eBay 2002 Annual Report Download - page 46

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 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'' to our Consolidated Financial Statements, which is incorporated by
reference herein.
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
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
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