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Yahoo! Inc.
Notes to Consolidated Financial Statements
Note 1 T
HE
C
OMPANY AND
S
UMMARY OF
S
IGNIFICANT
A
CCOUNTING
P
OLICIES
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! is focused
on powering its communities of users, advertisers, publishers, and developers by creating indispensable
experiences built on trust. Together with the Company’s owned and operated online properties and services
(“Yahoo! Properties” or “Owned and Operated sites”), Yahoo! also provides its advertising offerings and access
to Internet users beyond Yahoo! through its distribution network of third-party entities (“Affiliates”), who have
integrated the Company’s advertising offerings into their Websites, referred to as Affiliate sites, or their other
offerings. The Company generates revenues by providing marketing services to advertisers across a majority of
Yahoo! Properties and Affiliate sites. Additionally, although many of the services the Company provides to users
are free, Yahoo! does charge fees for a range of premium services.
Basis of Presentation. The consolidated financial statements include the accounts of Yahoo! Inc. 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
(“GAAP”) in the United States (“U.S.”) 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, stock-based compensation, goodwill and other intangible assets, income taxes,
contingencies, and restructuring charges. 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 advertisers and publishers and offerings to users. The Company classifies these revenues as
marketing services and fees.
The Company recognizes revenue on arrangements in accordance with Financial Accounting Standard Board’s
(“FASB”) Emerging Issues Task Force (“EITF”) Issue No. 00-21, “Revenue Arrangements with Multiple
Deliverables” and Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin (“SAB”) No. 104,
“Revenue Recognition,” (“SAB 104”). 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 collectability of the
related fee 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. In accordance with EITF No. 02-16, “Accounting
by a Customer (Including a Reseller) for Certain Consideration Received from a Vendor,” the Company also
evaluates whether an arrangement should be characterized as revenue or a reimbursement of costs incurred. In
accordance with EITF Issue No. 99-19, “Reporting Revenue Gross as a Principal Versus Net as an Agent,” the
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