Google 2007 Annual Report Download - page 72

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These non-cancelable contractual obligations and open purchase orders amounts do not include payments we may be
obligated to make to vendors upon their attainment of milestones under the related agreements.
Other Long-Term Liabilities
Other long-term liabilities consist of cash obligations, primarily milestone and royalty payments owed in connection
with certain acquisitions and licensing agreements.
In addition, upon adoption of Financial Interpretation No. 48, Accounting for Uncertainty in Income Taxes, (“FIN
48”) on January 1, 2007, we decreased current taxes payable by $219.4 million and increased long-term taxes payable by
the same amount as FIN 48 specifies that tax positions for which the timing of the ultimate resolution is uncertain should
be recognized as long-term liabilities. We also recognized additional long-term taxes payable of $259.0 million in the year
ended December 31, 2007. At this time, we are unable to make a reasonably reliable estimate of the timing of payments in
individual years beyond 12 months due to uncertainties in the timing of tax audit outcomes. As a result, this amount is not
included in the table above.
Off-Balance Sheet Entities
At December 31, 2007 and 2006, we did not have interests in any variable interest entities, as defined by the
Financial Accounting Standards Board Interpretation No. 46 (Revised 2003), Consolidation of Variable Interest Entities—
An Interpretation of ARB No. 51, having a significant effect on the financial statements.
Critical Accounting Policies and Estimates
We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the
U.S. In doing so, we have to make estimates and assumptions that affect our reported amounts of assets, liabilities,
revenues and expenses, as well as related disclosure of contingent assets and liabilities. In some cases, we could reasonably
have used different accounting policies and estimates. In some cases changes in the accounting estimates are reasonably
likely to occur from period to period. Accordingly, actual results could differ materially from our estimates. To the extent
that there are material differences between these estimates and actual results, our financial condition or results of
operations will be affected. We base our estimates on past experience and other assumptions that we believe are
reasonable under the circumstances, and we evaluate these estimates on an ongoing basis. We refer to accounting
estimates of this type as critical accounting policies and estimates, which we discuss further below. We have reviewed our
critical accounting policies and estimates with the audit committee of our board of directors.
Income Taxes
We are subject to income taxes in the U.S. and numerous foreign jurisdictions. Significant judgment is required in
evaluating our uncertain tax positions and determining our provision for income taxes. Effective January 1, 2007, we
adopted Financial Interpretation No. 48, Accounting for Uncertainty in Income Taxes-an interpretation of FASB Statement
No. 109 (“FIN 48”). FIN 48 contains a two-step approach to recognizing and measuring uncertain tax positions
accounted for in accordance with SFAS No. 109, “Accounting for Income Taxes.” The first step is to evaluate the tax
position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the
position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is
to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement.
Although we believe we have adequately reserved for our uncertain tax positions, no assurance can be given that the
final tax outcome of these matters will not be different. We adjust these reserves in light of changing facts and
circumstances, such as the closing of a tax audit or the refinement of an estimate. To the extent that the final tax outcome
of these matters is different than the amounts recorded, such differences will impact the provision for income taxes in the
period in which such determination is made. The provision for income taxes includes the impact of reserve provisions and
changes to reserves that are considered appropriate, as well as the related net interest.
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