Yahoo 2012 Annual Report Download - page 85

on an ongoing basis. See “Note 9—Derivative Instruments” for additional information related to the Company’s
derivative instruments. Accounts receivable are typically unsecured and are derived from revenue earned from
customers. The Company performs ongoing credit evaluations of its customers and maintains allowances for
potential credit losses. Historically, such losses have been within management’s expectations. As of
December 31, 2011 and 2012, no one customer accounted for 10 percent or more of the accounts receivable
balance and no one customer accounted for 10 percent or more of the Company’s revenue for 2010, 2011, or
2012. Revenue under the Company’s Search and Advertising Services and Sales Agreement (the “Search
Agreement”) with Microsoft Corporation (“Microsoft”) represented more than 10 percent of the Company’s
revenue during 2011 and 2012.
Comprehensive Income. Comprehensive income consists of two components, net income and other
comprehensive income. Other comprehensive income refers to revenue, expenses, and gains and losses that under
GAAP are recorded as an element of shareholders’ equity but are excluded from net income. The Company’s
other comprehensive income consists of foreign currency translation adjustments from those subsidiaries not
using the U.S. dollar as their functional currency, unrealized gains and losses on marketable securities classified
as available-for-sale, net changes in fair value of derivative instruments related to our net investment hedges, as
well as the Company’s share of its equity investees’ other comprehensive income.
Foreign Currency. The functional currency of the Company’s international subsidiaries is evaluated on a case-
by-case basis and is often the local currency. The financial statements of these subsidiaries are translated into
U.S. dollars using period-end rates of exchange for assets and liabilities, historical rates of exchange for equity,
and average rates of exchange for the period for revenue and expenses. Translation gains (losses) are recorded in
accumulated other comprehensive income (loss) as a component of stockholders’ equity. In addition, the
Company records translation gains (losses) related to its foreign equity method investments in accumulated other
comprehensive income (loss). The Company records foreign currency transaction gains and losses, realized and
unrealized in other income, net in the consolidated statements of income. The Company recorded $13 million and
$9 million of net gains in 2010 and 2011, respectively, and $1 million of net losses in 2012.
Cash and Cash Equivalents, Short- and Long-Term Marketable Debt and Equity Securities. The Company
invests its excess cash in money market funds, time deposits, and liquid debt instruments of the U.S. and foreign
governments and their agencies, U.S. municipalities, and high-credit corporate issuers which are classified as
marketable debt securities and cash equivalents. All investments with an original maturity of three months or less
are considered cash equivalents. Investments with maturities of less than 12 months from the balance sheet date
are classified as current assets. Investments with maturities greater than 12 months from the balance sheet date
are classified as long-term assets.
Operating cash deposits held with banks may exceed the amount of insurance provided on such deposits.
Generally, these deposits may be redeemed upon demand and are maintained with financial institutions with
reputable credit and therefore bear minimal credit risk. The Company seeks to mitigate its credit risk by
spreading such risk across multiple counterparties and monitoring the risk profiles of these counterparties.
The Company’s marketable debt and equity securities are classified as available-for-sale and are reported at fair
value, with unrealized gains and losses, net of tax, recorded in accumulated other comprehensive income (loss).
Realized gains or losses and declines in value judged to be other-than-temporary, if any, on available-for-sale
securities are reported in other income, net. The Company evaluates the investments periodically for possible
other-than-temporary impairment. A decline of fair value below amortized costs of debt securities is considered
an other-than-temporary impairment if the Company has the intent to sell the security or it is more likely than not
that the Company will be required to sell the security before recovery of the entire amortized cost basis. In those
instances, an impairment charge equal to the difference between the fair value and the amortized cost basis is
recognized in earnings. Regardless of the Company’s intent or requirement to sell a debt security, an impairment
is considered other-than-temporary if the Company does not expect to recover the entire amortized cost basis; in
those instances, a credit loss equal to the difference between the present value of the cash flows expected to be
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