eBay 2004 Annual Report Download - page 31

Intangible assets include purchased customer lists and user base, trademarks and trade names, developed
technologies, and other intangible assets. We amortize intangible assets, excluding goodwill, using the
straight-line method over estimated useful lives ranging from one to eight years.
Goodwill represents the excess of the purchase price over the fair value of the net tangible and identiÑable
intangible assets acquired in a business combination. Goodwill is subject to at least an annual assessment for
impairment, applying a fair-value based test. We evaluate goodwill, at a minimum, on an annual basis and
whenever events and changes in circumstances suggest that the carrying amount may not be recoverable.
Impairment of goodwill is tested at the reporting unit level by comparing the reporting unit's carrying amount,
including goodwill, to the fair value of the reporting unit. The fair values of the reporting units are estimated
using a combination of the income, or discounted cash Öows, approach and the market approach, which
utilizes comparable companies' data. If the carrying amount of the reporting unit exceeds its fair value,
goodwill is considered impaired and a second step is performed to measure the amount of impairment loss, if
any. Our annual impairment test was carried out as of August 31, 2004 and we determined that there was no
impairment. There were no events or circumstances from that date through December 31, 2004 that would
impact this assessment.
We expect amortization of acquired intangible assets will increase in 2005 as a result of the intangible
assets associated with our acquisitions of mobile.de and Marktplaats.nl, as well as our additional investment in
Internet Auction during 2004 and our recent acquisition of Rent.com. Amortization of acquired intangible
assets will also increase should we make additional acquisitions in the future.
Non-Operating Items
Interest and Other Income, Net
Percent Percent
2002 Change 2003 Change 2004
(In thousands, except percentages)
Interest and other income, net ÏÏÏÏÏÏÏÏÏÏÏÏÏ $49,209 (23)% $37,803 106% $77,867
As a percentage of net revenuesÏÏÏÏÏÏÏÏÏÏÏÏ 4.1% 1.7% 2.4%
Interest and other income, net consists primarily of interest earned on cash, cash equivalents and
investments as well as foreign exchange transaction gains and losses and other non-operating transactions.
Our interest and other income, net increased in total and as a percentage of net revenues during 2004 as
compared to the prior year, primarily as a result of gains from the sale of an equity investment and
amendments to certain sublease agreements. In addition, we recorded increased interest income primarily due
to higher investment balances, and increased cash and cash equivalents balances. The weighted-average
interest rate of our portfolio increased to 1.7% in 2004 from 1.6% in 2003. We expect that interest and other
income, net, will remain generally comparable in total to 2004 during 2005.
Our interest and other income, net decreased in total and as a percentage of net revenues during 2003,
primarily as a result of one-time gains recognized in 2002 from the sale of certain subsidiaries, real estate
properties and an equity investment that totaled $20.3 million. This decrease was oÅset, in part, by increased
investment income on a larger aggregate balance of cash, cash equivalents and investments even though the
weighted-average interest rate of our portfolio declined to 1.6% in 2003 from 2.8% in 2002.
Interest Expense
Percent Percent
2002 Change 2003 Change 2004
(In thousands, except percentages)
Interest expense ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $1,492 189% $4,314 106% $8,879
As a percentage of net revenuesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 0.1% 0.2% 0.3%
Interest expense consists of interest charges on our consolidated lease arrangement related to our
San Jose headquarters oÇce facilities, capital leases, and mortgage notes.
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