Yahoo 2011 Annual Report Download - page 86

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the deconsolidation of Alipay; and (b) the Company, Softbank and Alibaba Group released claims against
Alibaba Group, Alipay, HoldCo, Mr. Ma, Mr. Tsai and certain of their related parties (including Alibaba Group’s
directors in their capacity as such) from any and all claims and liabilities, subject to certain limitations, arising
out of or based upon such actions.
The Company is evaluating the impact of the Framework Agreement on the Company’s consolidated financial
statements as 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.
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 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 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.
The Company makes adjustments to the earnings in equity interests line in the consolidated statements of income
for any differences between U.S. GAAP and accounting principles generally accepted in Japan (“Japanese
GAAP”), the standards by which Yahoo Japan’s financial statements are prepared.
During the year ended December 31, 2011, the Company recorded $33 million in U.S. GAAP adjustments to
Yahoo Japan’s net income to reflect the Company’s 35 percent share of non-cash losses related to impairments of
assets held by Yahoo Japan. The $33 million recorded during the year ended December 31, 2011 primarily
includes $7 million related to the Company’s share of a non-cash loss in connection with an impairment of assets
held by Yahoo Japan in the second quarter of 2011 and a $26 million, U.S. GAAP adjustment to Yahoo Japan’s
net income in the first quarter of 2011 to reflect the Company’s share of an other-than-temporary impairment of a
cost method investment of Yahoo Japan that resulted primarily from reductions in the projected operating results
of the Yahoo Japan investee.
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, 2011.
As of December 31, 2010 and 2011, the Company’s ownership interest in Yahoo Japan was approximately 35
percent. 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.
During the years ended December 31, 2009, 2010 and 2011, the Company received cash dividends from Yahoo
Japan in the amounts of $26 million, $61 million, and $75 million, net of tax, respectively, which were recorded
as reductions in the Company’s investment in Yahoo Japan.
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