Yahoo 2006 Annual Report Download - page 73

Download and view the complete annual report

Please find page 73 of the 2006 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 126

  • 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
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126

Yahoo! Inc.
Notes to Consolidated Financial Statements
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!’s mission is to connect
people to their passions, their communities, and the world’s knowledge.
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 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 reporting and 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. In 2006, the Company identified $25 million of non-cash expenses, net of tax, (or $0.02 per diluted
share) relating to 2004 and earlier years, which were corrected in 2006. See Note 10 — “Income Taxes” and
Note 12 — “Employee Benefits” for additional information.
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 (“SAB”) 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 Deliver-
ables.” 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 accounts for cash consideration given to customers, for which it does not
receive a separately identifiable benefit or cannot reasonably estimate fair value, as a reduction of revenue rather
than as an expense.
Marketing services revenue is generated from several offerings including: the display of rich media advertisements,
display of text based links to an advertiser’s website, listing based services and commerce based transactions.
63