Yahoo 2010 Annual Report Download - page 59

period. To the extent the U.S. dollar strengthens against foreign currencies, the translation of these foreign
currency-denominated transactions results in reduced revenue, operating expenses, and net income. Conversely,
our revenue, operating expenses, and net income will increase if the U.S. dollar weakens against foreign
currencies. Using the foreign currency exchange rates from the year ended December 31, 2009, revenue for the
Americas segment for the year ended December 31, 2010 would have been lower than we reported by $13
million, revenue for the EMEA segment would have been higher than we reported by $15 million, and revenue
for the Asia Pacific segment would have been lower than we reported by $93 million. Using the foreign currency
exchange rates from the year ended December 31, 2009, direct costs for the Americas segment for the year ended
December 31, 2010 would have been lower than we reported by $3 million, direct costs for the EMEA segment
would have been higher than we reported by $4 million, and direct costs for the Asia Pacific segment would have
been lower than we reported by $10 million.
As mentioned above, we are also exposed to foreign exchange rate fluctuations as we convert the financial
statements of our foreign subsidiaries and our investments in equity interests into U.S. dollars in consolidation. If
there is a change in foreign currency exchange rates, the conversion of the foreign subsidiaries’ financial
statements into U.S. dollars results in a gain or loss which is recorded as a component of accumulated other
comprehensive income which is part of stockholders’ equity. In addition, we have certain assets and liabilities
that are denominated in currencies other than the respective entity’s functional currency. Changes in the
functional currency value of these assets and liabilities create fluctuations that will lead to a gain or loss. We
record these foreign currency transaction gains and losses, realized and unrealized, in other income, net on the
condensed consolidated statements of income. During the years ended December 31, 2010, 2009, and 2008, we
recorded realized and unrealized foreign currency transaction gains of $13 million and transaction losses of $1
million, and $25 million, respectively.
Investment Risk. We are exposed to investment risk as it relates to changes in the market value of our
investments. We have investments in marketable debt securities.
Our cash and marketable debt securities investment policy and strategy attempts primarily to preserve capital and
meet liquidity requirements. A large portion of our cash is managed by external managers within the guidelines
of our investment policy. We protect and preserve invested funds by limiting default, market, and reinvestment
risk. To achieve this objective, we maintain our portfolio of cash and cash equivalents and short-term and long-
term investments in a variety of liquid fixed income securities, including both government and corporate
obligations and money market funds. As of December 31, 2010 and 2009, net unrealized gains and losses on
these investments were not material.
We invest in equity instruments of public companies for business and strategic purposes and have classified these
securities as available-for-sale or investment in equity interests. These investments may be subject to significant
fluctuations in fair value due to the volatility of the stock market and the industries in which these companies
participate. Our investments in available-for-sale equity securities amounted to $1 million and $3 million as of
December 31, 2010 and 2009, respectively. Our realized gains and losses from the sale of available-for-sale
investments were not material in 2010. During the year ended December 31, 2009, we realized gains of $67
million related to the sale of our investment in Gmarket. During the year ended December 31, 2009, we sold our
direct investment in Alibaba.com for net proceeds of $145 million and recorded a pre-tax gain of $98 million in
other income, net.
Our objective in managing exposure to stock market fluctuations is to minimize the impact of stock market
declines to earnings and cash flows. Using a hypothetical reduction of 10 percent in the stock price of these
available-for-sale investments, the fair value of our equity investments would decrease by less than $1 million as
of both December 31, 2010 and 2009.
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