Yahoo 2010 Annual Report Download - page 67

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
premier digital media company that delivers personalized digital content and experiences, across devices and
around the globe, to vast audiences. Yahoo! provides engaging and innovative canvases for advertisers to connect
with their target audiences using its unique blend of Science + Art + Scale. Through its proprietary technology
and insights, Yahoo! delivers unique content and experiences for its audience and create powerful opportunities
for its advertisers to connect with their target audiences, in context and at scale. To users, Yahoo! provides online
properties and services (“Yahoo! Properties”). To advertisers, Yahoo! provides a range of marketing services
designed to reach and connect with users of its Yahoo! Properties, as well as with Internet users beyond Yahoo!
Properties, through a distribution network of third-party entities (“Affiliates”) that have integrated Yahoo!’s
advertising offerings into their Websites or other offerings (those Websites and offerings, “Affiliate sites”).
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, revenue, and expenses and the related disclosure of
contingent assets and liabilities. On an ongoing basis, the Company evaluates its estimates, including those
related to revenue, the useful lives of long-lived assets including property and equipment and intangible assets,
investment fair values, stock-based compensation, goodwill, 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. In October 2009, FASB amended the accounting standard for multiple deliverable revenue
arrangements, which provided updated guidance on whether multiple deliverables exist, how deliverables in an
arrangement should be separated, and how consideration should be allocated. This standard eliminates the use of
the residual method and will require arrangement consideration to be allocated based on the relative selling price
for each deliverable. The selling price for each arrangement deliverable can be established based on vendor
specific objective evidence (“VSOE”) or third-party evidence (“TPE”) if VSOE is not available. The new
standard provides additional flexibility to utilize an estimate of selling price (“ESP”) if neither VSOE nor TPE is
available.
The Company elected to early adopt this accounting standard on January 1, 2010 on a prospective basis for
applicable transactions originating or materially modified after December 31, 2009. The adoption of this standard
did not have a significant impact on the Company’s revenue recognition for multiple deliverable arrangements.
Upon adoption, the selling prices for certain custom advertising solutions may use the best estimate of selling price
as provided under the new standard. The adoption of this standard did not have a material impact on the Company’s
consolidated financial position, cash flows, or results of operations for the year ended December 31, 2010.
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. The
Company’s arrangements generally do not include a provision for cancellation, termination, or refunds that
would significantly impact revenue recognition.
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