eBay 2003 Annual Report Download - page 69

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 our consolidated Ñnancial position for the year
ended December 31, 2003, was a translation gain of approximately $66.3 million. This gain 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 than our functional currencies create gains and losses that are
reÖected in our consolidated statement of income. In addition, as at December 31, 2003, we held balances
in cash, cash equivalents and investments outside the U.S. totaling approximately $597 million.
As of December 31, 2003, we had outstanding forward foreign exchange contracts with notional values
equivalent to approximately $222.4 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.
We convert the Ñnancial statements of our foreign subsidiaries into U.S. dollars. When there is a
change in foreign currency exchange rates, the conversion of the foreign subsidiaries' Ñnancial statements
into the U.S. dollars will lead to a translation gain or loss. Translation exposure is the change in the book
value of assets, liabilities, revenues, and expenses that results from changes in foreign currency exchange
rates. From time to time we enter into transactions to hedge portions of our foreign currency denominated
earnings translation exposure using both options and forward contracts. The notional amount of the options
hedges entered into in 2003 was 57 million Euro. The premium cost was approximately $869,000 and the
net loss on the options totaled approximately $486,000, which was recorded in other income and expense
in 2003. The notional amount of forward contracts entered into in 2003 was 20 million Euro. The net loss
on these forward contracts totaled approximately $635,000 and was recorded in other income and expense
in 2003. All contracts that hedge translation exposure mature ratably over the quarter in which they are
executed.
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Annual Financial Statements and Selected Quarterly Financial Data: 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.
ITEM 9A. CONTROLS AND PROCEDURES
(a) Evaluation of disclosure controls and procedures. Based on the evaluation of our disclosure
controls and procedures (as deÑned in the Rules 13a-15(e) and 15d-15(e) under the Securities Exchange
Act of 1934, as amended (the ""Exchange Act'')) required by Exchange Act Rules 13a-15(b) or
15d-15(b), our Chief Executive OÇcer and our Chief Financial OÇcer have concluded that as of the end
of the period covered by this report, our disclosure controls and procedures were eÅective.
(b) Changes in internal controls. There were no changes in our internal controls over Ñnancial
reporting that occurred during our most recent Ñscal quarter that have materially aÅected, or are
reasonably likely to materially aÅect, our internal control over Ñnancial reporting.
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