Yahoo 2015 Annual Report Download - page 80

determined. See Note 16—“Income Taxes” in the Notes to our consolidated financial statements
for additional information.
Standby Letters of Credit.As of December 31, 2015, we had outstanding potential obligations
relating to standby letters of credit of $42 million. Standby letters of credit are financial guarantees
provided by third parties for ongoing operating liabilities such as leases, utility bills, taxes, and
insurance. If any letter of credit is drawn upon by a beneficiary, we are obligated to reimburse the
provider of the guarantee. The standby letters of credit generally renew annually.
Other Commitments and Off-Balance Sheet Arrangements.In the ordinary course of business, we
may provide indemnifications of varying scope and terms to customers, vendors, lessors, joint
ventures and business partners, purchasers of assets or subsidiaries and other parties with respect to
certain matters, including, but not limited to, losses arising out of our breach of agreements or
representations and warranties made by us, services to be provided by us, intellectual property
infringement claims made by third parties or, with respect to the sale, lease, or assignment of assets
or the sale of a subsidiary, matters related to our conduct of the business and tax matters prior to the
sale, lease, or assignment of assets. In addition, we have entered into indemnification agreements
with our directors and certain of our officers that will require us, among other things, to indemnify
them against certain liabilities that may arise by reason of their status or service as directors or
officers. We have also agreed to indemnify certain former officers, directors, and employees of
acquired companies in connection with the acquisition of such companies. We maintain director and
officer insurance, which may cover certain liabilities arising from our obligation to indemnify our
current and former directors and officers, and former directors and officers of acquired companies, in
certain circumstances. It is not possible to determine the aggregate maximum potential loss under
these indemnification agreements due to the limited history of prior indemnification claims and the
unique facts and circumstances involved in each particular agreement. Such indemnification
agreements might not be subject to maximum loss clauses. Historically, we have not incurred material
costs as a result of obligations under these agreements and we have not accrued any material
liabilities related to such indemnification obligations in our consolidated financial statements.
As of December 31, 2015, we did not have any relationships with unconsolidated entities or financial
partnerships, such as entities often referred to as structured finance or special purpose entities,
established for the purpose of facilitating off-balance sheet arrangements or other contractually
narrow or limited purposes. Accordingly, we are not exposed to any financing, liquidity, market, or
credit risk that could arise if we had such relationships. In addition, we identified no variable interests
currently held in entities for which we are the primary beneficiary. In addition, as of December 31,
2015, we had no off-balance sheet arrangements that have, or are reasonably likely to have, a current
or future material effect on our consolidated financial condition, results of operations, liquidity,
capital expenditures or capital resources.
Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition and results of operations is based upon our
consolidated financial statements, which have been prepared in accordance with GAAP. The
preparation of these consolidated financial statements requires us to make estimates, judgments, and
assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and the
related disclosure of contingent assets and liabilities. We base our estimates on historical experience
and on various other assumptions that we believe are reasonable under the circumstances, the results
of which form the basis for making judgments about, among other things, the carrying values of
assets and liabilities that are not readily apparent from other sources. Actual results may differ from
these estimates.
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