Yahoo 2004 Annual Report Download - page 80

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Yahoo! Japan. During April 1996, the Company signed a joint venture agreement with SOFTBANK, which was amended
in September 1997, whereby Yahoo! Japan Corporation (‘‘Yahoo! Japan’’) was formed. The Company also has commercial
arrangements with Yahoo! Japan, consisting of services, including algorithmic search services and sponsored search services
and the related traffic acquisition costs, and license fees. Due to the acquisition of Overture, traffic acquisition costs have
increased resulting in the net cost of these arrangements of approximately $67 million for the year ended December 31,
2004, compared to net revenues of $8 million and $9 million for the years ended December 31, 2002 and 2003,
respectively. As of December 31, 2003 and 2004, the Company had a net payable balance to Yahoo! Japan of approxi-
mately $2 million and $30 million respectively.
The investment in Yahoo! Japan is being accounted for using the equity method. As of December 31, 2004, the carrying
value of the investment was approximately $240 million and is recorded in long-term other assets. The fair value of the
Company’s 34 percent ownership in Yahoo! Japan, based on the quoted trading price, was approximately $12 billion as
of December 31, 2004.
Prior to and during 2001, Yahoo! Japan acquired the Company’s equity interests in certain entities in Japan for total
consideration of approximately $65 million, paid partially in shares of Yahoo! Japan common stock and partially in cash.
As a result of the acquisition, the Company increased its investment in Yahoo! Japan, which resulted in approximately
$41 million of goodwill to be amortized over seven years. The amortization ceased upon the adoption of SFAS No. 142.
The Company also records its share of the results of Yahoo! Japan one quarter in arrears within earnings in equity
interests. The following table presents Yahoo! Japan’s condensed financial information, as derived from the Yahoo! Japan
financial statements for the years ended September 30, 2002, 2003 and 2004 and as of September 30, 2003 and 2004
(in thousands):
Years Ended September 30,
2002 2003 2004
Operating data:
Revenues $297,787 $500,091 $868,281
Gross profit 246,137 462,352 810,114
Income from operations 124,522 262,393 470,681
Net income 67,672 145,720 290,576
Balance sheet data:
Current assets $316,584 $622,794
Noncurrent assets 206,704 291,566
Current liabilities 112,959 192,761
Noncurrent liabilities 15,795 22,803
The differences between United States and Japanese generally accepted accounting principles did not materially impact
the amounts reflected in the Company’s financial statements.
Yahoo! Europe. During November, 1996, the Company signed a joint venture agreement with a subsidiary of SOFTBANK
whereby separate companies were formed in France, Germany and the United Kingdom (collectively ‘‘Yahoo! Europe’’) to
establish and manage versions of the Yahoo! Internet Guide for those countries, develop related online navigational
services, and conduct other related business. The parties have invested a total of $6 million in proportion to their
respective equity interests as of December 31, 2004. The Company has a majority share of approximately 70 percent in
each of the Yahoo! Europe entities, and therefore, has consolidated their financial results. Minority interests are presented
separately on the consolidated balance sheets and statement of operations.
Yahoo! Korea. During August 1997, the Company signed a joint venture agreement with SOFTBANK and other
SOFTBANK affiliated companies whereby Yahoo! Korea was formed to develop and operate a Korean version of the
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