eBay 2003 Annual Report Download - page 97

eBay Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (CONTINUED)
building improvements, ten years for aviation equipment, the shorter of Ñve years or the term of the lease
for leasehold improvements, three years for furniture and Ñxtures and three years for vehicles.
Intangible assets
Intangible assets resulting from the acquisitions of entities accounted for using the purchase method
of accounting are estimated by management based on the fair value of assets received. IdentiÑable
intangible assets are comprised of purchased customer lists, trademarks and tradenames, developed
technologies, and other intangible assets. IdentiÑable intangible assets are being amortized using the
straight-line method over estimated useful lives ranging from one to eight years.
Goodwill represents the excess of the purchase price over the fair value of the net tangible and
identiÑable intangible assets acquired in a business combination. We adopted Statement of Financial
Accounting Standards No. 142, or SFAS No. 142, ""Goodwill and Other Intangible Assets,'' on January 1,
2002 on a prospective basis. In accordance with SFAS No. 142, goodwill is no longer subject to
amortization. Rather, goodwill is subject to at least an annual assessment for impairment, applying a fair-
value based test. The consolidated statement of income for the year ended December 31, 2001 includes
goodwill amortization of $32.6 million.
Impairment of long-lived assets and Goodwill
We evaluate long-lived assets for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable in accordance with SFAS No. 144,
""Accounting for the Impairment or Disposal of Long-Lived Assets.'' An asset is considered impaired if its
carrying amount exceeds the future net cash Öow the asset is expected to generate. If an asset is
considered to be impaired, the impairment to be recognized is measured by the amount by which the
carrying amount of the asset exceeds its fair market value. We assess the recoverability of our long-lived
and intangible assets by determining whether the unamortized balances can be recovered through
undiscounted future net cash Öows of the related assets. The amount of impairment, if any, is measured
based on projected discounted future net cash Öows.
We evaluate goodwill, at a minimum, on an annual basis and whenever events and changes in
circumstances suggest that the carrying amount may not be recoverable. Impairment of goodwill is tested
at the reporting unit level by comparing the reporting unit's carrying amount, including goodwill, to the
fair value of the reporting unit. The fair values of the reporting units are estimated using a combination of
the income, or discounted cash Öows, approach and the market approach, which utilizes comparable
companies' data. If the carrying amount of the reporting unit exceeds its fair value, goodwill is considered
impaired and a second step is performed to measure the amount of impairment loss, if any. We conducted
our annual impairment test as of August 31, 2003 and determined there to be no impairment. There were
no events or circumstances from that date through December 31, 2003 that would impact this assessment.
Due to customers
Customers utilize our payment services to transfer money electronically over the Internet. Any stored
value remaining from transactions in a customer's account represents a liability to the customer.
Customers can elect to sweep their account balances into the PayPal Money Market fund to earn a rate of
return; otherwise, no interest is paid on customer account balances.
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