eBay 2002 Annual Report Download - page 78

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the local currency. Accordingly, our foreign operations use the local currency as their functional currency.
Our international operations are subject to risks typical of international operations, including, but not
limited to diÅering economic conditions, changes in political climate, diÅering tax structures, other
regulations and restrictions and foreign exchange rate volatility. Accordingly, our future results could be
materially adversely impacted by changes in these or other factors.
Foreign exchange rate Öuctuations may adversely impact our Ñnancial position as well as our results of
operations. Foreign exchange rate Öuctuations may adversely impact our Ñnancial position as the assets and
liabilities of our foreign operations are translated into U.S. dollars in preparing our consolidated balance
sheet. The eÅect of foreign exchange rate Öuctuations on eBay's Ñnancial position for the year ended
December 31, 2002, was a translation loss of approximately $48.0 million. This loss is recognized as an
adjustment to stockholders' equity through other comprehensive income. Additionally, foreign exchange
rate Öuctuations may adversely impact our results of operations as exchange rate Öuctuations on
transactions denominated in currencies other our functional currency create gains and losses which are
reÖected in our consolidated statement of income. The eÅect of foreign exchange rate Öuctuations on
eBay's results of operations for the year ended December 31, 2002, was a transaction loss of approximately
$1.1 million.
As of December 31, 2002, we had outstanding forward foreign exchange contracts with notional values
equivalent to approximately $69 million with maturity dates within 92 days. The forward contracts are
used to oÅset changes in the value of assets and liabilities denominated in foreign currencies as a result of
currency Öuctuations. Transaction gains and losses on the contracts and the assets and liabilities are
recognized each period in our statement of income and generally are oÅsetting. As we purchased the
forward contracts on December 31, 2002, the fair values of the forward contracts were immaterial as of
this date.
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Annual Financial Statements: See Part IV, Item 15(a)(1) of this Annual Report on Form 10-K.
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
76