eBay 2010 Annual Report Download - page 96

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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 as well as other online commerce, or ecommerce, platforms and online payment services to a diverse
community of individuals and businesses.
We have two business segments: Marketplaces and Payments. Our Marketplaces segment provides the
infrastructure to enable global online commerce on a variety of platforms, including the 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), and our
fixed price media marketplace (Half.com). Our Payments segment is comprised of our online payment solutions
PayPal and Bill Me Later. Historically, we also had a Communications segment that consisted of Skype
Technologies S.A. (“Skype”). On November 19, 2009, we sold Skype to an investor group for cash, a subordinated
note and an equity stake in the outstanding capital stock of the Skype successor entity (approximately 30%).
Skype’s results of operations are consolidated in our 2008 and 2009 results through the date of sale. Our
non-controlling interest in Skype for periods after the completion of the sale is accounted for under the equity
method of accounting. Our proportionate share of the net income (loss) of Skype is recognized on a one quarter lag
as a component of interest and other income (expense), net in our consolidated statement of income.
We are required to comply with various regulations worldwide in order to operate our businesses,
particularly our Payments business. We also partner with banks and other financial institutions in order to offer
our Payments services globally. Changes in regulations, non-compliance with regulations or loss of key bank and
financial institution partners could have a significant adverse impact on our ability to operate our business;
therefore, we monitor these areas closely to mitigate potential adverse impacts.
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 bad debts, Bill Me Later loan losses, provision for transaction
losses, claims under buyer protection programs, legal contingencies, income taxes, value added 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. We have evaluated all subsequent events through the date the financial statements were issued.
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