Yahoo 2013 Annual Report Download - page 68

that the final tax outcome of these matters is different than the amounts recorded, such differences will affect the
provision for income taxes in the period in which such determination is made. The provision for income taxes
includes the effect of liability provisions and changes to reserves that are considered appropriate, as well as the
related net interest and penalties.
We record a valuation allowance against certain of our deferred income tax assets if it is more likely than not that
those assets will not be realized. In evaluating our ability to realize our deferred income tax assets we consider all
available positive and negative evidence, including our operating results, ongoing tax planning, and forecasts of
future taxable income on a jurisdiction by jurisdiction basis. In the event we were to determine that we would be
able to realize these deferred income tax assets in the future, we would make an adjustment to the valuation
allowance, which would reduce the provision for income taxes.
Goodwill. Goodwill is not amortized but is evaluated for impairment annually or whenever we identify certain
triggering events or circumstances that would more likely than not reduce the estimated fair value of a reporting
unit below its carrying amount. Events or circumstances that might indicate an interim evaluation is warranted
include, among other things, unexpected adverse business conditions, regulatory changes, loss of key personnel
and reporting unit and macro-economic factors. Goodwill is tested for impairment at the reporting unit level,
which is one level below our operating segments.
We identified U.S. & Canada, Latin America, and Tumblr as the reporting units below the Americas operating
segment; Europe and Middle East as the reporting units below the EMEA operating segment; and Taiwan,
Hong Kong, Australia & New Zealand, India & South East Asia as the reporting units below the Asia Pacific
operating segment. These operating segments are the same as our reportable segments.
We test for goodwill impairment as of October 31 each year. To test for impairment, we first use a qualitative
approach to determine whether it is more likely than not the estimated fair value of a reporting unit is less than its
carrying amount. If, after completing the qualitative assessment we determine that it is more likely than not that
the estimated fair value is greater than the carrying value, then we conclude that no impairment exists, and the
two-step goodwill impairment test is not required. If the two-step quantitative test is required, the first step of the
quantitative test involves comparing the estimated fair value of our reporting units to their carrying values,
including goodwill. If the carrying value of the reporting unit exceeds its fair value, the second step of the
quantitative test is performed by comparing the carrying value of the goodwill in the reporting unit to its implied
fair value. An impairment charge is recognized for the excess of the carrying value of goodwill over its implied
fair value.
In 2013, for the U.S. & Canada, Latin America, Tumblr, Taiwan, Hong Kong, and Australia & New Zealand
reporting units, we performed the qualitative assessment. We took into consideration events and circumstances
that would impact the fair value of these reporting units, including reporting unit, industry, and macro-economic
factors. Reporting unit factors that were considered included the results of the most recent impairment test,
financial performance in the current year, and changes to the reporting unit’s carrying value. For industry factors,
we considered growth projections, market share, and transactions within the industry. Macroeconomic factors
over the past year did not negatively impact the qualitative assessment for these reporting units. Therefore, based
on the qualitative assessment, we concluded the two-step impairment test was unnecessary, and no goodwill
impairment charge was required for 2013 for these reporting units.
For 2013, a quantitative assessment was performed for Europe, India & Southeast Asia, and Middle East
reporting units. The fair values of these reporting units were estimated using an average of a market approach
and an income approach as this combination is deemed to be the most indicative of our estimated fair value in an
orderly transaction between market participants and is consistent with the methodology used for the goodwill
impairment test in prior years. In addition, we ensure that the fair values estimated under these two approaches
are comparable with each other. Under the market approach, we utilize publicly-traded comparable company
information to determine revenue and earnings multiples that are used to value our reporting units adjusted for an
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