Yahoo 2011 Annual Report Download - page 31

it is possible that a resolution of one or more such proceedings could result in liability, penalties, or sanctions, as
well as judgments, consent decrees, or orders preventing us from offering certain features, functionalities,
products, or services, or requiring a change in our business practices, products or technologies, which could in
the future materially and adversely affect our business, operating results, and financial condition. See Note
12—“Commitments and Contingencies” in the Notes to the consolidated financial statements.
Fluctuations in foreign currency exchange rates affect our operating results in U.S. dollar terms.
A portion of our revenue comes from international operations. Revenue generated and expenses incurred by our
international subsidiaries and equity method investees are often denominated in the currencies of the local
countries. As a result, our consolidated U.S. dollar financial statements are subject to fluctuations due to changes
in exchange rates as the financial results of our international subsidiaries and equity method investees are
translated from local currencies into U.S. dollars. In addition, our financial results are subject to changes in
exchange rates that impact the settlement of transactions in non-local currencies.
We use derivative instruments, such as foreign currency forward contracts, to partially offset certain exposures to
fluctuations in foreign currency exchange rates. The use of such instruments may not offset any or more than a
portion of the adverse financial effects of unfavorable movements in foreign currency exchange rates over the
limited time the instruments are in place.
We may be required to record a significant charge to earnings if our goodwill, amortizable intangible assets,
investments in equity interests, including investments held by our equity method investees, or other
investments become impaired.
We are required under generally accepted accounting principles to test goodwill for impairment at least annually
and to review our amortizable intangible assets and investments in equity interests, including investments held by
our equity method investees, for impairment when events or changes in circumstance indicate the carrying value
may not be recoverable. Factors that could lead to impairment of goodwill and amortizable intangible assets
include significant adverse changes in the business climate (affecting our company as a whole or affecting any
particular segment) and declines in the financial condition of our business. Factors that could lead to impairment
of investments in equity interests include a prolonged period of decline in the stock price or operating
performance of, or an announcement of adverse changes or events by, the companies in which we invested or the
investments held by those companies. Factors that could lead to an impairment of U.S. government securities,
which constitute a significant portion of our assets, include any downgrade of U.S. government debt or concern
about the creditworthiness of the U.S. government. We have recorded and may be required in the future to record
additional charges to earnings if our goodwill, amortizable intangible assets, investments in equity interests,
including investments held by our equity investees, or other investments become impaired. Any such charge
would adversely impact our financial results.
We may have exposure to additional tax liabilities which could negatively impact our income tax provision, net
income, and cash flow.
We are subject to income taxes and other taxes in both the U.S. and the foreign jurisdictions in which we
currently operate or have historically operated. The determination of our worldwide provision for income taxes
and current and deferred tax assets and liabilities requires judgment and estimation. In the ordinary course of our
business, there are many transactions and calculations where the ultimate tax determination is uncertain. We earn
a significant amount of our operating income from outside the U.S., and any repatriation of funds currently held
in foreign jurisdictions may result in higher effective tax rates for us. In the past there have been proposals to
change U.S. tax laws that could significantly impact how U.S. multinational corporations are taxed on foreign
earnings. We cannot predict the form or timing of potential legislative changes, but any newly enacted tax law
could have a material adverse impact on our tax expense and cash flow. We are subject to regular review and
audit by both domestic and foreign tax authorities as well as subject to the prospective and retrospective effects
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