Yahoo 2013 Annual Report Download - page 87

The Company recognizes all derivative instruments as other assets or liabilities on the Company’s consolidated
balance sheets at fair value. 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 $192 million, $180 million, and $130 million during 2011, 2012, and 2013, respectively. The
estimated useful life of costs capitalized is evaluated for each specific project and ranges from one to three years.
During 2011, 2012, and 2013, the amortization of capitalized costs totaled approximately $114 million, $142
million, and $175 million, respectively. Capitalized software and labor costs are included in property and
equipment, net. Included in the capitalized amounts above are $22 million, $24 million, and $16 million,
respectively, of stock-based compensation expense in the years ended December 31, 2011, 2012, and 2013.
Goodwill. Goodwill represents the excess of the purchase price over the fair value of the net tangible and
intangible assets acquired in a business combination. Goodwill is not amortized, but is tested for impairment on
an annual basis and more frequently if impairment indicators are present. The Company’s reporting units are one
level below the operating segments level. If the reporting unit does not pass the qualitative assessment, then the
reporting unit’s carrying value is compared to its fair value. The fair values of the reporting units are estimated
using an average of a market approach and an income approach as this combination is deemed to be the most
indicative of the Company’s fair value in an orderly transaction between market participants. Goodwill is
considered impaired if the carrying value of the reporting unit exceeds its fair value. The income approach uses
expected future operating results and failure to achieve these expected results may cause a future impairment of
goodwill at the reporting unit. If the carrying value of the reporting unit exceeds its fair value, the second step of
the goodwill impairment 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. The Company conducted its annual goodwill impairment test as of October 31, 2013
and determined that the fair values of its reporting units, with the exception of the Middle East reporting unit,
exceeded their carrying values and therefore goodwill in those reporting units was not impaired. The Company
concluded that the carrying value of the Middle East reporting unit exceeded its fair value and recorded a
goodwill impairment charge of approximately $64 million in the quarter ended December 31, 2013. See
Note 5—“Goodwill” for additional information.
Intangible Assets. Intangible assets are carried at cost and amortized over their estimated useful lives, generally
on a straight-line basis over one to eight years as the pattern of use is ratable. The Company reviews identifiable
amortizable intangible assets to be held and used 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 cash flows resulting from use of the asset and its eventual
disposition. Measurement of any impairment loss is based on the excess of the carrying value of the asset over its
fair value.
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