Yahoo 2012 Annual Report Download - page 40

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. Any losses
on these instruments that we experience may adversely impact our financial results, cash flows and financial
condition. See Item 7A—“Quantitative and Qualitative Disclosures About Market Risk” of this Annual Report.
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 in foreign
jurisdictions to the U.S. may result in higher effective tax rates for us. There have been proposals from Congress
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
of changing tax regulations and legislation. Although we believe our tax estimates are reasonable, the ultimate
tax outcome may materially differ from the tax amounts recorded in our consolidated financial statements and
may materially affect our income tax provision, net income, or cash flows in the period or periods for which such
determination and settlement is made.
Adverse macroeconomic conditions could cause decreases or delays in spending by our advertisers and could
harm our ability to generate revenue and our results of operations.
Advertising expenditures tend to be cyclical, reflecting overall economic conditions and budgeting and buying
patterns. Since we derive most of our revenue from advertising, adverse macroeconomic conditions have caused,
and future adverse macroeconomic conditions could cause, decreases or delays in advertising spending and
negatively impact our advertising revenue and short-term ability to grow our revenue. Further, any decreased
collectability of accounts receivable or early termination of agreements, whether resulting from customer
bankruptcies or otherwise due to adverse macroeconomic conditions, could negatively impact our results of
operations.
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