Yahoo 2013 Annual Report Download - page 85

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 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, 2012 and 2013, 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 2011, 2012, or 2013. See Note 19 “Search Agreement with Microsoft Corporation” for
revenue under the Company’s Search and Advertising Services and Sales Agreement (the “Search Agreement”)
with Microsoft Corporation (“Microsoft”).
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 or
equity method investments where the local currency is the functional currency, unrealized gains and losses on
marketable securities classified as available-for-sale, unrealized gains and losses on cash flow hedges, 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 and measurement of local currencies of foreign subsidiaries where the foreign currency is different
from the local currency in other income, net in the consolidated statements of income. The Company recorded $9
million of net gains in 2011, and $1 million and $6 million of net losses in 2012 and 2013, respectively.
Cash and Cash Equivalents, Short- and Long-Term Marketable 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 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, which are available for use to fund current operations. 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 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
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