Yahoo 2015 Annual Report Download - page 27

be required to enter into costly royalty or licensing agreements or be prevented from using such
rights, which could require us to change our business practices in the future, hinder us from offering
certain features, functionalities, products or services, require us to develop non-infringing products or
technologies, and limit our ability to compete effectively. We may also incur substantial expenses in
defending against third-party claims regardless of the merit of such claims. In addition, many of our
agreements with our customers or Affiliates require us to indemnify them for some types of third-
party intellectual property infringement claims, which could increase our costs in defending such
claims and our damages. Furthermore, such customers and Affiliates may discontinue the use of our
products, services, and technologies either as a result of injunctions or otherwise. The occurrence of
any of these results could harm our brands or have an adverse effect on our business, financial
position, operating results, and cash flows.
We may be required to record a significant charge to earnings if our goodwill, intangible assets,
investments in equity interests, or other investments become impaired.
We have previously recorded charges to earnings when our goodwill, intangible assets, investments
in equity interests, including investments held by any equity method investee, and other investments
became impaired. For example, we recorded a $4.461 billion non-cash goodwill impairment charge
during the fourth quarter of 2015. We are required under generally accepted accounting principles to
test goodwill for impairment at least annually and to review our intangible assets, investments in
equity interests (including investments held by any equity method investee), and our other
investments, for impairment when events or changes in circumstance indicate the carrying value may
not be recoverable. Factors that could lead to impairment of goodwill, intangible assets (including
goodwill or assets acquired via acquisitions) and other investments include significant adverse
changes in the business climate and actual or projected operating results (affecting our company as
a whole or affecting any particular reporting unit) and declines in the financial condition of our
business. Factors that could lead to impairment of investments in equity interests include a
prolonged period of decline in the stock price or operating performance of, or an announcement of
adverse changes or events by, the companies in which we invested or the investments held by those
companies. Factors that could lead to an impairment of U.S. government securities, which constitute
a significant portion of our current assets, include any downgrade of U.S. government debt or
concern about the creditworthiness of the U.S. government. We may be required in the future to
record additional charges to earnings if our goodwill, intangible assets, investments in equity
interests, including investments held by any equity method investee, or other investments become
impaired. Any such charge would adversely impact our financial results.
Fluctuations in foreign currency exchange rates may adversely affect our operating results and
financial condition.
Revenue generated and expenses incurred by our international subsidiaries and any equity method
investee are often denominated in the currencies of the local countries. As a result, our consolidated
U.S. dollar financial statements are subject to fluctuations due to changes in exchange rates as the
financial results of our international subsidiaries and any equity method investee are translated from
local currencies into U.S. dollars. Our financial results are also subject to changes in exchange rates
that impact the settlement of transactions in non-local currencies. The carrying values of our equity
investments in any equity investee are also subject to fluctuations in the exchange rates of foreign
currencies.
We use derivative instruments, such as foreign currency forward contracts and options, to partially
offset certain exposures to fluctuations in foreign currency exchange rates. The use of such
instruments may not offset any, or more than a portion, of the adverse financial effects of
unfavorable movements in foreign currency exchange rates. Any losses on these instruments that we
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