eBay 2013 Annual Report Download - page 141

eBay Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
needed in the jurisdictions where these investments are expected, as well as our ability to generate cash in those jurisdictions and our access to
capital markets. This analysis enables us to conclude whether or not we will indefinitely reinvest the current period’s foreign earnings. We
benefit from tax rulings concluded in several different jurisdictions, most significantly Switzerland, Singapore and Luxembourg. These rulings
provide for significantly lower rates of taxation on certain classes of income and require various thresholds of investment and employment in
those jurisdictions. These rulings resulted in a tax savings of $540 million and $439 million in 2013 and 2012 , respectively, which increased
earnings per share (diluted) by approximately $0.41 and $0.33 in 2013 and 2012 , respectively. These tax rulings are currently in effect and
expire over periods ranging from 2020 to the duration of business operations in the respective jurisdictions. We evaluate compliance with our tax
ruling agreements annually.
The following table reflects changes in unrecognized tax benefits since January 1, 2011:
During 2013 we increased our reserves by $104 million for various issues that related to tax examination risks assessed during the year. In
addition, we reduced our reserves by $143 million based on audit findings and settlement of multiple uncertain tax positions. If the remaining
balance of unrecognized tax benefits were realized in a future period, it would result in a tax benefit of $256 million . As of December 31, 2013
,
our liabilities for unrecognized tax benefits were included in accrued expenses and other current liabilities and deferred and other tax liabilities,
net.
We recognize interest and/or penalties related to uncertain tax positions in income tax expense. In 2013 , we reduced our accrual for
penalties and interest resulting in a tax benefit of $17 million . The amount of interest and penalties accrued as of December 31, 2013 and 2012
was approximately $77 million and $117 million , respectively.
We are subject to both direct and indirect taxation in the U.S. and various states and foreign jurisdictions. We are under examination by
certain tax authorities for the 2003 to 2012 tax years. We believe that adequate amounts have been reserved for any adjustments that may
ultimately result from these or other examinations. The material jurisdictions where we are subject to potential examination by tax authorities for
tax years after 2002 include, among others, the U.S. (Federal and California), France, Germany, Italy, Korea, Israel, Switzerland, Singapore and
Canada.
Although the timing of the resolution and/or closure of audits is highly uncertain, it is reasonably possible that the balance of gross
unrecognized tax benefits could significantly change in the next 12 months. However, given the number of years remaining subject to
examination and the number of matters being examined, we are unable to estimate the full range of possible adjustments to the balance of gross
unrecognized tax benefits.
Note 17 – Loans and Interest Receivable, Net
Loans and interest receivable represent purchased consumer receivables arising from loans made by a partner chartered financial institution
to individual consumers in the U.S. to purchase goods and services through our Bill Me Later merchant network. Although a chartered financial
institution continues to own each respective customer account, we own the related consumer receivable and Bill Me Later is responsible for all
servicing functions related to the customer accounts. Effective August 29, 2013, ownership of most of the existing customer accounts was
transitioned to a new chartered financial institution. As part of the arrangement with the new chartered financial institution, we sell the chartered
financial institution a participation interest in the entire pool of consumer receivables outstanding under the customer accounts .
During 2013 and
2012 , we purchased approximately $4.1 billion and $3.2 billion , respectively, in consumer receivables. As of December 31, 2013 , the total
outstanding balance of this pool of consumer receivables is $2.9 billion , of which we sold a participation interest to the new chartered financial
institution of $65 million , or 2.25% . The chartered financial institution has no recourse related to its participation interest for failure of debtors
to pay when due. The participation interest held by the chartered financial institution has the same priority to the interests held by us and is
subject to the same credit, prepayment, and interest rate risk associated with this pool of consumer receivables.
F-39
2013 2012 2011
(In millions)
Gross amounts of unrecognized tax benefits as of the beginning of the period
$
340
$
286
$
428
Increases related to prior period tax positions
104
60
33
Decreases related to prior period tax positions
(143
)
(24
)
(139
)
Increases related to current period tax positions
37
19
41
Settlements
(4
)
(1
)
(77
)
Gross amounts of unrecognized tax benefits as of the end of the period
$
334
$
340
$
286