eBay 2002 Annual Report Download - page 108

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eBay Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (CONTINUED)
Recent accounting pronouncements
Accounting for Costs Associated with Exit or Disposal Activities
In June 2002, the Financial Accounting Standards Board or FASB issued Statement of Financial
Accounting Standards No. 146 or SFAS No. 146, ""Accounting for Costs Associated with Exit or Disposal
Activities,'' which nulliÑes Emerging Issues Task Force, or EITF Issue No. 94-3, ""Liability Recognition
for Certain Employee Termination BeneÑts and Other Costs to Exit an Activity (including Certain Costs
Incurred in a Restructuring).'' SFAS No. 146 requires that a liability for a cost associated with an exit or
disposal activity be recognized when the liability is incurred and states that an entity's commitment to an
exit plan, by itself, does not create a present obligation that meets the deÑnition of a liability. SFAS
No. 146 also establishes that fair value is the objective for initial measurement of the liability. The
provisions of SFAS No. 146 are eÅective for exit or disposal activities initiated after December 31, 2002.
We do not expect the adoption of SFAS No. 146 to have a material impact upon our Ñnancial position,
cash Öows or results of operations.
Guarantor's Accounting and Disclosure Requirements for Guarantees
In November 2002, the FASB issued FASB Interpretation No. 45 or FIN 45, ""Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness
of Others.'' FIN 45 requires a guarantor to recognize a liability for obligations it has undertaken in relation
to the issuance of a guarantee. It requires that the liability be recorded at fair value on the date that the
guarantee is issued. It also requires a guarantor to provide additional disclosures regarding guarantees,
including the nature of the guarantee, the maximum potential amount of future payments under the
guarantee, the carrying amount of the liability, if any, for the guarantor's obligations under the guarantee,
and the nature and extent of any recourse provisions or available collateral that would enable the guarantor
to recover the amounts paid under the guarantee. The disclosure requirements under FIN 45 are eÅective
for the interim and annual periods ending after December 15, 2002. The recognition and measurement
provisions under FIN 45 are eÅective for guarantees issued or modiÑed after December 31, 2002. We do
not expect the adoption of FIN 45 to have a material impact upon our Ñnancial position, cash Öows or
results of operations. See ""Note 11 Ì Commitments and Contingencies.''
Accounting for Stock Based Compensation
In December 2002, the FASB issued SFAS No. 148, ""Accounting for Stock Based Compensation Ì
Transition and Disclosure.'' SFAS 148 provides two additional transition methods for entities that
voluntarily adopt the fair value method of recording expenses when accounting for stock based
compensation. Further, the statement requires disclosure of comparable information for all companies
regardless of whether, when, or how an entity adopts the preferable, fair value based method of accounting.
These disclosures are now required for interim periods in addition to the traditional annual disclosure. The
amendments to SFAS No. 123, which provides for additional transition methods, are eÅective for periods
beginning after December 15, 2002. The disclosure provisions are eÅective for Ñscal years ending after
December 15, 2002 and have been incorporated into the notes to the accompanying Ñnancial statements.
We have chosen not to voluntarily adopt the fair value method of accounting for employee stock option
grants at this time.
Consolidation of Variable Interest Entities
In January 2003, the FASB issued FIN 46, ""Consolidation of Variable Interest Entities.'' This
interpretation of Accounting Research Bulletin No. 51, ""Consolidated Financial Statements,'' addresses
consolidation by business enterprises of certain variable interest entities where there is a controlling
Ñnancial interest in a variable interest entity or where the variable interest entity does not have suÇcient
106