eBay 2001 Annual Report Download - page 32

In July 2001, the Financial Accounting Standards Board, or FASB, issued SFAS No. 141, ""Business
Combinations,'' which requires business combinations initiated after June 30, 2001 to be accounted for
using the purchase method of accounting and broadens the criteria for recording intangible assets separate
from goodwill. Recorded goodwill and intangible assets will be evaluated against these new criteria and
may result in certain intangible assets being subsumed into goodwill, or alternatively, amounts initially
recorded as goodwill may be separately identiÑed and recognized apart from goodwill. EÅective July 1,
2001, we adopted the provisions of SFAS No. 141 that apply to business combinations initiated after
June 30, 2001. We adopted all remaining provisions of SFAS No. 141 eÅective January 1, 2002. The
adoption of SFAS No. 141 did not change the method of accounting used in previous business
combinations accounted for under the pooling-of-interest method.
In July 2001, the FASB issued SFAS No. 142, ""Goodwill and Other Intangible Assets,'' that requires
the use of a non-amortization approach to account for purchased goodwill and certain intangible assets.
Under a non-amortization approach, goodwill and certain intangible assets will not be amortized as a cost
of operations, but instead would be reviewed for impairment and written down and charged to operations
only in the periods in which the recorded value of goodwill and certain intangible assets exceed their fair
values. This Statement is eÅective for Ñscal years beginning after December 15, 2001. We adopted SFAS
No. 142 eÅective January 1, 2002. Transitional impairments, if any, are not expected to be material,
however, impairment reviews may result in future periodic write-downs.
Merger-related Costs
Percent Percent
1999 Change 2000 Change 2001
(in thousands, except percent changes)
Merger related costs ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 4,359 (64)% $ 1,550 (100)% $ 0
As a percentage of net revenues ÏÏÏÏÏÏÏÏ 2% 0% 0%
Merger-related costs were primarily attributed to direct costs associated with mergers accounted for
under the pooling of interests method. These amounts consist primarily of professional services, contract
and facility termination expenses and various registration and Ñling fees. Direct costs associated with
mergers accounted for under the purchase method are capitalized in determining the purchase price.
We incurred direct merger related transaction costs in 1999, related to the mergers with Billpoint,
ButterÑelds, Kruse and alando.de, as well as in 2000 related to the merger with Half.com. Due to the
elimination of the pooling of interests method of accounting, merger-related costs in future periods will be
capitalized as a component of the purchase price.
Non-Operating Items
Interest and Other Income, Net
Percent Percent
1999 Change 2000 Change 2001
(in thousands, except percent changes)
Interest and other income, netÏÏÏÏÏÏÏÏÏÏ $23,833 94% $46,337 (10)% $41,613
As a percentage of net revenues ÏÏÏÏÏÏÏÏ 11% 11% 6%
Interest and other income, net consists of interest earned on cash, cash equivalents, investments and
foreign exchange transaction gains and losses. Our interest and other income, net decreased during 2001 as
a result of a lower interest rate environment. Our weighted-average interest rate was approximately 5.9% in
1999, 4.3% in 2000 and 3.6% in 2001. Although, we maintained higher cash, cash equivalent and
investment balances during 2001 as a result of increased operating and Ñnancing cash Öows, the decrease
in interest rates resulted in an overall decline in interest income. We expect that interest and other income,
net will decrease despite an increase in our cash balances generated by positive operating cash Öows due to
expected lower interest rates in 2002.
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