Yahoo 2009 Annual Report Download - page 59

As of December 31, 2009, we did not have any relationships with unconsolidated entities or financial
partnerships, such as entities often referred to as structured finance or special purpose entities, 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 any financing, liquidity, market, or credit risk that could arise if
we had engaged in such relationships.
Critical Accounting Policies 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 U.S. GAAP. 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 estimate is made, and if different estimates
that reasonably could have been used, or changes in the accounting estimate that are reasonably likely to occur,
could materially impact the consolidated financial statements. We believe that the following critical accounting
policies reflect the more significant estimates and assumptions used in the preparation of the consolidated
financial statements.
Management has discussed the development and selection of these critical accounting estimates with the Audit
Committee of our Board and the Audit Committee has reviewed the disclosure below. In addition, there are other
items within our financial statements that require estimation, but are not deemed critical as defined above.
Changes in estimates used in these and other items could have a material impact on our financial statements.
Revenue Recognition. Our revenues are generated from marketing services and fees. Marketing services revenues
are generated from several offerings including: the display of graphical advertisements, display of text-based
links to advertisers’ Websites, listings-based services, and commerce-based transactions. Fees revenues include
revenues 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 certain transactions that contain
non-standard business terms and conditions. In addition, we enter into certain sales transactions that involve
multiple elements (arrangements with more than one deliverable). We also enter into arrangements to purchase
goods and/or services from certain customers. As a result, significant contract interpretation is sometimes
required to determine the appropriate accounting for these transactions including: (1) whether an arrangement
exists; (2) whether fees are fixed or determinable; (3) how the arrangement consideration should be allocated
among potential multiple elements; (4) when to recognize revenue on the deliverables; (5) whether all elements
of the arrangement have been delivered; (6) whether the arrangement should be reported gross as a principal
versus net as an agent; (7) whether we receive a separately identifiable benefit from the purchase arrangements
with certain customers for which we can reasonably estimate fair value; and (8) whether the consideration
received from a vendor should be characterized as revenue or a reimbursement of costs incurred. In addition, our
revenue recognition policy requires an assessment as to whether collection is reasonably assured, which
inherently requires us to evaluate the creditworthiness of our customers. Changes in judgments on these
assumptions and estimates could materially impact the timing or amount of revenue recognition.
Income Taxes. Significant judgment is required in evaluating our uncertain tax positions and determining our
provision for income taxes. See Note 10—“Income Taxes” in the Notes to the consolidated financial statements
for additional information. We establish reserves for tax-related uncertainties based on estimates of whether, and
the extent to which, additional taxes will be due. These reserves are established when we believe that certain
51