Yahoo 2004 Annual Report Download - page 65

Download and view the complete annual report

Please find page 65 of the 2004 Yahoo annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 114

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114

Income Taxes. Deferred income taxes are determined based on the differences between the financial reporting and tax basis
of assets and liabilities and are measured using the currently enacted tax rates and laws. The provision for income taxes
comprises the Company’s current tax liability and change in deferred income tax assets and liabilities. A valuation
allowance is provided to reduce deferred income tax assets to the amount that, based on available evidence, is more likely
than not to be realized.
Comprehensive Income. Comprehensive income as defined includes all changes in equity (net assets) during a period from
non-owner sources. Items of comprehensive income for the Company are unrealized gains and losses on available-for-sale
securities, net of tax, and foreign currency translation adjustments which are added to net income to compute compre-
hensive income.
Cash and Cash Equivalents, Short and Long-Term Investments. The Company invests its excess cash in debt instruments of the U.S.
Government and its agencies, and in high-quality corporate issuers which are classified as marketable debt securities. All
highly liquid investments with an original maturity of three months or less are considered cash equivalents. Investments
with effective maturities of less than twelve months from the balance sheet date are considered short-term investments.
Investments with effective maturities greater than twelve months from the balance sheet date are considered long-term
investments.
The Company’s marketable debt and equity securities are classified as available-for-sale and are reported at fair value, with
unrealized gains and losses, net of tax, recorded in accumulated other comprehensive income. Realized gains or losses and
declines in value judged to be other than temporary, if any, on available-for-sale securities are reported in other income,
net. The Company evaluates the investments periodically for possible impairment and reviews factors such as the length
of time and extent to which fair value has been below cost basis, the financial condition of the issuer, and the Company’s
ability and intent to hold the investment for a period of time which may be sufficient for anticipated recovery in market
value. The Company records impairment charges equal to the amount that the carrying value of its available-for-sale
securities exceeds the estimated fair market value of the securities as of the evaluation date, if appropriate. The fair value
for securities is determined based on quoted market prices as of the valuation date. In computing realized gains and
losses on available-for-sale securities, the Company determines cost based on amounts paid, including direct costs such as
commissions, to acquire the security using the specific identification method.
The Company has investments in equity instruments of privately-held companies. These investments are included in
other long-term assets and are generally accounted for under the cost method, as the Company does not have the ability
to exercise significant influence over operations. The Company monitors its investments for impairment by considering
current factors including economic environment, market conditions and operational performance and other specific
factors relating to the business underlying the investment, and records reductions in carrying values when necessary. The
fair value for privately held securities is estimated using the best available information as of the valuation date, including
the quoted market prices of comparable public companies, recent financing rounds of the investee and other investee
specific information, in accordance with Accounting Principles Board Opinion No. 18, ‘‘The Equity Method of Account-
ing for Investments in Common Stock.’’
The Company accounts for derivatives under SFAS No. 133, ‘‘Accounting for Derivative Instruments and Hedging
Activities.’’ SFAS No. 133 establishes methods of accounting for derivative financial instruments and hedging activities
related to those instruments as well as other hedging activities. The derivatives held by the Company as of December 31,
2004 comprise warrants to purchase equity instruments in public and private companies at specified prices over original
terms varying from 4 to 10 years. These warrants are held for business and strategic purposes. During the year ended
December 31, 2004, the Company entered into a derivative contract to sell certain securities. As of December 31, 2004,
the contract was completed. During 2002, 2003 and 2004, the realized and unrealized gains on derivatives recorded in
other income, net were not material to the consolidated results of operations.
59