eBay 1998 Annual Report Download - page 29

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29
Year 2000 Issues
Many currently installed computer systems and software products are coded to accept only two-digit entries in
the date code field and cannot reliably distinguish dates beginning on January 1, 2000 from dates prior to the year
2000. Many companies’ software and computer systems may need to be upgraded or replaced in order to correctly
process dates beginning in 2000 and to comply with the “Year 2000” requirements. The Company has reviewed its
internal programs and has determined that there are no significant Year 2000 issues within the Company’ s systems
or services. The Company has completed modifications to its internal systems to attempt to ensure Year 2000
compliance. The costs of these modifications have not been material and have involved a reallocation of internal
resources rather than incremental expenditures. Although the Company believes that its software is Year 2000
compliant, the Company may be wrong. If the Company is wrong, it could face unexpected expenses to fix the
problem or unanticipated webside outages, either of which could harm its business. The Company uses third-party
equipment and software that may not be Year 2000 compliant. For example, the Company relies on credit card
companies to collect the majority of its revenues from users. Due to the nature of the credit card system, some
industry analysts have questioned the effect of the year 2000 on credit card processing and billing. Failure of the
Company’ s credit card vendors or other third-party equipment or software vendors to properly process dates for the
year 2000 and thereafter could require the Company to incur unanticipated expenses in seeking alternative means of
payment or hardware or software replacements. It also could result in loss of revenues or unanticipated eBay website
outages. The Company’ s marketing efforts are also dependent on the continued operation of Internet portals and
other Internet sites on which it advertises.
Although the Company has developed contingency plans with respect to collecting payment under these
circumstances, the Company is unable to make contingency plans if any significant number of the computers
constituting the Internet fail to process dates properly for the year 2000 and there is a systemwide slowdown or
breakdown. The Company’ s business is dependent on the continued successful operation of the Internet. Any
interruption or significant degradation of Internet operations due to Year 2000 problems could harm the Company’ s
business.
Recent Accounting Pronouncements
The American Institute of Certified Public Accountants issued Statement of Position (“SOP”) No. 98-1,
“Software for Internal Use,” which provides guidance on accounting for the cost of computer software developed or
obtained for internal use. SOP No. 98-1 is effective for financial statements for fiscal years beginning after
December 15, 1998. The Company does not expect that the adoption of SOP No. 98-1 will have a material impact
on its financial statements.