eBay 2010 Annual Report Download - page 82

component of accumulated other comprehensive income (loss), net of estimated tax. As of December 31, 2010,
approximately 62% of our total cash and investment portfolio was held in bank deposits and money market
funds. As such, changes in interest rates will impact interest income. Additionally, changes in interest rates will
impact our interest rate sensitive credit agreement and accordingly, impact interest expense or cost of net
revenues. As of December 31, 2010, we held no direct investments in auction rate securities, collateralized debt
obligations, structured investment vehicles or mortgaged-backed securities.
Investments in both fixed-rate and floating-rate interest-earning instruments carry varying degrees of
interest rate risk. The fair market value of our fixed-rate securities may be adversely impacted due to a rise in
interest rates. In general, securities with longer maturities are subject to greater interest-rate risk than those with
shorter maturities. While floating rate securities generally are subject to less interest-rate risk than fixed-rate
securities, floating-rate securities may produce less income than expected if interest rates decrease. Due in part to
these factors, our investment income may fall short of expectations or we may suffer losses in principal if
securities are sold that have declined in market value due to changes in interest rates. As of December 31, 2010,
the balance of our fixed income investments was $2.2 billion, which represented approximately 24% of our total
cash and investment portfolio. As of December 31, 2010, our fixed income investments earned an average pretax
yield of approximately 1.8%, with a weighted average maturity of 26 months. If interest rates were to
instantaneously increase (decrease) by 100 basis points, the fair market value of our total fixed-income
investment portfolio as of December 31, 2010 could decrease (increase) by approximately $23.5 million.
Investment Risk
As of December 31, 2010, our cost and equity method investments totaled $729.4 million, which
represented approximately 8% of our total cash and investment portfolio and was primarily related to our
retained equity interest in Skype. These investments relate primarily to equity-method investments in private
companies. We review our investments for impairment when events and circumstances indicate a decline in fair
value of such assets below carrying value is other-than-temporary. Our analysis includes review of recent
operating results and trends, recent sales/acquisitions of the investee securities, and other publicly available data.
Equity Price Risk
We are exposed to equity price risk on marketable equity instruments due to market volatility. At
December 31, 2010, the total fair value of our marketable equity instruments was $541.5 million, which
represented approximately 6% of our total cash and investment portfolio and was primarily related to our equity
holdings in MercadoLibre.
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements and accompanying notes listed in Part IV, Item 15(a)(1) of this
Annual Report on Form 10-K are included elsewhere in this Annual Report on Form 10-K.
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9A: CONTROLS AND PROCEDURES
Evaluation of disclosure controls and procedures. Based on the evaluation of our disclosure controls and
procedures (as defined in the Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, or the
Exchange Act) required by Exchange Act Rules 13a-15(b) or 15d-15(b), our principal executive officer and our
principal financial officer have concluded that as of the end of the period covered by this report, our disclosure
controls and procedures were effective.
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