Yahoo 2014 Annual Report Download - page 70

upon the initial public offering of Hortonworks and a $41 million gain related to the mark to market of
the warrants held as of December 31, 2014, which were included within other income, net on the
consolidated statements of income. Changes in the estimated fair value of the Hortonworks warrants
will be recorded through other income, net in our consolidated statements of income.
Other income (expense), net consists of gains and losses from sales or impairments of marketable
securities and/or investments in privately-held companies, foreign exchange gains and losses due to
re-measurement of monetary assets and liabilities denominated in non-functional currencies, and
unrealized and realized foreign currency transaction gains and losses, including gains and losses
related to balance sheet hedges. Other income (expense), net decreased $12 million and $6 million
for the years ended December 31, 2013 and 2014, respectively, compared to 2012 and 2013,
respectively. The decline from 2012 to 2013 was primarily due to an investment sale in 2012, for which
there were no similar transactions in 2013. The increase in expense from 2013 to 2014 was primarily
due to foreign exchange losses.
Other income, net may fluctuate in future periods due to changes in our average investment
balances, changes in interest and foreign exchange rates, changes in the fair value of foreign
currency forward contracts, realized gains and losses on investments, and impairments of
investments.
Income Taxes
The provision for income taxes for the year ended December 31, 2014 differs from the amount
computed by applying the federal statutory income tax rate to income before provision for income
taxes and earnings in equity interests as follows (dollars in thousands):
Years Ended December 31,
2012 (*) 2013 (*) 2014 (*)
Income tax at the U.S. federal statutory rate of
35 percent $1,824,973 35% $221,648 35% $3,679,333 35%
State income taxes, net of federal benefit 237,637 5% 23,000 4% 400,824 4%
Stock-based compensation expense 19,946 — 16,015 3% 8,132 —
Research tax credits — — (18,036) (3)% (23,775) —
Effect of non-U.S. operations (138,078) (3)% (47,968) (8)% (53,079) (1)%
Settlement with tax authorities (4,711) — (46,943) (7)% (24,870) —
Remeasurement of prior year tax positions — — (24,246) (4)% — —
Acquisition related non-deductible expenses 1,894 — 9,296 1% 16,881 —
Goodwill impairment charge — — 22,244 3% 30,945 —
Other (1,618) — (1,618) — 3,711 —
Provision for income taxes $1,940,043 37% $153,392 24% $4,038,102 38%
(*) Percent of income before income taxes and earnings in equity interests.
Significant variances year-over-year as shown above are further explained as follows:
• On January 2, 2013, the American Taxpayer Relief Act of 2012 was signed into law retroactively
extending the federal research and development credit for amounts paid or incurred after
December 31, 2011 and before January 1, 2014. As such, the provision for income taxes for the
66