eBay 2002 Annual Report Download - page 101

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eBay Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 Ì The Company and Summary of SigniÑcant Accounting Policies:
The Company
eBay Inc. (""eBay'') was incorporated in California in May 1996, and reincorporated in Delaware in
April 1998. As of December 31, 2002, through our wholly-owned and majority-owned subsidiaries and
aÇliates, we had websites directed towards the United States, Australia, Austria, Belgium, Canada,
France, Germany, Ireland, Italy, the Netherlands, New Zealand, Singapore, South Korea, Spain, Sweden,
Switzerland, Taiwan and the United Kingdom. We pioneered online trading by developing a Web-based
community in which buyers and sellers are brought together to buy and sell almost anything. The eBay
online service permits sellers to list items for sale, buyers to bid on items of interest, and all eBay users to
browse through listed items in a fully-automated, topically-arranged service that is available online seven
days a week.
On October 3, 2002, we completed our acquisition of PayPal, Inc. in a tax-free, stock-for-stock
transaction. PayPal provides an online global payments platform and is headquartered in Mountain View,
California. The PayPal Ñnancial statements are included in our Consolidated Financial Statements for the
post-acquisition period from October 4, 2002 through December 31, 2002.
Stock splits
In April 2000, our Board of Directors approved a two-for-one common stock split. Stockholders of
record on May 9, 2000 received one additional share for each share owned on May 24, 2000. All share and
per share amounts in these Consolidated Financial Statements and related notes reÖect the stock splits in
all periods presented.
Use of estimates
The preparation of Consolidated Financial Statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that aÅect 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 revenues and expenses during the
reporting period. Actual results could diÅer from those estimates.
Principles of consolidation and basis of presentation
The accompanying Ñnancial statements are consolidated and include the Ñnancial statements of eBay
and our majority-owned subsidiaries. All signiÑcant intercompany balances and transactions have been
eliminated in consolidation.
The consolidated accounts include 100 percent of the assets and liabilities of these majority-owned
subsidiaries and the ownership interests of minority investors are recorded as minority interests.
Investments in entities where we hold more than a 20 percent but less than a 50 percent ownership
interest and have the ability to signiÑcantly inÖuence the operations of the investee are accounted for using
the equity method of accounting and the investment balance is included in long term investments, while
our share of the investees' operations is included in other income.
Certain prior period balances have been reclassiÑed to conform to the current period presentation.
Fair value of Ñnancial instruments
Cash and cash equivalents are short-term, highly liquid investments with original maturities of three
months or less when purchased. Our Ñnancial instruments, including cash, cash equivalents, accounts
99