Yahoo 2014 Annual Report Download - page 127

September 30,
2013 2014
Balance sheet data:
Current assets $6,318,156 $6,161,126
Long-term assets $1,728,912 $1,908,379
Current liabilities $1,992,508 $1,948,540
Long-term liabilities $ 56,762 $ 35,418
Noncontrolling interests $ 74,754 $ 66,998
Since acquiring its equity interest in Yahoo Japan, the Company has recorded cumulative earnings in
equity interests, net of dividends received and related taxes on dividends, of $2.8 billion and $3.3
billion as of December 31, 2013 and 2014, respectively.
Under technology and trademark license and other commercial arrangements with Yahoo Japan, the
Company records revenue from Yahoo Japan based on a percentage of advertising revenue earned
by Yahoo Japan. The Company recorded revenue from Yahoo Japan of approximately $281 million,
$264 million, and $253 million, respectively, for the years ended December 31, 2012, 2013, and 2014.
As of December 31, 2013 and 2014, the Company had net receivable balances from Yahoo Japan of
approximately $42 million and $47 million, respectively.
Note 9 Foreign Currency Derivative Financial Instruments
The Company uses derivative financial instruments, primarily forward contracts and option contracts,
to mitigate risk associated with adverse movements in foreign currency exchange rates.
The Company records all derivatives in the consolidated balance sheets at fair value, with assets
included in prepaid expenses and other current assets or other long-term assets, and liabilities
included in accrued expenses and other current liabilities or other long-term liabilities. The
Company’s accounting treatment for these instruments is based on whether or not the instruments
are designated as a hedging instrument. The effective portions of net investment hedges are
recorded in other comprehensive income as a part of the cumulative translation adjustment. The
effective portions of cash flow hedges are recorded in accumulated other comprehensive income
until the hedged item is recognized in revenue on the consolidated statements of income when the
underlying hedged revenue is recognized. Any ineffective portions of net investment hedges and
cash flow hedges are recorded in other income, net on the Company’s consolidated statements of
income. For balance sheet hedges, changes in the fair value are recorded in other income, net on the
Company’s consolidated statements of income.
The Company enters into master netting arrangements, which are designed to reduce credit risk by
permitting net settlement of transactions with the same counterparty. The Company presents its
derivative assets and liabilities at their gross fair values on the consolidated balance sheets. However,
under the master netting arrangements with the respective counterparties of the foreign exchange
contracts, subject to applicable requirements, the Company is allowed to net settle transactions. The
Company is not required to pledge, and is not entitled to receive, cash collateral related to these
derivative transactions.
Designated as Hedging Instruments
Net Investment Hedges. The Company hedges, on an after-tax basis, a portion of its net investment
in Yahoo Japan with forward contracts and option contracts to reduce the risk that its investment in
123