Google 2009 Annual Report Download - page 84

Google Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
We recognize as revenues the fees charged advertisers each time a user clicks on one of the text-based ads
that are displayed next to the search results pages on our site or on the search results pages or content pages of
our Google Network members’ web sites and, for those advertisers who use our cost-per impression pricing, the
fees charged advertisers each time an ad is displayed on our members’ sites. We report our Google AdSense
revenues on a gross basis principally because we are the primary obligor to our advertisers.
Google TV Ads enable advertisers, operators, and programmers to buy, schedule, deliver, and measure ads on
television. We recognize as revenue the fees charged advertisers each time an ad is displayed on television in
accordance with the terms of the related agreements.
We also offer display advertising management services such as media planning, buying, implementation, and
measurement tools for advertisers and agencies and forecasting and reporting tools for publishers. We recognize
the related fees as licensing and other revenues in the period advertising impressions are delivered.
Google Checkout is our online shopping payment processing system for both consumers and merchants. We
recognize as revenues any fees charged to merchants on transactions processed through Google Checkout.
Further, cash ultimately paid to merchants under Google Checkout promotions, including cash paid to merchants
as a result of discounts provided to consumers on certain transactions processed through Google Checkout, are
accounted for as an offset to revenues.
We generate fees from search services on a per-query basis. Our policy is to recognize revenues from
per-query search fees in the period we provide the search results.
We also generate fees from the sale and license of our Search Appliance products, which include hardware,
software, and post-contract support primarily for two years. As the deliverables are not sold separately, sufficient
vendor-specific objective evidence does not exist for the allocation of revenue. As a result, we recognized the
entire fee for the sale and license of these products ratably over the term of the post-contract support
arrangement. Beginning the first quarter of 2010, we adopted the new accounting guidance which requires us to
allocate the consideration of the arrangement to each of the deliverables based on our best estimate of their
selling prices as there is no vendor-specific objective or third-party evidence of the selling prices. As a result, we
now recognize revenue allocated to the hardware and software at the time of sale and revenue allocated to post-
contract support ratably over the term of the service arrangement.
In addition, we generate fees through the license of our Google Apps products. We recognize as revenue the
fees we charge customers for hosting the related enterprise applications and services ratably over the term of the
service arrangement.
Revenues realized through display advertising management services, Google TV Ads, Google Checkout,
search services, Search Appliance, and Google Apps were not material in any of the years presented.
We recognize revenues as described above because the services have been provided, the fees we charge are
fixed or determinable, we and our advertisers or other customers understand the specific nature and terms of the
agreed-upon transactions and collectability is reasonably assured.
We record deferred revenue when payments are received in advance of our performance in the underlying
agreement on the accompanying Consolidated Balance Sheets.
66