eBay 2009 Annual Report Download - page 97

eBay Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
allowance for doubtful accounts and authorized credits was $104.9 million and $102.8 million at December 31,
2008 and 2009, respectively. The allowance for loans and interest receivable was $48.1 million and $50.3 million
at December 31, 2008 and 2009, respectively.
During the years ended December 31, 2007, 2008, and 2009, no customers accounted for more than 10% of
net revenues. As of December 31, 2008 and 2009, no customers accounted for more than 10% of net accounts
receivable or net loans receivable.
Provision for transaction losses
We are exposed to losses due to credit card and other payment misuse, as well as non-performance of and
credit losses from sellers. Provisions for these items represent our estimate of actual losses based on our
historical experience and actuarial techniques, as well as economic conditions.
Loans and interest receivable, net
Loans receivable represent extensions of credit to individual consumers to purchase goods and services
through our Bill Me Later merchant network. The terms of the consumer relationship require us to submit
monthly bills to the consumer detailing loan repayment requirements. The terms also allow us to charge the
consumer, in certain circumstances, interest and fees. Loans receivable are reported at their outstanding principal
balances, net of deferred origination costs and net of allowance, and include the estimated collectible interest and
fees. We charge off loans receivable in the month in which the customer becomes 180 days past due. Bankrupt
accounts are charged off within 60 days of receiving notification from the bankruptcy courts.
Funds receivable and funds payable
Funds receivable and payable relate primarily to our Payments segment and arise due to the time taken to
clear transactions through external payment networks. When customers fund their account using their bank
account or credit card, or withdraw money to their bank account or through a debit card transaction, there is a
clearing period before the cash is received or settled, usually one to three business days for U.S. transactions, and
generally up to five business days for international transactions. Hence, these funds are treated as a receivable or
payable, as the case may be, until the cash is settled.
Customer accounts
Based on differences in regulatory requirements and commercial law in the jurisdictions where PayPal
operates, PayPal holds customer balances either as direct claims against PayPal or as an agent or custodian on
behalf of PayPal’s customers. Customer balances held as direct claims against PayPal are included on our
consolidated balance sheet as funds receivable and customer accounts with an offsetting current liability in funds
payable and amounts due to customers. We maintain these customer account balances in interest bearing bank
deposits (including time deposits with maturity dates of less than one year).
Customer funds held by PayPal as an agent or custodian on behalf of our customers are not reflected in our
consolidated balance sheet. These off-balance sheet funds totaled approximately $1.9 billion and $2.2 billion as
of December 31, 2008 and 2009, respectively. These off-balance sheet funds include funds held in the U.S. that
are deposited in bank accounts insured by the Federal Deposit Insurance Corporation and funds that customers
choose to invest in the PayPal Money Market Fund. The PayPal Money Market Fund is invested in a portfolio
managed by BlackRock Fund Advisors.
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