Yahoo 2004 Annual Report Download - page 66

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Concentration of Risk. Financial instruments that potentially subject the Company to significant concentration of credit risk
consist primarily of cash, cash equivalents, marketable debt securities, and accounts receivable. As of December 31, 2004,
substantially all of the Company’s cash, cash equivalents, and investments were managed by four financial institutions.
Accounts receivable are typically unsecured and are derived from revenue earned from customers. The Company performs
ongoing credit evaluations of its customers and maintains allowances for potential credit losses. The Company makes
judgment as to its ability to collect outstanding receivables based primarily on management’s evaluation of the customer’s
financial condition, past collection history and overall aging of the receivables. Historically, such losses have been within
management’s expectations. As of December 31, 2003 and 2004, no one customer accounted for 10 percent or more of
the accounts receivable balance. The fair value of marketable equity securities held by the Company was approximately
$816 million as of December 31, 2004. The fair value of these investments is subject to fluctuation based on market
prices.
Long-Lived Assets.
Property and Equipment. Buildings are stated at cost and depreciated using the straight-line method over the estimated useful
lives of 25 years. Leasehold improvements are amortized over the shorter of the lease term and five years. Computers and
equipment, and furniture and fixtures are stated at cost and depreciated using the straight-line method over the estimated
useful lives of the assets, generally two to five years. The Company recognized depreciation expense on property and
equipment of approximately $88 million, $105 million, and $165 million for 2002, 2003, and 2004, respectively.
Goodwill. Goodwill is carried at cost. Goodwill is not amortized but is subject to an annual test for impairment at the
reporting unit level (operating segment or one level below an operating segment) and between annual tests in certain
circumstances. The performance of the test involves a two-step process. The first step of the impairment test involves
comparing the fair value of the Company’s reporting units with the reporting unit’s carrying amount, including goodwill.
The Company generally determines the fair value of its reporting units using the expected present value of future cash
flows, giving consideration to the market valuation approach. If the carrying amount of the Company’s reporting units
exceeds the reporting unit’s fair value, the Company performs the second step of the goodwill impairment test to
determine the amount of impairment loss. The second step of the goodwill impairment test involves comparing the
implied fair value of the Company’s reporting unit’s goodwill with the carrying amount of that goodwill.
Intangible Assets Other than Goodwill. Intangible assets other than goodwill are carried at cost less accumulated amortization.
Intangible assets are generally amortized on a straight-line basis over the economic lives of the respective assets, generally
two to seven years. Long-lived assets and certain identifiable intangible assets to be held and used are reviewed for
impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be
recoverable. Determination of recoverability is based on an estimate of undiscounted future cash flows resulting from the
use of the asset and its eventual disposition. Measurement of any impairment loss for long-lived assets and certain
identifiable intangible assets that management expects to hold and use is based on the amount the carrying value exceeds
the fair value of the asset.
Foreign Currency. The functional currency of the Company’s international subsidiaries is generally the local currency. The
financial statements of these subsidiaries are translated to United States dollars using period-end rates of exchange for
assets and liabilities, and average rates of exchange for the year for revenues and expenses. Translation gains (losses) are
recorded in accumulated other comprehensive income as a component of stockholders’ equity. Net gains and losses
resulting from foreign exchange transactions are included in other income, net and were not significant during the
periods presented.
Recent Accounting Pronouncements
In March 2004, the EITF reached a consensus on EITF Issue No. 03-01, ‘‘The Meaning of Other-Than-Temporary
Impairment and Its Application to Certain Investments’’ (‘‘EITF 03-01’’). EITF 03-01 provides guidance on the meaning
of ‘‘other-than-temporary’’ impairment and its application to certain marketable debt and equity securities accounted for
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