Yahoo 2004 Annual Report Download - page 62

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Notes to Consolidated Financial Statements YAHOO! INC.
Note 1 THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company. Yahoo! Inc., together with its consolidated subsidiaries, (‘‘Yahoo!’’ or the ‘‘Company’’) is a leading global
Internet brand and one of the most trafficked Internet destinations worldwide. Yahoo! seeks to provide Internet services
that are essential and relevant to users and businesses through the provision of online properties (the ‘‘Yahoo! Network’’)
to Internet users and a range of tools and marketing solutions for businesses to market to that community of users.
Stock Split. On April 7, 2004, the Yahoo! Board of Directors approved a two-for-one split of the Company’s shares of
common stock effected in the form of a stock dividend. As a result of the stock split, Yahoo! stockholders received one
additional share of Yahoo! common stock for each share of common stock held of record on April 26, 2004. The
additional shares of Yahoo! common stock were distributed on May 11, 2004. All share and per share amounts in these
consolidated financial statements and related notes have been retroactively adjusted to reflect the stock split for all periods
presented.
Basis of Presentation. The consolidated financial statements include the accounts of Yahoo! and its majority-owned subsidiar-
ies. All significant intercompany accounts and transactions have been eliminated. Investments in entities in which the
Company can exercise significant influence, but are less than majority owned and not otherwise controlled by the
Company, are accounted for under the equity method and are included in other assets on the consolidated balance
sheets. The Company has included the results of operations of acquired companies from the date of acquisition.
Certain prior year balances have been reclassified to conform to the current year presentation. Effective this year, a new
subtotal is being presented in the consolidated statement of operations: Income before income taxes, earnings in equity
interests, minority interests and cumulative effect of accounting change. Earnings in equity interests and minority
interests in operations of consolidated subsidiaries are now presented below the provision for income taxes. In accordance
with generally accepted accounting principles, these items have consistently been presented net of income taxes. This
presentation has also been adopted for prior periods. In addition, the Company has made reclassifications in the
consolidated balance sheets related to the classification of auction rate securities. Certain of these securities were included
in the cash and cash equivalents line on the balance sheet in prior years. These amounts have been reclassified to short
term marketable debt securities. See Note 7 – ‘‘Investments’’ for additional information.
The preparation of consolidated financial statements in conformity with generally accepted accounting principles in the
United States requires management to make estimates, judgments and assumptions that affect the reported amounts of
assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. On an on-going basis,
the Company evaluates its estimates, including those related to uncollectible receivables, the useful lives of long-lived
assets including property and equipment, investment fair values, goodwill and other intangible assets, income taxes and
contingencies. In addition, the Company uses assumptions when employing the Black-Scholes option valuation model to
estimate the fair value of stock options granted for pro forma disclosure purposes. The Company bases its estimates of
the carrying value of certain assets and liabilities on historical experience and on various other assumptions that are
believed to be reasonable under the circumstances, when these carrying values are not readily available from other sources.
Actual results may differ from these estimates.
Revenue Recognition. The Company’s revenues are derived principally from services, which comprise marketing services for
businesses and offerings to users. The Company classifies these revenues as marketing services and fees.
The Company recognizes revenue on arrangements in accordance with Securities and Exchange Commission Staff
Accounting Bulletin No. 104 ‘‘Revenue Recognition,’’ (‘‘SAB 104’’) and Financial Accounting Standard Board’s Emerging
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