Yahoo 2008 Annual Report Download - page 78

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Yahoo! Inc.
Notes to Consolidated Financial Statements—(Continued)
interest in the newly formed entity, which operates as “Yahoo! 7.” Pursuant to a shareholders agreement and a
power of attorney granted by Seven to vote certain of its shares, the Company has the right to vote 50.1 percent
of the outstanding voting interests in Yahoo! 7 and control over the day-to-day operations and therefore
consolidates Yahoo! 7, which includes the operations of Yahoo! Australia. For accounting purposes, the
Company is considered to have acquired the assets contributed by Seven in exchange for 50 percent of the
ownership of Yahoo! Australia. Accordingly, the Company accounted for this transaction in accordance with
SFAS No. 141 “Business Combinations.” The total purchase price was $35 million including direct transaction
costs of $2 million.
The allocation of the purchase price of the Company’s share of the assets acquired and liabilities assumed based
on their fair values was as follows (in thousands):
Cash acquired ....................................................................... $ 3,763
Other tangible assets acquired .......................................................... 2,400
Amortizable intangible assets:
Customer contracts, related relationships, and developed technology and intellectual property
rights ........................................................................ 18,600
Goodwill ........................................................................... 16,030
Total assets acquired ............................................................. 40,793
Deferred income taxes ................................................................ (6,075)
Total .......................................................................... $34,718
The amortizable intangible assets have useful lives not exceeding seven years and a weighted average useful life
of seven years. No amounts have been allocated to in-process research and development and approximately $16
million has been allocated to goodwill. Goodwill represents the excess of the purchase price over the fair value of
the net tangible and intangible assets acquired and is not deductible for tax purposes.
As a result of this transaction, the Company’s ownership in Yahoo! Australia, which is now part of Yahoo! 7,
decreased to 50 percent. The Company effectively recognized a non-cash gain of approximately $30 million
representing the difference between the fair value of Yahoo! Australia and its carrying value adjusted for the
Company’s continued ownership in Yahoo! 7. This non-cash gain was accounted for as a capital transaction and
recorded as additional paid-in capital because of certain future events that could affect actual realization of the
gain. The Company also recorded a minority interest of $7 million related to its reduced ownership of Yahoo!
Australia and Seven’s retained interest in their contributed net assets.
Investment in Gmarket Inc. During the year ended December 31, 2006, the Company acquired shares in Gmarket,
a leading retail e-commerce provider in South Korea, for $61 million, including direct transaction costs of
approximately $1 million. During the year ended December 31, 2007, the Company acquired additional shares in
Gmarket for $8 million. As of December 31, 2008, the Company held an approximate 10 percent ownership
interest in Gmarket, with an investment cost base totaling $69 million.
Other Acquisitions—Business Combinations. During the year ended December 31, 2006, the Company acquired
three other companies which were accounted for as business combinations. The total purchase price for these
three acquisitions was $42 million and consisted of $41 million in cash consideration and $1 million of direct
transaction costs. The total cash consideration of $41 million less cash acquired of $1 million resulted in a net
cash outlay of $40 million. Of the purchase price, $27 million was allocated to goodwill, $21 million to
amortizable intangible assets, and $6 million to net assumed liabilities. In connection with these business
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