eBay 2009 Annual Report Download - page 69

Provision for transaction and loan losses increased $53.5 million, or 18%, in 2008 compared to 2007. The
increase was due primarily to an increase in transaction loss expense and an increase in bad debt expense. PayPal
transaction loss expense increased approximately $32.2 million due primarily to an increase in net TPV. Bad debt
expense increased approximately $22.1 million due to increased revenues and an increase in our bad debt reserve
rate due to the global economic environment.
Amortization of Acquired Intangible Assets
2007 2008 2009
(In thousands, except percentages)
Amortization of acquired intangible assets ......... $204,104 $234,916 $262,686
As a percentage of net revenues .................. 2.7% 2.8% 3.0%
From time to time we have purchased, and we expect to continue to purchase, assets or businesses that are
intended to help accelerate category and geographic expansion, increase the features, functions, and formats
available to our users and maintain a leading role in ecommerce and online payments. We amortize intangible
assets over the period of estimated benefit, using the straight-line method and estimated useful lives ranging from
one to eight years. The increase in amortization of acquired amortizable intangibles during 2009 and 2008
compared to prior years is due to the business acquisitions consummated during 2009, 2008 and 2007. These
purchase transactions generally result in the creation of acquired intangible assets with finite lives and lead to a
corresponding increase in the amortization expense in future periods. The sale of our Communications business
segment, Skype, will reduce amortization of acquired intangibles over the course of the next year. See “Note 5 —
Goodwill and Intangible Assets” to the consolidated financial statements included in this report.
Restructuring
2007 2008 2009
(In thousands, except percentages)
Restructuring ................................. $— $49,119 $38,187
As a percentage of net revenues .................. — 0.6% 0.4%
In 2009, we began the consolidation of certain customer service facilities in North America and Europe to
streamline our operations and deliver better and more efficient customer support to our users, which will
potentially impact approximately 1,100 employees. In connection with this consolidation, we estimate we will
incur aggregate costs of $45.0 million to $55.0 million, primarily employee severance and benefits. During 2009,
we incurred restructuring charges of $26.0 million in connection with this consolidation. We expect to complete
these activities by mid-2010. See “Note 11 — Restructuring” to the consolidated financial statements included in
this report.
In 2008, we implemented a strategic reduction of our existing global workforce by approximately 800
employees worldwide to simplify and streamline our organization and strengthen the overall competitiveness of
our existing business. Since inception of the plan, we have incurred approximately $61.3 million in restructuring
related charges, primarily employee severance and benefits. The restructuring activities in connection with this
plan are substantially complete.
Impairment of Goodwill
During 2007, 2008 and 2009, we conducted our annual impairment test of goodwill as of August 31. As a
result of this test, no goodwill impairment charges were recorded during 2008 and 2009. However, in 2007, we
recorded a $1.4 billion impairment of goodwill charge related to our Communications segment. See “Note 5 —
Goodwill and Intangible Assets” to the consolidated financial statements included in this report.
61