eBay 2001 Annual Report Download - page 75

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eBay Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (CONTINUED)
measurement of current and deferred tax assets and liabilities is based on provisions of the enacted tax
law; the eÅects of future changes in tax laws or rates are not anticipated. If necessary, the measurement of
deferred tax assets is reduced by the amount of any tax beneÑts that are not expected to be realized based
on available evidence.
Recent accounting pronouncements
In July 2001, the Financial Accounting Standards Board (""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 intangible assets with indeÑnite lives 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 will adopt
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.
In October 2001, the FASB issued SFAS No. 144, ""Accounting for the Impairment or Disposal of
Long-Lived Assets,'' that develops one accounting model for long-lived assets that are to be disposed of by
sale and expands the scope of discontinued operations. This Statement is eÅective for Ñscal years
beginning after December 15, 2001. We will adopt SFAS No. 144 eÅective January 1, 2002, and are
currently evaluating the eÅect that adoption of this Statement will have on our Ñnancial position, results of
operations, and cash Öows.
Note 2 Ì Net Income Per Share:
Basic net income per share is computed by dividing the net income for the period by the weighted
average number of common shares outstanding during the period. Diluted net income per share is
computed by dividing the net income for the period by the weighted average number of common and
common equivalent shares outstanding during the period. Common equivalent shares, composed of
unvested, restricted common stock and incremental common shares issuable upon the exercise of stock
options and warrants, are included in diluted net income per share to the extent such shares are dilutive.
71