eBay 2005 Annual Report Download - page 107

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eBay Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
The estimated fair value of short and long-term investments classified by date of contractual maturity at
December 31, 2005 are as follows (in thousands):
December 31,
2005
One year or less (including restricted cash and investments of $29,702)ÏÏÏÏÏÏÏÏÏÏ $ 804,352
One year through two years (including restricted cash and investments of $989) ÏÏ 491,937
Two years through three years (including restricted cash and investments of $76) 281,781
Equity instruments and equity method investments ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 51,949
$1,630,019
During 2003, we recorded impairment charges totaling $1.2 million as a result of the deterioration of the
financial condition of certain of our private and public equity investees that were considered to be other than
temporary. We did not record any impairment charges during 2004 and 2005.
Equity method investments
We have certain investments accounted for using the equity method of accounting of which the total of
these investments, including identifiable intangible assets, deferred tax liabilities and goodwill, are classified
on our balance sheet as a long-term investments. Our consolidated results of operations include, as a
component of other income, our share of the net income or loss of these investments together with
amortization expense relating to acquired intangible assets. Our share of the results of investees' results of
operations are not significant for any period presented.
Note 6 Ì Derivative Instruments:
Transaction Exposure
As of December 31, 2005, we had outstanding forward foreign exchange hedge contracts with notional
values equivalent to approximately $151.5 million with maturity dates within 31 days. The hedge contracts are
used to offset changes in non-US dollar denominated functional currency value of assets and liabilities as a
result of foreign exchange rate fluctuations. Transaction gains and losses on the contracts and the assets and
liabilities are recognized each period in interest and other income, net.
Translation Exposure
We consolidate the earnings of our international subsidiaries by converting them into U.S. dollars in
accordance with Statement of Financial Accounting Standards No. 52 ""Foreign Currency Translation''
(FAS 52). Such earnings will fluctuate when there is a change 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 foreign currency options and forward contracts. All contracts that hedge translation
exposure mature ratably over the quarter in which they are executed. During the years ended December 31,
2004 and 2005, the realized gains and losses related to these hedges were not significant.
Economic Exposure
We currently charge our international subsidiaries on a monthly basis for their use of intellectual property
and technology and for certain corporate services provided by eBay and by PayPal. These charges are
denominated in Euros and these forecasted inter-company transactions represent a foreign currency cash flow
exposure. To reduce foreign exchange risk relating to these forecasted inter-company transactions, we entered
into forward foreign exchange contracts during the year ended December 31, 2005. The objective of the
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