LinkedIn 2012 Annual Report Download - page 77

Notes to Consolidated Financial Statements
1. Description of Business and Summary of Significant Accounting Policies
LinkedIn Corporation and its subsidiaries (the ‘‘Company’’), a Delaware corporation, was
incorporated on March 6, 2003. The Company operates an online professional network on the Internet
through which the Company’s members are able to create, manage and share their professional identities
online, build and engage with their professional networks, access shared knowledge and insights, and find
business opportunities, enabling them to be more productive and successful. The Company believes it is
the most extensive, accurate and accessible network focused on professionals.
Certain Significant Risks and Uncertainties
The Company operates in a dynamic industry and, accordingly, can be affected by a variety of factors.
For example, management of the Company believes that changes in any of the following areas could have
a significant negative effect on the Company in terms of its future consolidated financial position, results
of operations, or cash flows: scaling and adaptation of existing technology and network infrastructure;
protection of customers’ information and privacy concerns; security measures related to the Company’s
website; rates of revenue growth; engagement and usage of the Company’s solutions; management of the
Company’s growth; new markets and international expansion; protection of the Company’s brand and
intellectual property; competition in the Company’s market; qualified employees and key personnel;
intellectual property infringement and other claims; and changes in government regulation affecting the
Company’s business, among other things.
Principles of Consolidation
The consolidated financial statements include the Company and its wholly-owned subsidiaries. All
intercompany balances and transactions have been eliminated.
Use of Estimates
The preparation of the Company’s consolidated financial statements in conformity with generally
accepted accounting principles (‘‘GAAP’’) in the United States of America 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 income and expenses during the reporting period. These estimates are based on information
available as of the date of the consolidated financial statements; therefore, actual results could differ from
management’s estimates.
Concentrations of Credit Risk
Financial instruments, which potentially subject the Company to concentrations of credit risk, consist
primarily of cash and cash equivalents, short-term investments, foreign exchange contracts and accounts
receivable. Although the Company deposits its cash with multiple high credit quality financial institutions,
its deposits, at times, may exceed federally insured limits. The Company’s investment portfolio consists of
investment grade securities diversified amongst security types, industries, and issuers. The Company’s
investment policy limits the amount of credit exposure to maximum of 5% to any one issuer, except for its
U.S. treasury and agency securities, and the Company believes no significant concentration risk exists with
respect to these investments. Foreign exchange contracts are transacted with various financial institutions
with high credit standing.
Credit risk with respect to accounts receivable is dispersed due to the large number of customers,
none of which accounted for more than 10% of total accounts receivable as of December 31, 2012 and
2011. In addition, the Company’s credit risk is mitigated by the relatively short collection period. The
Company records accounts receivable at the invoiced amount and does not charge interest. Collateral is
not required for accounts receivable. The Company maintains an allowance for doubtful accounts
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