Yahoo 2015 Annual Report Download - page 97

Yahoo! Inc.
Notes to Consolidated Financial Statements
Note 1
The Company And Summary Of Significant Accounting Policies
The Company. Yahoo! Inc., together with its consolidated subsidiaries (“Yahoo” or the “Company”),
is a guide to digital information discovery, focused on informing, connecting, and entertaining users
through its search, communications, and digital content products. By creating highly personalized
experiences, the Company helps users discover the information that matters most to them around
the world—on mobile or desktop. The Company creates value for advertisers with a streamlined,
simple advertising technology stack that leverages Yahoo’s data, content, and technology to connect
advertisers with their target audiences. Advertisers can build their businesses through
advertisements targeted to audiences on the Company’s online properties and services (“Yahoo
Properties”) and a distribution network of third party entities (“Affiliates”) who integrate the
Company’s advertising offerings into their websites or other offerings (“Affiliate sites”). The
Company’s revenue is generated principally from display and search advertising. The Company
manages and measures its business geographically, principally in the Americas, EMEA (Europe,
Middle East, and Africa) and Asia Pacific.
Basis of Presentation. The consolidated financial statements include the accounts of Yahoo! Inc. and
its majority-owned or otherwise controlled subsidiaries. All intercompany accounts and transactions
have been eliminated. Investments in entities in which the Company can exercise significant
influence, but does not own a majority equity interest or otherwise control, are accounted for using
the equity method and are included as investments in equity interests on the consolidated balance
sheets. The Company has included the results of operations of acquired companies from the date of
the acquisition.
At the beginning of 2015, the Company began classifying editorial costs as cost of revenue—other
rather than including such costs in sales and marketing expense. To conform to the current period
presentation, the Company reclassified nil and $89 million, respectively, in internal website editorial
costs previously included in sales and marketing expense to cost of revenue—other for the years
ended December 31, 2013 and 2014. Also, at the beginning of 2015, the Company began classifying
non-data center facilities-related costs within general and administrative expense. To conform to the
current period presentation, the Company reclassified $51 million and $51 million, respectively, in
facilities-related costs previously included in product development expense and $47 million and $61
million, respectively, previously included in sales and marketing expense to general and
administrative expense for the years ended December 31, 2013 and 2014.
Prior to the adoption of Accounting Standard Update (“ASU”) 2015-16, “Business Combinations,” in
the third quarter of 2015, the Company identified measurement-period adjustments of $11 million to
previous purchase accounting estimates for acquisitions, which were primarily related to the
finalization of tax and other adjustments. These adjustments were immaterial and applied
retrospectively to the acquisition dates. Accordingly, the Company’s consolidated balance sheet as of
December 31, 2014 has been updated to reflect the effects of the measurement-period adjustments.
The Company revised the 2014 Consolidated Statement of Cash Flows to correct for a non-cash
acquisition of property and equipment resulting in an increase in cash provided by operating
activities of $23 million and a corresponding decrease in net cash provided by investing activities.
The preparation of consolidated financial statements in conformity with generally accepted
accounting principles (“GAAP”) in the United States (“U.S.”) requires management to make
93