eBay 2010 Annual Report Download - page 70

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Provision for transaction and loan losses increased by $9.4 million, or 2%, in 2010 compared to 2009. The
increase was due primarily to the ongoing roll-out of eBay’s buyer protection program and increases in
transaction volume, partially offset by improvements in PayPal’s transaction loss rate, bad debt rates and loan
loss rates. PayPal’s transaction loss rate declined due to improvements in fraud loss detection, as well as the
substitution of eBay’s Buyer Protection Program for PayPal’s program, partially offset by the recent launch of
PayPal’s buyer protection program for Merchant Services transactions. Our bad debt rates declined from
improved charge-off rates. Bill Me Later loan loss rates declined due a lower charge-off rate and improved
delinquency rates. We continue to expect our provision for transaction and loan loss expense to fluctuate
depending on many factors, including macroeconomic conditions, our customer protection programs and
regulatory changes.
Provision for transaction and loan losses increased $35.4 million, or 10%, in 2009 compared to 2008. The
increase was due primarily to the addition of the provision for loan losses associated with our Bill Me Later
business and the expansion of eBay’s Buyer Protection program, partially offset by decreases in bad debt expense
as well as improvements to PayPal’s fraud and credit loss rates and substitution of eBay’s Buyer Protection
Program for PayPal programs.
Amortization of Acquired Intangible Assets
From time to time we have purchased, and we expect to continue to purchase, assets and businesses. These
purchase transactions generally result in the creation of acquired intangible assets with finite lives and lead to a
corresponding increase in our amortization expense in future periods. We amortize intangible assets over the
period of estimated benefit, using the straight-line method and estimated useful lives ranging from one to eight
years. Amortization of acquired intangible assets is also impacted by our sales of assets and businesses and
timing of acquired intangible assets becoming fully amortized. See “Note 5 — Goodwill and Intangible Assets”
to the consolidated financial statements included in this report.
Amortization of acquired intangible assets decreased by $73.0 million, or 28%, in 2010 compared to 2009.
The decrease in amortization of acquired intangible assets was due primarily to our sale of Skype and the timing
of acquired intangible assets becoming fully amortized, partially offset by amortization of intangibles that
resulted from our acquisition of Gmarket.
The increase in amortization of acquired amortizable intangibles during 2009 compared to 2008 was due to
the business acquisitions consummated during 2009, partially offset by our sale of Skype in the same year.
Restructuring
Restructuring expense consists of employee severance and benefits and facility costs associated with the
consolidation of certain customer service facilities in North America and Europe in fiscal 2009 and 2010, as well
as a strategic reduction of our global workforce in fiscal 2008 and 2009. See “Note 11 — Restructuring” to the
consolidated financial statements included in this report.
In 2009, we began the consolidation of certain customer service facilities in North America and Europe to
streamline our operations and deliver better and more efficient customer support to our users. The consolidation
has impacted approximately 1,000 employees. In connection with this consolidation, we estimate that we will
incur approximately $48.0 million of restructuring related charges, primarily employee severance and benefits.
During 2010 and 2009, we incurred restructuring charges of $26.0 million and $21.4 million, respectively, in
connection with this consolidation. As of December 31, 2010, the restructuring activities in connection with this
plan are substantially complete.
In 2009, we completed a strategic reduction of our global workforce by approximately 800 employees
worldwide to simplify and streamline our organization and strengthen the overall competitiveness of our existing
business. During 2008 and 2009, we incurred restructuring charges of $49.1 million and $12.2 million,
respectively, related to this plan.
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