Google 2013 Annual Report Download - page 46

40 GOOGLE INC.
PART II
ITEM7A.QuantitativeandQualitativeDisclosuresAboutMarketRisk
Business Combinations
We allocate the fair value of purchase consideration to the tangible assets acquired, liabilities assumed and intangible assets
acquiredbasedontheirestimatedfairvalues.Theexcessofthefairvalueofpurchaseconsiderationoverthefairvaluesofthese
identiableassetsandliabilitiesisrecordedasgoodwill.Whendeterminingthefairvaluesofassetsacquiredandliabilitiesassumed,
managementmakessignicantestimatesandassumptions,especiallywithrespecttointangibleassets.
Criticalestimatesinvaluingcertainintangibleassetsincludebutarenotlimitedtofutureexpectedcashowsfromcustomer
relationshipsandacquiredpatentsanddevelopedtechnology;anddiscountrates.Management’sestimatesoffairvalueare
based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual
resultsmaydierfromestimates.
Other estimates associated with the accounting for acquisitions may change as additional information becomes available regarding
the assets acquired and liabilities assumed, as more fully discussed in Note 6 of Notes to Consolidated Financial Statements
includedinItem8ofthisAnnualReportonForm10-K.
Goodwill
Goodwillisallocatedtoreportingunitsexpectedtobenetfromthebusinesscombination.Wetestgoodwillforimpairmentat
the reporting unit level at least annually, or more frequently if events or changes in circumstances occur that would more likely
thannotreducethefairvalueofareportingunitbelowitscarryingvalue.Weevaluateourreportingunitsonanannualbasis
and,ifnecessary,reassigngoodwillusingarelativefairvalueallocationapproach.Goodwillimpairmenttestsrequirejudgment,
includingtheidenticationofreportingunits,assignmentofassetsandliabilitiestoreportingunits,assignmentofgoodwillto
reportingunits,anddeterminationofthefairvalueofeachreportingunit.AsofDecember31,2013,noimpairmentofgoodwill
hasbeenidentied.
Impairment of Marketable and Non-Marketable Securities
Weperiodicallyreviewourmarketableandnon-marketablesecuritiesforimpairment.Ifweconcludethatanyoftheseinvestments
areimpaired,wedeterminewhethersuchimpairmentisother-than-temporary.Factorsweconsidertomakesuchdetermination
include the duration and severity of the impairment, the reason for the decline in value and the potential recovery period and
ourintenttosell.Formarketabledebtsecurities,wealsoconsiderwhether(1)itismorelikelythannotthatwewillberequired
tosellthesecuritybeforerecoveryofitsamortizedcostbasis,and(2)theamortizedcostbasiscannotberecoveredasaresult
ofcreditlosses.Ifanyimpairmentisconsideredother-than-temporary,wewillwritedowntheassettoitsfairvalueandrecord
thecorrespondingchargeasinterestandotherincome,net.
 Quantitative and Qualitative Disclosures About
Market Risk
Weareexposedtonancialmarketrisks,includingchangesincurrencyexchangeratesandinterestrates.
Foreign Currency Exchange Risk
Wetransactbusinessgloballyinmultiplecurrencies.Ourinternationalrevenues,aswellascostsandexpensesdenominated
inforeigncurrencies,exposeustotheriskofuctuationsinforeigncurrencyexchangeratesagainsttheUSdollar.Ourmost
signicantcurrencyexposuresaretheEuro,theBritishpound,andJapaneseYen.Weareanetreceiverofforeigncurrencies
andthereforebenetfromaweakeningoftheU.S.dollarandareadverselyaectedbyastrengtheningoftheU.S.dollarrelative
totheforeigncurrency.
WeuseforeignexchangeoptioncontractstoprotectourforecastedU.S.dollar-equivalentearningsfromadversechangesin
foreigncurrencyexchangerates.Thesehedgingcontractsreduce,butdonotentirelyeliminatetheimpactofadversecurrency
exchangeratemovements.Wedesignatetheseoptioncontractsascashowhedgesforaccountingpurposes.Thefairvalueof
theoptioncontractisseparatedintoitsintrinsicandtimevalues.Changesinthetimevaluearerecordedininterestandother
income,net.Changesintheintrinsicvaluearerecordedasacomponentofaccumulatedothercomprehensiveincome(AOCI)
andsubsequentlyreclassiedintorevenuestoosetthehedgedexposuresastheyoccur.
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