eBay 2003 Annual Report Download - page 37

Operating lease amounts include minimum rental payments under our non-cancelable operating leases
for oÇce facilities, including our corporate headquarters located in San Jose, California, as well as limited
computer and oÇce equipment that we utilize under lease arrangements. The amounts presented are
consistent with contractual terms and are not expected to diÅer signiÑcantly, unless a substantial change in
our headcount needs requires us to exit an oÇce facility early or expand our occupied space.
Other purchase obligation amounts include minimum purchase commitments for advertising,
computer equipment, software applications, engineering development services and other goods and services
that were entered into through our ordinary course of business. For those contractual arrangements in
which there are signiÑcant performance requirements, we have developed estimates to project expected
payment obligations. These estimates have been developed based upon historical trends, when available,
and our anticipated future obligations. Given the signiÑcance of such performance requirements within our
advertising and other arrangements, actual payments could diÅer signiÑcantly from these estimates.
IndemniÑcation Provisions
During the ordinary course of business, in certain limited circumstances, we have included
indemniÑcation provisions within certain of our contracts. Pursuant to these agreements, we indemnify,
hold harmless, and agree to reimburse the indemniÑed party for losses suÅered or incurred by the
indemniÑed party, generally parties with which we have commercial relations, in connection with certain
intellectual property infringement claims by any third party with respect to our services. To date, we have
not incurred any costs in connection with such indemniÑcation clauses.
Subsequent Events
On January 26, 2004, we entered into an agreement with mobile.de to acquire all of its outstanding
shares for 121 million Euros (approximately $153 million at the January 26, 2004 exchange rate), subject
to certain closing adjustments, plus acquisition costs. mobile.de is a classiÑeds website for vehicles in
Germany. The acquisition, which is subject to regulatory approval in Germany by the Federal Cartel
OÇce, is expected to close in the second quarter of 2004. The acquisition will be accounted for using the
purchase method of accounting.
In February 2004, we elected not to exercise certain rights to extend the lease period for our San Jose
corporate headquarters. The lease on these facilities will end on March 1, 2005, and we are obligated to
make payments to the lessor of $126.4 million at lease expiration.
Critical Accounting Policies, Judgments and Estimates
General
The preparation of our Consolidated Financial Statements and related notes requires us to make
judgments, estimates, and assumptions that aÅect the reported amounts of assets, liabilities, revenue and
expenses, and related disclosure of contingent assets and liabilities. We have based our estimates on
historical experience and on various other assumptions that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about the carrying values of
assets and liabilities that are not readily apparent from other sources. Our senior management has
discussed the development, selection and disclosure of these estimates with the Audit Committee of our
Board of Directors. Actual results may diÅer from these estimates under diÅerent assumptions or
conditions.
An accounting policy is considered to be critical if it requires an accounting estimate to be made
based on assumptions about matters that are highly uncertain at the time the estimate is made, and if
diÅerent estimates that reasonably could have been used, or changes in the accounting estimates that are
reasonably likely to occur periodically, could materially impact the Ñnancial statements. We believe the
following critical accounting policies reÖect the more signiÑcant estimates and assumptions used in the
preparation of the Consolidated Financial Statements. The following descriptions of critical accounting
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