eBay 2007 Annual Report Download - page 105

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The estimated fair value of short and long-term investments classified by date of contractual maturity at
December 31, 2007 are as follows (in thousands):
December 31,
2007
One year or less (including restricted cash of $17,410)......................... $ 78,023
One year through two years ............................................ 16,462
Two years through three years ........................................... —
Restricted cash of $8,852 within 10 years .................................. 8,852
$103,337
Equity and cost method investments
We have certain investments accounted for using the equity and cost method of accounting totaling
$65.5 million in 2006 and $112.9 million in 2007. The total of these investments, including identifiable intangible
assets, deferred tax liabilities and goodwill, are classified on our balance sheet as long-term investments. Our
consolidated results of operations include, as a component of other income, our share of the net income or loss of the
equity method investments together with amortization expense relating to acquired intangible assets. Our share of
the results of investees’ results of operations is not significant for any period presented.
Note 6 — Derivative Instruments:
We recognize all derivative instruments on the balance sheet at fair value. Changes in the fair value (i.e., gains
or losses) of the derivatives are recorded each period in the consolidated statement of income or accumulated other
comprehensive income (loss). For derivative instruments that are designated and qualify as cash flow hedges, the
effective portion of the derivative’s gain or loss is initially reported as a component of accumulated other
comprehensive income (loss) and subsequently reclassified into the financial statements line item in which the
hedged item is recorded in the same period the forecasted transaction affects earnings.
Transaction Exposure
As of December 31, 2007, we had outstanding foreign exchange hedge contracts with notional values
equivalent to approximately $171.8 million with maturity dates within 31 days. The hedge contracts are used to
offset changes in non-US dollar denominated functional currency value of assets and liabilities as a result of foreign
exchange rate fluctuations. Transaction gains and losses on the contracts and the assets and liabilities are recognized
each period in interest and other income, net.
Translation Exposure
We consolidate the earnings of our international subsidiaries by converting them into U.S. dollars in
accordance with Financial Accounting Standards No. 52 “Foreign Currency Translation” (“FAS 52”). Such
earnings will fluctuate when there is a change in foreign currency exchange rates. We enter into transactions
to hedge portions of our foreign currency denominated earnings translation exposure using foreign exchange
contracts. All contracts that hedge translation exposure mature ratably over the quarter in which they are executed.
Translation gains and losses are recorded as a component of accumulated other comprehensive income (loss).
During the years ended December 31, 2005, 2006 and 2007, the realized gains and losses related to these hedges
were not significant.
95
eBay Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)