eBay 2009 Annual Report Download - page 75

are used by the financial institution as a basis for calculating our net interest expense or income. As of
December 31, 2009, we had a total of $2.5 billion in cash withdrawals offsetting our $2.5 billion in Aggregate
Cash Deposits held within the same financial institution under this cash pooling arrangement.
Customer balances held as direct claims against us, primarily PayPal, are included on our consolidated
balance sheet in funds receivable and customer accounts with an offsetting current liability in funds payable and
amounts due to customers, and totaled approximately $1.5 billion and $1.1 billion as of December 31, 2009 and
2008. Customer funds held by PayPal as an agent or custodian on behalf of our customers are not reflected in our
consolidated balance sheets. These funds include funds on behalf of U.S. customers that are deposited in bank
accounts insured by the Federal Deposit Insurance Corporation (subject to applicable limits) and funds that
U.S. customers choose to invest in the PayPal Money Market Fund, which totaled approximately $2.2 billion and
$1.9 billion as of December 31, 2009 and 2008, respectively. The PayPal Money Market Fund is invested in a
portfolio managed by BlackRock Fund Advisors.
Indemnification Provisions
In the ordinary course of business, we have included limited indemnification provisions in certain of our
agreements with parties with whom we have commercial relations, including our standard marketing, promotions
and application-programming-interface license agreements. Under these contracts, we generally indemnify, hold
harmless, and agree to reimburse the indemnified party for losses suffered or incurred by the indemnified party in
connection with claims by a third party with respect to our domain names, trademarks, logos and other branding
elements to the extent that such marks are applicable to our performance under the subject agreement. In a
limited number of agreements, we have provided an indemnity for other types of third-party claims, which are
indemnities mainly related to various intellectual property rights. In our PayPal business, we have provided an
indemnity to our payment processors in the event of certain third-party claims or card association fines against
the processor arising out of conduct by PayPal or PayPal customers. In connection with the sale of Skype, we
made certain customary warranties to the buyer in the purchase agreement. Our liability to the buyer for
inaccuracies in these warranties is generally subject to certain limitations. With respect to certain specified
litigation matters involving Skype that were pending as of the closing of the transaction, we also agreed, among
other things, to bear 50% of the cost of any monetary judgment that is rendered in respect of those matters. It is
not possible to determine the maximum potential loss under these indemnification and other provisions due to
our limited history of prior indemnification claims and the unique facts and circumstances involved in each
particular provision. To date, no significant costs have been incurred, either individually or collectively, in
connection with our indemnification provisions.
Critical Accounting Policies, Judgments and Estimates
General
The preparation of our consolidated financial statements and related notes requires us to make judgments,
estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and
related disclosure of contingent assets and liabilities. We have based our estimates on historical experience and
on various other assumptions that are believed to be reasonable under the circumstances, the results of which
form the basis for making judgments about the carrying values of assets and liabilities that are not readily
apparent from other sources. Our senior management has discussed the development, selection and disclosure of
these estimates with the Audit Committee of our Board of Directors. Actual results may differ from these
estimates under different assumptions or conditions.
An accounting policy is considered to be critical if it requires an accounting estimate to be made based on
assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates
that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur
periodically, could materially impact the consolidated financial statements. We believe the following critical
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