Yahoo 2005 Annual Report Download - page 70

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64
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. To users, Yahoo!
provides its owned and operated online properties and services (the “Yahoo! Properties”). To businesses,
Yahoo! provides a range of tools and marketing solutions designed to enable businesses to reach the
Yahoo! 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 or otherwise controlled subsidiaries. All significant intercompany accounts and
transactions have been eliminated. Investments in entities in which the Company can exercise significant
influence, but does not own a majority equity interest or otherwise control, are accounted for using the
equity method and are included as Investments in equity interests on the consolidated balance sheets. The
Company has included the results of operations of acquired companies from the date of acquisition.
Certain prior year amounts have been reclassified to conform to the current year presentation. The
Company has changed the classification of amortization expense related to developed technology and
patents in the consolidated statements of operations. This amortization expense of $12 million,
$44 million, and $64 million for 2003, 2004, and 2005, respectively, was previously included as part of
operating expenses and has been reclassified to cost of revenues for all periods presented.
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 the 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 Issues Task Force (“EITF”) Issue No. 00-21, “Revenue
Arrangements with Multiple Deliverables.” In all cases, revenue is recognized only when the price is fixed
or determinable, persuasive evidence of an arrangement exists, the service is performed and collectibility
of the resulting receivable is reasonably assured. In accordance with EITF No. 01-9, “Accounting for
Consideration Given by a Vendor to a Customer or a Reseller of the Vendor’s Product,” the Company