eBay 2008 Annual Report Download - page 89

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eBay Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 — 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’s purpose is to pioneer 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.
We operate three primary business segments: Marketplaces, Payments and Communications. Our Market-
places segment provides the infrastructure to enable global online commerce on a variety of platforms, including the
traditional eBay.com platform, and our other online platforms, such as our online classifieds businesses, our
secondary tickets marketplace, StubHub, our online shopping comparison website, Shopping.com, our apartment
listing service platform, Rent.com, as well as our fixed price media marketplace (Half.com). Our Payments segment
is comprised of payment solutions PayPal (which enables individuals or businesses to securely, easily and quickly
send and receive payments online) and Bill Me Later (which we acquired in November 2008 and which enables
online U.S. merchants to offer, and U.S. consumers to obtain, transactional credit at the point of sale). Our
Communications segment, which consists of Skype, enables VoIP calls between Skype users and 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 U.S. 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 transaction and loan losses, legal contingencies, income taxes,
revenue recognition, stock-based compensation and the recoverability of goodwill and intangible assets. We base
our estimates on historical experience and on various other assumptions that we believe 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 a minority interest. Investments in
private entities where we hold 20% or more but less than a 50% ownership interest 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 private 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, where our share of the investees’
results of operations is not included in our consolidated statement of income, and our cost basis of our investments is
included in long-term investments.
Certain prior period balances have been reclassified to conform to the current period presentation. Customer
accounts were reclassified from “Other Current Assets” to “Funds Receivable and Customer Accounts.” Operating
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