Yahoo 2010 Annual Report Download - page 78

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The investment in Alibaba Group 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 investments in
equity interests on the Company’s consolidated balance sheets. The Company records its share of the results of
Alibaba Group and any related amortization expense, one quarter in arrears, within earnings in equity interests in
the consolidated statements of income.
The Company’s initial purchase price was based on acquiring a 40 percent equity interest in Alibaba Group on a
fully diluted basis; however, the Company acquired a 46 percent interest based on outstanding shares. In
allocating the initial excess of the carrying value of the investment in Alibaba Group over its proportionate share
of the net assets of Alibaba Group, the Company allocated a portion of the excess to goodwill to account for the
estimated reductions in the carrying value of the investment in Alibaba that may occur as the Company’s equity
interest is diluted to 40 percent. As of December 31, 2009 and 2010, the Company’s ownership interest in
Alibaba Group was approximately 44 percent and 43 percent, respectively.
In the initial public offering (“IPO”) of Alibaba.com on November 6, 2007, Alibaba Group sold an approximate
27 percent interest in Alibaba.com through the issuance of new Alibaba.com shares, the sale of previously held
shares in Alibaba.com, and the exchange of certain Alibaba Group shares previously held by Alibaba Group
employees for shares in Alibaba.com, resulting in a gain on disposal of interests in Alibaba.com. Accordingly, in
the first quarter of 2008, the Company recorded a non-cash gain of $401 million, net of tax, within earnings in
equity interests representing the Company’s share of Alibaba Group’s gain, and the Company’s ownership
interest in Alibaba Group increased approximately 1 percent from 43 percent to 44 percent.
As of December 31, 2010 the difference between the Company’s carrying value of its investment in Alibaba
Group and its proportionate share of the net assets of Alibaba Group is summarized as follows (in thousands):
Carrying value of investment in Alibaba Group .......................................... $2,280,602
Proportionate share of Alibaba Group stockholders’ equity ................................. 1,652,344
Excess of carrying value of investment over proportionate share of Alibaba Group’s
stockholders’ equity(*) ....................................................... $ 628,258
(*) The excess carrying value has been primarily assigned to goodwill.
The amortizable intangible assets included in the excess carrying value have useful lives not exceeding seven
years and a weighted average useful life of approximately five years. No amount has been allocated to in-process
research and development. Goodwill is not deductible for tax purposes.
The following table presents Alibaba Group’s U.S. GAAP financial information, as derived from the Alibaba
Group financial statements (in thousands):
Twelve Months Ended September 30,
2008 2009 2010
Operating data:
Revenue ................................................ $ 456,808 $730,336 $1,298,229
Gross profit .............................................. $ 317,139 $534,974 $ 986,455
Loss from operations(1) .................................... $ (236,017) $ (39,460) $ (14,355)
Net income (loss)(2) ....................................... $1,909,009 $ (19,932) $ 42,463
Net income (loss) attributable to Alibaba Group(2) ............... $1,870,093 $ (57,346) $ (10,743)
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