Yahoo 2012 Annual Report Download - page 86

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collected based on credit risk and the amortized cost basis of the debt security is recognized in earnings. The
Company has no current requirement or intent to sell a material portion of debt securities as of December 31,
2012. The Company expects to recover up to (or beyond) the initial cost of investment for securities held. In
computing realized gains and losses on available-for-sale securities, the Company determines cost based on
amounts paid, including direct costs such as commissions to acquire the security, using the specific identification
method. During the years ended December 31, 2010, 2011 and 2012, gross realized gains and losses on available-
for-sale debt and equity securities were not material.
Allowance for Doubtful Accounts. The Company records its allowance for doubtful accounts based upon its
assessment of various factors. The Company considers historical experience, the age of the accounts receivable
balances, the credit quality of its customers, current economic conditions, and other factors that may affect
customers’ ability to pay to determine the level of allowance required.
Derivative Financial Instruments. The Company uses derivative financial instruments, primarily foreign
currency forward contracts, to mitigate certain foreign currency exposures. The Company has designated certain
foreign currency forward contracts as net investment hedges, which are accounted for in accordance with
ASC 815 “Derivatives and Hedging” (“ASC 815”) with the effective portion of changes in fair value recorded in
accumulated other comprehensive income on the Company’s consolidated balance sheet and any ineffective
portion is recorded in other income, net on the Company’s consolidated statements of income. The Company
expects the net investment hedges to be effective, on an after-tax basis, as described in ASC 815. Effectiveness
will be assessed each quarter. Should any portion of the net investment hedge become ineffective, the ineffective
portion will be reclassified to other income, net on the Company’s consolidated statements of income. The fair
values of the net investment hedges are determined using quoted observable inputs. Gains and losses reported in
accumulated other comprehensive income will not be reclassified into earnings until a sale of the Company’s
underlying investment.
The Company has designated certain foreign currency forward contracts as balance sheet hedges to mitigate
foreign currency balance sheet exposures. These balance sheet hedges are used to partially offset the foreign
currency exchange gains and losses generated by the re-measurement of certain assets and liabilities denominated
in non-functional currency. Changes in the fair value of these derivatives are recorded in other income, net on the
Company’s consolidated statements of income. The fair values of the balance sheet hedges are determined using
quoted observable inputs.
The Company recognizes all derivative instruments as other assets or liabilities on the Company’s consolidated
balance sheets at fair value. The Company’s derivative financial instruments are not used for trading or
speculative purposes. See Note 9—“Derivative Financial Instruments” for a full description of the Company’s
derivative financial instrument activities and related accounting.
Property and Equipment. Buildings are stated at cost and depreciated using the straight-line method over the
estimated useful lives of 25 years. Leasehold improvements are amortized over the lesser of their expected useful
lives and the remaining lease term. Computers and equipment and furniture and fixtures are stated at cost and
depreciated using the straight-line method over the estimated useful lives of the assets, generally three to five
years.
Property and equipment to be held and used are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying value of the assets may not be recoverable. Determination of
recoverability is based on the lowest level of identifiable estimated undiscounted future cash flows resulting from
the use of the asset and its eventual disposition. Measurement of any impairment loss for long-lived assets that
management expects to hold and use is based on the excess of the carrying value of the asset over its fair value.
No impairments of such assets were identified during any of the periods presented.
Capitalized Software and Labor. The Company capitalized certain software and labor costs totaling
approximately $110 million, $192 million, and $180 million during 2010, 2011, and 2012, respectively. The
estimated useful life of costs capitalized is evaluated for each specific project and ranges from one to three years.
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