Yahoo 2012 Annual Report Download - page 105

information below. Due to these adjustments, the Yahoo Japan summarized financial information presented
below is not materially different than such information presented on the basis of U.S. GAAP.
Twelve Months Ended September 30,
2010 2011 2012
Operating data:
Revenue ............................................... $3,563,989 $3,988,377 $4,265,824
Gross profit ............................................ $2,882,992 $3,311,357 $3,594,633
Income from operations .................................. $1,679,221 $1,963,924 $2,189,323
Net income ............................................ $ 981,388 $1,114,637 $1,313,494
Net income attributable to Yahoo Japan ...................... $ 975,715 $1,108,390 $1,308,539
September 30,
2011 2012
Balance sheet data:
Current assets ..................................................... $3,622,833 $5,752,826
Long-term assets ................................................... $2,907,062 $1,837,829
Current liabilities ................................................... $1,117,773 $1,167,772
Long-term liabilities ................................................ $ 36,009 $ 49,461
Noncontrolling interests ............................................. $ 31,102 $ 31,034
Since acquiring its equity interest in Yahoo Japan, the Company has recorded cumulative earnings in equity
interests, net of dividends received and related taxes on dividends, of $1.9 billion and $2.3 billion as of
December 31, 2011 and 2012, respectively.
Under technology and trademark license and other commercial arrangements with Yahoo Japan, the Company
records revenue from Yahoo Japan based on a percentage of advertising revenue earned by Yahoo Japan. The
Company recorded revenue from Yahoo Japan of approximately $308 million, $287 million, and $281 million,
respectively, for the years ended December 31, 2010, 2011, and 2012. As of December 31, 2011 and 2012, the
Company had net receivable balances from Yahoo Japan of approximately $42 million and $43 million,
respectively.
Note 9 D ERIVATIVE F INANCIAL I NSTRUMENTS
The Company uses derivative financial instruments, primarily forward contracts, to mitigate risk associated with
adverse movements in foreign currency exchange rates. The Company evaluates the foreign currency risk and
whether to apply hedge accounting using ASC 815.
Net Investment Hedges. In December 2012, the Company started hedging, on an after-tax basis, its net investment in
Yahoo Japan with forward contracts to reduce the risk that its investment in Yahoo Japan will be adversely affected
by foreign currency exchange rate fluctuations. The forward contracts have maturities ranging from 9 months to 15
months. The Company elected to apply hedge accounting on its forward contracts for the net investment hedge of
Yahoo Japan. There was no ineffectiveness recorded for the net investment hedge for the year ended December 31,
2012. The Company recognizes net investment derivative instruments as either an asset or a liability on the
Company’s consolidated balance sheets at fair value. The notional amounts of the foreign currency forward
contracts were $3 billion as of December 31, 2012. The fair value of the foreign currency forward contract assets
were $3 million as of December 31, 2012, and are included in prepaid expenses and other current assets on the
Company’s consolidated balance sheet. A gain of $3 million was recorded for the year ended December 31, 2012
and was included in accumulated other comprehensive income on the Company’s consolidated balance sheet. The
Company did not enter into any net investment hedges in the years ended December 31, 2010 and 2011.
Balance Sheet Hedges. The Company recognizes balance sheet derivative instruments as either an asset or a
liability on the Company’s consolidated balance sheets at fair value. Changes in the fair value of these
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