eBay 2007 Annual Report Download - page 98

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treated as part of the cost of the acquisition. FAS 141(R) also establishes disclosure requirements to enable users to
evaluate the nature and financial effects of the business combination. FAS 141(R) applies prospectively to business
combinations for which the acquisition date is on or after the beginning of the first annual reporting period
beginning on or after December 15, 2008. We are currently evaluating the potential impact of this statement.
In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial
Statements — An amendment of ARB No. 51” (“FAS 160”). FAS 160 amends ARB 51 to establish accounting and
reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It
clarifies that a noncontrolling interest in a subsidiary, which is sometimes referred to as minority interest, is a third-
party ownership interest in the consolidated entity that should be reported as a component of equity in the
consolidated financial statements. Among other requirements, FAS 160 requires consolidated statement of
operations to be reported at amounts that include the amounts attributable to both the parent and the noncontrolling
interest. FAS 160 also requires disclosure, on the face of the consolidated income statement, of the amounts of
consolidated net income attributable to the parent and to the noncontrolling interest. FAS 160 is effective for fiscal
years, and interim periods within those fiscal years, beginning on or after December 15, 2008. Earlier adoption is
prohibited. We are currently evaluating the potential impact of this statement.
Note 2 — 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 shares of common stock and potentially dilutive
common stock outstanding during the period. The dilutive effect of outstanding options, restricted stock units and
nonvested stock is reflected in diluted earnings per share by application of the treasury stock method, which starting
on January 1, 2006, includes consideration of stock-based compensation required by FAS 123(R). The following
table sets forth the computation of basic and diluted net income per share for the periods indicated (in thousands,
except per share amounts):
2005 2006 2007
Year Ended December 31,
Numerator:
Net income ................................. $1,082,043 $1,125,639 $ 348,251
Denominator:
Weighted average common shares . . . .............. 1,361,748 1,403,455 1,359,282
Weighted average nonvested common stock subject to
forfeiture/repurchase ......................... (40) (4,204) (485)
Denominator for basic calculation . .............. 1,361,708 1,399,251 1,358,797
Weighted average effect of dilutive securities:
Weighted average nonvested common stock subject to
forfeiture/repurchase ......................... 40 4,204 485
Employee stock options ........................ 32,127 22,017 16,892
Denominator for diluted calculation.............. 1,393,875 1,425,472 1,376,174
Net income per share:
Basic ...................................... $ 0.79 $ 0.80 $ 0.26
Diluted .................................... $ 0.78 $ 0.79 $ 0.25
88
eBay Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)