eBay 2009 Annual Report Download - page 70

Interest and Other Income, Net
2007 2008 2009
(In thousands, except percentages)
Interest and other income, net ............... $137,671 $107,882 $1,422,385
As a percentage of net revenues ............. 1.8% 1.3% 16.3%
Interest and other income, net, consists of interest earned on cash, cash equivalents and investments, as well
as foreign exchange transaction gains and losses, our portion of operating results from investments accounted for
under the equity method of accounting, interest expense consisting of interest charges on the amount drawn under
our credit agreement and certain accrued contingencies. Included in cost of net revenues, and income from other
miscellaneous transactions not related to our primary operations such as the gain on sale of Skype in 2009.
Interest and other income, net excludes interest related to Bill Me later, which is included in cost of net revenues.
Interest and other income, net increased $1.3 billion during 2009 as compared to 2008. The increase was
primarily due to the gain on sale of Skype of $1.4 billion (please see “Note 4 — Sale of Skype” for additional
information). The gain on the sale of Skype was partially offset by a decrease in interest income of $86.5 million
due to lower interest rates that were earned on lower average cash, cash equivalents and investments balances.
The weighted-average interest rate of our cash and interest bearing investments portfolio decreased to 1.13% in
2009 from 3.5% in 2008.
Interest and other income, net decreased $29.8 million, or 22%, in 2008 as compared to 2007 due primarily
to lower cash, cash equivalents and investments balances and lower interest rates, fewer borrowings and lower
interest rates on our credit agreement as well as losses from our portion of unconsolidated joint ventures and
investments accounted for under the equity method of accounting, offset in part by foreign currency exchange
gains. In addition, as a result of the acquisition of Bill Me Later, we include a portion of interest expense within
cost of net revenues which represents our estimated cost of funds associated with Bill Me Later loan activity. The
weighted-average interest rate of our cash and interest bearing investments portfolio decreased to 3.5% in 2008
from 4.2% in 2007.
Provision for Income Taxes
2007 2008 2009
(In thousands, except percentages)
Provision for income taxes ................. $402,600 $404,090 $490,054
Effective tax rate ......................... 54% 19% 17%
The provision for income taxes differs from the amount computed by applying the statutory U.S. federal rate
principally due to foreign income with lower tax rates and from tax credits that lower the effective tax rate, offset
by state taxes, subsidiary losses and an impairment charge in 2007 for which we have not provided a benefit and
other factors that impact the effective tax rate.
The lower effective tax rate in 2009 compared to 2008 was due primarily to the gain resulting from the
disposal of Skype (including the impact of the Skype legal settlement) which was not taxable, as well as a benefit
from a ruling issued by a tax authority partially offset by a tax provision related to a legal entity restructuring.
The lower effective tax rate in 2008 compared to 2007 was due to the goodwill impairment charge in 2007
with respect to our Communications reporting unit which is non-deductible for tax purposes, partially offset by a
tax benefit from a ruling issued by a tax authority related to prior periods recognized in 2007.
From time to time, we engage in certain intercompany transactions and legal entity restructurings. We
consider many factors when evaluating these transactions, including the alignment of our corporate structure with
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