eBay 1999 Annual Report Download - page 59

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Environmental expenditures
The Company owns or controls real estate properties that are either used in the auction business or leased
to unrelated parties for various commercial applications. Certain environmental and structural deficiencies have
been identified in the past for which the Company has remediation responsibility. The amounts accrued to correct
these matters are based upon estimates developed in preliminary studies by external consultants. Due to
uncertainties inherent in the estimation process, the amounts accrued for these matters may be revised in future
periods as additional information is obtained.
Environmental expenditures that relate to current operations are charged to expense or capitalized as
appropriate. Expenditures that relate to an existing condition caused by past operations, and that do not contribute
to current or future revenue generation, are charged to expense. Liabilities are recorded when environmental
assessments are made, remediation obligations are probable and the costs can be reasonably estimated. The
timing of these accruals is generally upon the completion of feasibility studies. For the periods presented,
estimated liabilities of $5.9 million are included within other liabilities.
Investment in general partnerships
Interests in general partnerships in which the Company holds more than 50 percent ownership and exerts
control are consolidated. The consolidated accounts include 100 percent of the assets and liabilities of these
general partnerships and the ownership interests of minority investors are recorded as minority interests and are
included within other liabilities. Investments in general partnerships in which the Company holds more than
20 percent ownership and exerts significant influence are accounted for using the equity method of accounting
and are recorded as investment in partnerships and are included within other liabilities.
Impairment of long-lived assets
The Company evaluates the recoverability of long-lived assets in accordance with Statement of Financial
Accounting Standards (‘‘SFAS’’) No. 121, ‘‘Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of.’’ SFAS No. 121 requires recognition of impairment of long-lived assets in
the event the net book value of such assets exceeds the future undiscounted cash flows attributable to such assets.
Revenue recognition
Online transaction revenues are derived primarily from placement fees charged for the listing of items on
the eBay service and success fees calculated as a percentage of the final sales transaction value. Revenues related
to placement fees are recognized at the time the item is listed, while those related to success fees are recognized
at the time that the transaction is successfully concluded. A transaction is considered successfully concluded
when at least one buyer has bid above the seller’s specified minimum price or reserve price, whichever is higher,
at the end of the transaction term. Provisions for doubtful accounts and authorized credits to sellers are provided
at the time of revenue recognition based upon the Company’s historical experience.
The Company has reviewed Securities and Exchange Commission Staff Accounting Bulletin (‘‘SAB’’)
No. 101, ‘‘Revenue Recognition in Financial Statements,’’ and its effect on the recognition of placement fee
revenue. Although the Company believes the effect of SAB 101 on historical placement fee revenue is
insignificant, eBay has adopted the provision for placement fee revenue in the first quarter of 2000. As such,
placement fee revenue will be recognized ratably over the estimated period of the transaction.
Kruse auction revenues are derived primarily from entry fees on auction items, bidder registration fees and
commission fees calculated as a percentage of the final auction sales transaction value. Revenues related to these
fees are recognized upon the completion of an auction. Revenues are also derived from sponsorship fees paid by
eBAY INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
54