Yahoo 2005 Annual Report Download - page 57

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51
which would have been established for the purpose of facilitating off-balance sheet arrangements or other
contractually narrow or limited purposes. As such, we are not exposed to the financing, liquidity, market
or credit risk that could arise if we had engaged in such relationships.
Other commitments
In the ordinary course of business, we may provide indemnifications of varying scope and terms to
customers, vendors, lessors, business partners and other parties with respect to certain matters, including,
but not limited to, losses arising out of our breach of such agreements, services to be provided by us, or
from intellectual property infringement claims made by third parties. In addition, we have entered into
indemnification agreements with our directors and certain of our officers that will require us, among other
things, to indemnify them against certain liabilities that may arise by reason of their status or service as
directors or officers. We have also agreed to indemnify certain former officers and directors of acquired
companies in connection with the acquisition of such companies. We maintain director and officer
insurance, which may cover certain liabilities arising from our obligation to indemnify our directors and
officers and former directors and officers of acquired companies, in certain circumstances.
It is not possible to determine the maximum potential loss under these indemnification agreements due to
the limited history of prior indemnification claims and the unique facts and circumstances involved in each
particular agreement. Such indemnification agreements may not be subject to maximum loss clauses.
Historically, we have not incurred material costs as a result of obligations under these agreements and we
have not accrued any liabilities related to such indemnification obligations in our consolidated financial
statements.
On April 21, 2003, Overture completed its purchase of the Web Search unit of Fast Search and Transfer
ASA, a Norway based developer of search and real-time filtering technologies, for $70 million in cash, plus
a contingent earn-out payment of up to $30 million over three years based on specified operating criteria.
The earn-out payment is not included in the contractual obligations table.
Critical Accounting Policies, Judgments and Estimates
Our discussion and analysis of our financial condition and results of operations is based upon our
consolidated financial statements, which have been prepared in accordance with accounting principles
generally accepted in the United States. The preparation of these consolidated financial statements
requires us to make estimates, judgments and assumptions that affect the reported amounts of assets,
liabilities, revenues and expenses, and the related disclosure of contingent assets and liabilities. We base
our estimates on historical experience and on various other assumptions that we believe are reasonable
under the circumstances, the results of which form the basis for making judgments about the carrying
values of assets and liabilities that are not readily apparent from other sources. Actual results may differ
from these estimates.
An accounting policy is considered to be critical if it requires an accounting estimate to be made based on
assumptions about matters that are highly uncertain at the time the estimates are made, and if different
estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably
likely to occur, could materially impact the consolidated financial statements. We believe the following
critical accounting policies reflect the more significant estimates and assumptions used in the preparation
of the consolidated financial statements.
Revenue Recognition. Our revenues are generated from marketing services and fees. Marketing services
revenue is generated from several offerings including: the display of textual, rich media advertisements,
display of text based links to the advertiser’s website, listing based services, and commerce based
transactions. Fees revenue includes revenue from a variety of consumer and business fee-based services.
While the majority of our revenue transactions contain standard business terms and conditions, there are