eBay 2011 Annual Report Download - page 98

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 is a global commerce
platform and payments leader. We enable commerce through eBay, the world's largest online marketplace, which allows users to buy and sell in
nearly every country on earth; through PayPal, which enables individuals and businesses to securely, easily and quickly send and receive online
payments; and through GSI, which facilitates ecommerce, multichannel retailing and digital marketing for global enterprises. X.commerce brings
together the technology assets and developer communities of eBay, PayPal and Magento, an ecommerce storefront platform, to support eBay
Inc.'s mission of enabling commerce. We also reach millions of people through specialized marketplaces such as StubHub, the world's largest
ticket marketplace, and eBay classifieds sites, which together have a presence in more than 1,000 cities around the world.
We have three reportable business segments: Marketplaces, Payments and GSI. Our Marketplaces segment includes our eBay.com platform
and its localized counterparts and our other online platforms, such as our online classifieds businesses and StubHub. Our Payments segment is
comprised of PayPal, Bill Me Later and Zong. Our GSI segment consists of GSI, which was added upon the completion of our acquisition of GSI
on June 17, 2011. The results of our new GSI segment have been included in our consolidated results of operations from the acquisition date.
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 approximately 30% equity stake in the outstanding capital stock of the Skype
successor entity. Skype's results of operations are consolidated in our 2009 results through the date of sale. We sold our remaining interest in
Skype in 2011.
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 or 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 (GAAP) 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 Inc., our wholly and majority-
owned subsidiaries and variable interest entities ("VIE") if we are the primary beneficiary. Ownership interests of minority interests are recorded
as a noncontrolling interest. All significant intercompany balances and transactions have been eliminated in consolidation. A qualitative approach
is applied to assess the consolidation requirement for VIEs. Investments in entities where we hold at least 20% ownership interest and have the
ability to exercise significant influence, but not control, over the investee are accounted for using the equity method of accounting. For such
investments, our share of the investees' results of operations is included in interest and other, net and our investment balance is included in long-
term investments. Investments in entities where we hold less than a 20% ownership interest are generally accounted for using the cost method of
accounting, and our share of the investees' results of operations is included in our consolidated statement of income to the extent dividends are
received.
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