eBay 2002 Annual Report Download - page 105

Download and view the complete annual report

Please find page 105 of the 2002 eBay annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 145

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145

eBay Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (CONTINUED)
2002 are included within other liabilities. Due to uncertainties inherent in the estimation process, the
amounts accrued for these matters may be revised in future periods as additional information is obtained.
Comprehensive income
Comprehensive income includes all changes in equity (net assets) during a period from non-owner
sources. The change in comprehensive income for all periods presented resulted from foreign currency
translation gains and losses, unrealized and realized gains and losses on investments, and unrealized losses
on cash Öow hedges.
Revenue recognition
Our net revenues result from fees associated with our transaction, third-party advertising, end-to-end
services, and oÉine services in our U.S., International and Payments segments. Transaction revenue is
derived primarily from listing, feature and Ñnal value fees paid by sellers and fees from payment processing
services. Revenue from third-party advertising is derived principally from the sale of online banner and
sponsorship advertisements for cash and through barter arrangements. End-to-end services revenue is
derived principally from contractual arrangements with third parties that provide transaction services to
eBay users. OÉine services revenue is derived from a variety of sources including seller commissions,
buyer premiums, bidder registration fees and auction-related services including appraisal and authentica-
tion, primarily related to our ButterÑelds and Kruse subsidiaries.
Listing and feature fee revenues are recognized ratably over the estimated period of the auction while
revenues related to Ñnal value fees are recognized at the time that the transaction is successfully
concluded. A transaction is considered successfully concluded when at least one buyer has bid above the
seller's speciÑed minimum price or reserve price, whichever is higher, at the end of the transaction term.
We earn transaction fees, allocated to our Payments segment, from processing transactions for certain
customers. Revenue resulting from a payment processing transaction is recognized once the transaction is
complete. Provisions for doubtful accounts, authorized credits and transaction losses are made at the time
of revenue recognition based upon our historical experience. The provision for doubtful accounts is
recorded as a charge to operating expense, while the provisions for authorized credits and transaction losses
are recognized as reductions of net revenues.
Our third-party advertising revenue is derived principally from the sale of online banner and
sponsorship advertisements for cash and through barter arrangements. To date, the duration of our banner
and sponsorship advertising contracts has ranged from one week to three years, but is generally one week
to three months. Advertising revenues on both banner and sponsorship contracts are recognized as
""impressions'' (i.e., the number of times that an advertisement appears in pages viewed by users of our
websites) are delivered or ratably over the term of the agreement where such agreements provide for
minimum monthly or quarterly advertising commitments or where such commitments are Ñxed throughout
the term. Barter transactions are valued based on amounts realized in similar cash transactions occurring
within six months prior to the date of the barter transaction. To the extent that signiÑcant delivery
obligations remain at the end of a period or collection of the resulting account receivable is not considered
probable, revenues are deferred until the obligation is satisÑed or the uncertainty is resolved. These
amounts are included in deferred revenue in our balance sheet. Third-party advertising revenues, including
barter transactions, totaled 3%, 11% and 5% of our consolidated net revenues for the years ended
December 31, 2000, 2001 and 2002, respectively. Revenue from barter arrangements totaled $2.5 million,
$10.4 million and $10.1 million for the years ended December 31, 2000, 2001 and 2002, respectively.
Third-party advertising revenues may be aÅected by the Ñnancial condition of our customers and by
the success of online promotions in general. Recently, the industry pricing of online advertisements has
deteriorated. Our third-party advertising revenue historically has been dependent on the performance of the
103