eBay 2012 Annual Report Download - page 100

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eBay Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 – The Company and Summary of Significant Accounting Policies
The Company
We are a global technology company that enables commerce through three reportable segments: Marketplaces, Payments and GSI. Our
Marketplaces segment includes our eBay.com platform and its localized counterparts and our other online platforms, such as our online
classifieds businesses and StubHub. Our Payments segment is comprised of PayPal, Bill Me Later and Zong. Our GSI segment consists of GSI,
which was added upon the completion of our acquisition of GSI on June 17, 2011. The results of our GSI segment have been included in our
consolidated results of operations from the acquisition date.
We are required to comply with various regulations worldwide in order to operate our businesses, particularly our Payments business. We
also partner with banks and other financial institutions in order to offer our Payments services globally. Changes in regulations, non-compliance
with regulations or loss of key bank or financial institution partners could have a significant adverse impact on our ability to operate our
Payments business; therefore, we monitor these areas closely to mitigate potential adverse impacts.
When we refer to “we,” “our,” “us” or “eBay” in this document, we mean the current Delaware corporation (eBay Inc.) and its California
predecessor, as well as all of our consolidated subsidiaries.
Use of estimates
The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. On
an ongoing basis, we evaluate our estimates, including those related to provisions for transaction and loan losses, legal contingencies, income
taxes, revenue recognition, stock-based compensation, goodwill and the recoverability of intangible assets. We base our estimates on historical
experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ from those
estimates.
Principles of consolidation and basis of presentation
The accompanying financial statements are consolidated and include the financial statements of eBay Inc., our wholly and majority-
owned subsidiaries and variable interest entities ("VIEs") if we are the primary beneficiary. Ownership interests of minority interests are
recorded as a non-controlling interest. All significant intercompany balances and transactions have been eliminated in consolidation. A
qualitative approach is applied to assess the consolidation requirement for VIEs. Investments in entities where we hold at least a 20% ownership
interest and have the ability to exercise significant influence, but not control, over the investee are accounted for using the equity method of
accounting. For such investments, our share of the investees' results of operations is included in interest and other, net and our investment
balance is included in long-term investments. Investments in entities where we hold less than a 20% ownership interest are generally accounted
for using the cost method of accounting, and our share of the investees' results of operations is included in our consolidated statement of income
to the extent dividends are received.
We have evaluated all subsequent events through the date the financial statements were issued.
Revenue recognition
Our Marketplaces segment generates net transaction revenues primarily from listing and final value fees paid by sellers. Listing fee
revenues are recognized ratably over the estimated period of the listing, while revenues related to final value fees are recognized at the time that
the transaction is successfully concluded. An auction transaction is considered successfully concluded when at least one buyer has bid above the
seller's specified minimum price or reserve price, whichever is higher, at the end of the transaction term.
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