Yahoo 2004 Annual Report Download - page 53

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and liabilities create fluctuations that will lead to a transaction gain or loss. During 2004, we recorded foreign currency
transaction gains, realized and unrealized, of approximately $6 million as compared to $3 million and $2 million in 2003
and 2002, respectively, which are recorded in other income, net on the consolidated statement of operations.
Investment Risk. The primary objective of our investment activities is to preserve principal while at the same time maximiz-
ing yields without significantly increasing risk. To achieve this objective, we maintain our portfolio of cash equivalents
and short-term and long-term investments in a variety of securities, including both government and corporate obligations
and money market funds. As of December 31, 2004 and 2003, net unrealized losses on these investments were not
material.
We are exposed to market risk as it relates to changes in the market value of our investments. We invest in equity
instruments of public companies for business and strategic purposes and have classified these securities as avail-
able-for-sale. These available-for-sale equity investments are subject to significant fluctuations in fair value due to the
volatility of the stock market and the industries in which these companies participate. We have realized gains and losses
from both the sale of investments, as well as mergers and acquisitions of companies in which we have invested. As of
December 31, 2004, we had available-for-sale equity investments with a fair value of approximately $812 million,
classified as current assets and included on the consolidated balance sheets as marketable equity securities. These equity
investments have a total cost basis of approximately $10 million. Our objective in managing exposure to stock market
fluctuations is to minimize the impact of stock market declines to earnings and cash flows. However, continued market
volatility, as well as mergers and acquisitions, have the potential to have a material non-cash impact on our financial
position and/or operating results in future periods. Using a hypothetical reduction of 10 percent in the stock price of
each of our equity securities, the fair value of our equity investments would decrease by approximately $80 million as of
December 31, 2004. Our investments in available-for-sale equity investments were not material as of December 31,
2003.
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