Yahoo 2009 Annual Report Download - page 87

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Yahoo! Inc.
Notes to Consolidated Financial Statements—(Continued)
September 30,
2008
September 30,
2009
Balance sheet data:
Current assets .................................................... $2,585,369 $3,191,097
Long-term assets ................................................. $2,193,374 $2,308,099
Current liabilities ................................................. $ 821,174 $1,562,583
Long-term liabilities ............................................... $ 20,131 $ 24,082
Noncontrolling interests ............................................ $ 187,570 $ 184,180
(1) The loss from operations of $236 million for the twelve months ended September 30, 2008 is primarily due to
Alibaba Group’s impairment loss on goodwill and intangible assets for which the Company has no basis in its
investment balance.
(2) The net income of $1.9 billion for the twelve months ended September 30, 2008 is primarily due to Alibaba
Group’s sale of an approximate 27 percent ownership in Alibaba.com from Alibaba.com’s IPO.
Since acquiring its interest in Alibaba Group, the Company has recorded, in retained earnings, cumulative
earnings in equity interests of $333 million and $308 million, respectively as of December 31, 2008 and 2009.
The Company also has commercial arrangements with Alibaba Group to provide technical, development, and
advertising services. For the years ended December 31, 2008 and 2009, these transactions were not material.
Equity Investment in Alibaba.com Limited. As part of the IPO of Alibaba.com, the Company purchased an
approximate 1 percent interest in the common stock of Alibaba.com. This investment was accounted for using
the equity method, consistent with the Company’s investment in Alibaba Group, which holds the controlling
interest in Alibaba.com. In September 2009, the Company sold its direct investment in Alibaba.com for net
proceeds of $145 million and recorded a pre-tax gain of $98 million ($60 million after tax) in other income, net.
Equity Investment in Yahoo Japan. During April 1996, the Company signed a joint venture agreement with
SOFTBANK, which was amended in September 1997, whereby Yahoo Japan Corporation (“Yahoo Japan”) was
formed. Yahoo Japan was formed to establish and manage a local version of Yahoo! in Japan. The fair value of
the Company’s approximate 35 percent ownership in the common stock of Yahoo Japan, based on the quoted
stock price, was approximately $6 billion as of December 31, 2009.
The investment in Yahoo Japan is being accounted for using the equity method and the total investment,
including net tangible assets, identifiable intangible assets and goodwill, is classified as part of the investments in
equity interests balance on the Company’s consolidated balance sheets. The Company records its share of the
results of Yahoo Japan and any related amortization expense, one quarter in arrears, within earnings in equity
interests in the consolidated statements of income.
As of December 31, 2009, the Company’s ownership interest in Yahoo Japan was approximately 35 percent
compared to 34 percent as of December 31, 2008. The 1 percent increase is primarily due to share repurchases
undertaken by Yahoo Japan on the open market. The Company’s proportionate share of Yahoo Japan’s total
share repurchase amount in excess of its book value was approximately $238 million and has been primarily
allocated to goodwill. Prior to and during 2001, Yahoo Japan acquired the Company’s equity interests in certain
entities in Japan for total consideration of approximately $65 million, paid partially in shares of Yahoo Japan
common stock and partially in cash. As a result of the acquisition, the Company increased its investment in
Yahoo Japan, which resulted in approximately $41 million of goodwill. The carrying value of the Company’s
investment in Yahoo Japan differs from the amount of the underlying equity in net assets of Yahoo Japan
primarily as a result of the goodwill resulting from these transactions. Goodwill is not deductible for tax
purposes.
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