eBay 2002 Annual Report Download - page 109

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eBay Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (CONTINUED)
equity at risk to Ñnance its activities without additional subordinated Ñnancial support from other parties.
This interpretation applies immediately to variable interest entities created after January 31, 2003 and
applies in the Ñrst year or interim period beginning after June 15, 2003 to variable interest entities in
which an enterprise holds a variable interest that it acquired before February 1, 2003. We expect that the
adoption of FIN 46 will require us to include our San Jose facilities lease arrangement and potentially
certain investments in our Consolidated Financial Statements eÅective July 1, 2003. In connection with
our San Jose facilities lease arrangement, our balance sheet following the July 1, 2003 adoption of FIN 46
will reÖect changes to record assets of $126.4 million, liabilities of $122.5 million and non-controlling
interests of $3.9 million. In addition, our post-adoption income statement will reÖect the reclassiÑcation of
rent expense payments from operating expenses to interest expense as well as the recognition of
depreciation expense, within operating expenses, for our use of the buildings. We estimate that the income
statement impact of consolidating our San Jose facilities lease will consist of a charge against earnings, net
of taxes, of $5.6 million upon the adoption of FIN 46 on July 1, 2003. This charge will reÖect the
accumulated depreciation charges that would have been recorded in previous periods had consolidation of
the San Jose facilities been required. Additionally, we have not decided whether we will keep the existing
Ñnancing arrangement or purchase the San Jose facilities. Whether or not we keep the existing Ñnancing
arrangement, we anticipate recording additional annual operating expenses of $1.7 million, net of taxes, for
the recognition of depreciation expense on the buildings. In the event we purchase the San Jose facilities,
we will also pay $126.4 million, eliminate Ñnancing payments and settle our two interest rate swaps we
used to establish a Ñxed rate of interest for $95 million of our Ñnancing arrangement. During the year
ended December 31, 2002, our Ñnancing payments related to the San Jose facilities totaled $7.9 million.
At December 31, 2002, settlement of our two interest rate swaps would have resulted in a loss of
$10.9 million.
Note 2 Ì Net Income Per Share:
Basic net income per share is computed by dividing the net income for the period by the weighted
average number of common shares outstanding during the period. Diluted net income per share is
computed by dividing the net income for the period by the weighted average number of common and
common equivalent shares outstanding during the period. Potentially dilutive securities, composed of
unvested, restricted common stock and incremental common shares issuable upon the exercise of stock
options and warrants, are included in diluted net income per share to the extent such shares are dilutive.
107