Yahoo 2012 Annual Report Download - page 76

Actual future gains and losses associated with our derivative positions may differ materially from the sensitivity
analysis performed as of December 31, 2012 due to the inherent limitations associated with predicting the timing
and amount of changes in foreign currency exchange rates and our actual exposures and positions. In addition,
the VaR sensitivity analysis may not reflect the complex market reactions that may arise from the market shifts
modeled within this VaR sensitivity analysis.
Revenue ex-TAC and related expenses generated from our international subsidiaries are generally denominated
in the currencies of the local countries. Primary currencies include Australian dollars, British pounds, Euros,
Japanese yen, Korean won, and Taiwan dollars. The statements of income of our international operations are
translated into U.S. dollars at exchange rates indicative of market rates during each applicable period. To the
extent the U.S. dollar strengthens against foreign currencies, the translation of these foreign currency-
denominated transactions results in reduced consolidated revenue and operating expenses. Conversely, our
consolidated revenue and operating expenses will increase if the U.S. dollar weakens against foreign currencies.
Using the foreign currency exchange rates from the year ended December 31, 2011, revenue ex-TAC for the
Americas segment for the year ended December 31, 2012 would have been higher than we reported by $9
million; revenue ex-TAC for the EMEA segment would have been higher than we reported by $17 million; and
revenue ex-TAC for the Asia Pacific segment would have been higher than we reported by $7 million. Using the
foreign currency exchange rates from the year ended December 31, 2011, direct costs for the Americas segment
for the year ended December 31, 2012 would have been higher than we reported by $5 million; direct costs for
the EMEA segment would have been higher than we reported by $8 million; and direct costs for the Asia Pacific
segment would have been higher than we reported by $2 million.
Investment Exposure
We are exposed to investment risk as it relates to changes in the market value of our investments. We have
investments in marketable debt securities and equity instruments of public and private companies.
Our cash and marketable debt securities investment policy and strategy attempts primarily to preserve capital and
meet liquidity requirements. A large portion of our cash is managed by external managers within the guidelines
of our investment policy. We protect and preserve invested funds by limiting default, market, and reinvestment
risk. To achieve this objective, we maintain our portfolio of cash and cash equivalents and short-term and long-
term investments in a variety of liquid fixed income securities, including both government and corporate
obligations and money market funds. As of December 31, 2011 and 2012, net unrealized gains and losses on
these investments were not material.
Alibaba Group Preference Shares Exposure. To estimate the fair value of the Alibaba Group Preference Shares,
we performed benchmarking by comparing the terms and conditions of the Alibaba Group Preference Shares to
dividend rates, subordination terms, and credit ratings of those of similar type instruments. The credit rating of
Alibaba Group, general business conditions, and market rates could materially affect the fair value of the Alibaba
Group Preference Shares.
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