Yahoo 2012 Annual Report Download - page 84

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Yahoo! Inc.
Notes to Consolidated Financial Statements
Note 1 T
HE
C
OMPANY
A
ND
S
UMMARY
O
F
S
IGNIFICANT
A
CCOUNTING
P
OLICIES
The Company. Yahoo! Inc., together with its consolidated subsidiaries (“Yahoo!” or the “Company”), is a global
technology company focused on making the world’s daily habits inspiring and entertaining. The Company
provides a variety of products and services, many of them personalized, including search, content, and
communication tools—all daily habits for hundreds of millions of users, on the Web and on mobile devices. The
majority of the Company’s product offerings are available in more than 45 languages and in 60 countries,
regions, and territories.
The Company creates value for advertisers and their brands by connecting them with targeted audiences of users
through their daily habits. Advertisers can build their businesses through advertising to these targeted audiences
on the Company’s online properties and services (“Yahoo! Properties”), or through a distribution network of
third-party entities (“Affiliates”) who integrate the Company’s advertising offerings into their Websites or other
offerings (those Websites and other offerings, “Affiliate sites”).
Basis of Presentation. The consolidated financial statements include the accounts of Yahoo! Inc. and its
majority-owned or otherwise controlled subsidiaries. All significant intercompany accounts and transactions have
been eliminated. Investments in entities in which the Company can exercise significant influence, but does not
own a majority equity interest or otherwise control, are accounted for using the equity method and are included
as investments in equity interests on the consolidated balance sheets. The Company has included the results of
operations of acquired companies from the date of acquisition. Certain prior period amounts have been
reclassified to conform to the current period presentation. To conform to the current period presentation, the
Company corrected the classification of $55 million and $84 million of costs principally included in product
development expenses to cost of revenue—other for the years ended December 31, 2010 and December 31, 2011,
respectively.
The preparation of consolidated financial statements in conformity with generally accepted accounting principles
(“GAAP”) in the United States (“U.S.”) requires management to make estimates, judgments, and assumptions
that affect the reported amounts of assets, liabilities, revenue, and expenses and the related disclosure of
contingent assets and liabilities. On an ongoing basis, the Company evaluates its estimates, including those
related to revenue, the useful lives of long-lived assets including property and equipment and intangible assets,
investment fair values, stock-based compensation, goodwill, income taxes, contingencies, and restructuring
charges. The Company bases its estimates of the carrying value of certain assets and liabilities on historical
experience and on various other assumptions that are believed to be reasonable under the circumstances, when
these carrying values are not readily available from other sources. Actual results may differ from these estimates.
Concentration of Risk. Financial instruments that potentially subject the Company to significant concentration of
credit risk consist primarily of cash, cash equivalents, marketable debt securities, accounts receivable, and
derivative financial instruments. The primary focus of the Company’s investment strategy is to preserve capital
and meet liquidity requirements. A large portion of the Company’s cash is managed by external managers within
the guidelines of the Company’s investment policy. The Company’s investment policy addresses the level of
credit exposure by limiting the concentration in any one corporate issuer or sector and establishing a minimum
allowable credit rating. To manage the risk exposure, the Company maintains its portfolio of cash and cash
equivalents and short-term and long-term investments in a variety of fixed income securities, including U.S. and
foreign government, agency, municipal and highly rated corporate debt obligations and money market funds. The
Company’s derivative instruments expose the Company to credit risk to the extent that its counterparties may be
unable to meet the terms of the agreements. The Company seeks to mitigate this risk by limiting its
counterparties to major financial institutions and by spreading the risk across several major financial institutions.
In addition, the potential risk of loss with any one counterparty resulting from this type of credit risk is monitored
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