eBay 2012 Annual Report Download - page 79

Based on our results for the year ended December 31, 2012 , a one-percentage point change in our provision for income taxes as a
percentage of income before taxes would have resulted in an increase or decrease in the provision of approximately $31 million , resulting in an
approximate $0.02 change in diluted earnings per share.
Revenue Recognition
We may enter into certain revenue transactions, primarily related to arrangements in our GSI segment and certain advertising contracts,
that are considered multiple element arrangements (arrangements with more than one deliverable). We also may enter into arrangements to
purchase goods and/or services from certain customers. As a result, significant interpretation and judgment is sometimes required to determine
the appropriate accounting for these transactions including: (1) how the arrangement consideration should be allocated among potential multiple
deliverables; (2) developing an estimate of the stand-alone selling price of each deliverable; (3) whether revenue should be reported gross (as
eBay is acting as a principal), or net (as eBay is acting as an agent); (4) when we provide cash consideration to our customers, determining
whether we are receiving an identifiable benefit that is separable from the customer's purchase of our products and/or services and for which we
can reasonably estimate fair value; and (5) whether the arrangement would be characterized as revenue or reimbursement of costs incurred.
Changes in judgments with respect to these assumptions and estimates could impact the timing or amount of revenue recognition.
Goodwill and Intangible Assets
The purchase price of an acquired company is allocated between intangible assets and the net tangible assets of the acquired business with
the residual of the purchase price recorded as goodwill. The determination of the value of the intangible assets acquired involves certain
judgments and estimates. These judgments can include, but are not limited to, the cash flows that an asset is expected to generate in the future
and the appropriate weighted average cost of capital.
At December 31, 2012, our goodwill totaled $8.5 billion and our identifiable intangible assets, net totaled $1.1 billion. We assess the
impairment of goodwill of our reporting units annually, or more often if events or changes in circumstances indicate that the carrying value may
not be recoverable. Goodwill is tested for impairment at the reporting unit level by first performing a qualitative assessment to determine
whether it is more likely than not that the fair value of the reporting unit is less than its carrying value. If the reporting unit does not pass the
qualitative assessment, then the reporting unit's carrying value is compared to its fair value. The fair values of the reporting units are estimated
using market and discounted cash flow approaches. Goodwill is considered impaired if the carrying value of the reporting unit exceeds its fair
value. The discounted cash flow approach uses expected future operating results. Failure to achieve these expected results may cause a future
impairment of goodwill at the reporting unit. We conducted our annual impairment test of goodwill as of August 31, 2012 and 2011. As a result
of this test, we determined that no adjustment to the carrying value of goodwill for any reporting units was required. See “Note 4 -
Goodwill and
Intangible Assets” to the consolidated financial statements included in this report. As of December 31, 2012, we determined that no events or
circumstances from August 31, 2012 through December 31, 2012 indicated that a further assessment was necessary.
Stock-Based Compensation
We measure and recognize stock-based compensation expense based on the fair value measurement for all share-based payment awards
made to our employees and directors, including employee stock options, employee stock purchases and restricted stock awards over the service
period for awards expected to vest. Stock-based compensation expense recognized for 2012 , 2011 and 2010 was $488 million , $458 million
and $381 million , respectively. See “Note 16 - Stock-Based and Employee Savings Plans” to the consolidated financial statements included in
this report.
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