial instruments and hedging activities
sive income (loss). Realized gains or losses and declines in related to those instruments as well as other hedging activ-
value judged to be other than temporary, if any, on avail- ities. The derivatives held by the Company comprise war-
able-for-sale securities are reported in other income, net. rants to purchase equity instruments in other public and
The Company reviews the securities for impairments con- private companies at specified prices over original terms
sidering current factors including the economic environ- varying from 2.5 to 10 years. These warrants are held for
ment, market conditions and the operational performance business and strategic purposes. During 2001, 2002 and
and other specific factors relating to the business underly- 2003, the realized and unrealized gains on derivatives
ing the securities. The Company records impairment recorded in other income, net were not material to the
charges equal to the amount that the carrying value of its consolidated results of operations.
available-for-sale securities exceeds the estimated fair mar-
ket value of the securities as of the evaluation date. The Concentration of Risk. Financial instruments that potentially
fair value for publicly held securities is determined based subject the Company to significant concentration of credit
on quoted market prices as of the evaluation date. In risk consist primarily of cash, cash equivalents, invest-
computing realized gains and losses on available-for-sale ments, and accounts receivable. As of December 31, 2003,
securities, the Company determines cost based on substantially all of the Company’s cash, cash equivalents,
amounts paid, including direct costs such as commissions, and investments were managed by four financial institu-
to acquire the security using the specific identification tions. Accounts receivable are typically unsecured and are
method. The Company had net unrealized gains on its derived from revenue earned from customers primarily
marketable debt and equity securities of approximately located in the United States. The Company performs
$32 million, $18 million and $8 million, net of tax of ongoing credit evaluations of its customers and maintains
approximately $13 million, $7 million and $3 million, at allowances for potential credit losses. Historically, such
December 31, 2001, 2002, and 2003, respectively. Real- losses have been within management’s expectations. As of
ized gains on marketable debt and equity securities were December 31, 2002 and 2003, no one customer
not material to the consolidated statements of operations accounted for 10 percent or more of the accounts receiva-
for the years ended December 31, 2001, 2002 and 2003. ble balance.
The Company has investments in equity instruments of Product Development. Product development costs consist pri-
privately-held companies. These investments are included marily of payroll and related expenses incurred for
in other long-term assets and are generally accounted for enhancements to and maintenance of the Company’s net-
under the cost method, as the Company does not have work, classification and organization of listings within
the ability to exercise significant influence over operations. Yahoo! properties, research and development expenses,
The Company monitors its investments for impairment
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