eBay 2005 Annual Report Download - page 87

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eBay Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 Ì The Company and Summary of Significant Accounting Policies:
The Company
eBay Inc. (""eBay'') was incorporated in California in May 1996, and reincorporated in Delaware in April
1998. eBay, together with its subsidiaries, pioneers new communities around the world, built on commerce,
sustained by trust, and inspired by opportunity. eBay brings together millions of buyers and sellers every day
on a local, national and international basis through an array of websites. eBay provides online marketplaces for
the sale of goods and services, online payment services and online communication offerings to a diverse
community of individuals and businesses.
eBay currently has three primary businesses: the eBay Marketplace, Payments and Communications. The
eBay Marketplaces segments provide the infrastructure to enable online commerce in a variety of formats,
including the traditional auction platform, along with our other online platforms, such as Rent.com,
Shopping.com, Kijiji, mobile.de, and Marktplaats.nl. The Payments segment, which consists of our PayPal,
Inc. (""PayPal'') business, enables individuals or businesses to securely, easily and quickly send and receive
payments online. The Communications segment, which consists of our Skype Technologies SA (""Skype'')
business, enables VoIP calls between Skype users, as well as provides low-cost connectivity to traditional
fixed-line and mobile telephones.
When we refer to ""we,'' ""our,'' ""us'' or ""eBay'' in this document, we mean the current Delaware
corporation (eBay Inc.) and its California predecessor, as well as all of our consolidated subsidiaries.
Use of estimates
The preparation of consolidated financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial
statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing
basis, we evaluate our estimates, including those related to provisions for doubtful accounts and authorized
credits, the provision for transaction losses, legal contingencies, income taxes, advertising and other non-
transaction revenues, and goodwill and intangible assets. We base our estimates on historical experience and
on various other assumptions that are believed to be reasonable under the circumstances. Actual results could
differ from those estimates.
Principles of consolidation and basis of presentation
The accompanying financial statements are consolidated and include the financial statements of eBay and
our majority-owned subsidiaries. All significant intercompany balances and transactions have been eliminated
in consolidation.
The consolidated financial statements include 100% of the assets and liabilities of these majority-owned
subsidiaries and the ownership interests of minority investors are recorded as minority interests. Investments in
entities where we hold more than a 20% but less than a 50% ownership interest and have the ability to
significantly influence the operations of the investee are accounted for using the equity method of accounting
and the investment balance is included in long-term investments, while our share of the investees' results of
operations is included in interest and other income, net. Investments in entities where we hold less than a 20%
ownership interest and where we do not have the ability to significantly influence the operations of the investee
are accounted for using the cost method of accounting and are included in long-term investments.
Certain prior period balances have been reclassified to conform to the current period presentation.
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