eBay 2013 Annual Report Download - page 131

eBay Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
party with respect to our domain names, trademarks, logos and other branding elements to the extent that such marks are applicable to our
performance under the subject agreement. In certain cases, we have agreed to provide indemnification for intellectual property infringement. Our
Enterprise business has provided in many of its major ecommerce agreements an indemnity for other types of third-party claims, which are
indemnities mainly related to various intellectual property rights, and we have provided similar indemnities in a limited number of agreements
for our other businesses, including our Magento business. In our PayPal business, we have provided an indemnity to our payment processors in
the event of certain third-party claims or card association fines against the processor arising out of conduct by PayPal or PayPal customers.
PayPal has also provided a limited indemnity to merchants using its retail point of sale payment services and to manufacturers of its point of sale
devices (e.g., the PayPal Here devices and the Beacon device). In addition, Bill Me Later has provided indemnification provisions in its
agreements with the chartered financial institutions that issue its credit products. It is not possible to determine the maximum potential loss under
these indemnification provisions due to our limited history of prior indemnification claims and the unique facts and circumstances involved in
each particular provision. To date, losses recorded in our statement of income in connection with our indemnification provisions have not been
significant, either individually or collectively.
Off-Balance Sheet Arrangements
As of December 31, 2013 , we had no off-balance sheet arrangements that have, or are reasonably likely to have, a current or future
material effect on our consolidated financial condition, results of operations, liquidity, capital expenditures or capital resources.
In Europe, we have two cash pooling arrangements with a financial institution for cash management purposes. These arrangements allow
for cash withdrawals from this financial institution based upon our aggregate operating cash balances held in Europe within the same financial
institution (“Aggregate Cash Deposits”). These arrangements also allow us to withdraw amounts exceeding the Aggregate Cash Deposits up to
an agreed-upon limit. The net balance of the withdrawals and the Aggregate Cash Deposits are used by the financial institution as a basis for
calculating our net interest expense or income. As of December 31, 2013 , we had a total of $3.1 billion in cash withdrawals offsetting our $3.1
billion in Aggregate Cash Deposits held within the same financial institution under these cash pooling arrangements.
Based on differences in regulatory requirements and commercial law in the jurisdictions where PayPal operates, PayPal holds customer
balances either as direct claims against PayPal or as an agent or custodian on behalf of PayPal's customers. Customer balances held by PayPal as
an agent or custodian on behalf of our customers are not reflected on our consolidated balance sheet, while customer balances held as direct
claims against PayPal are reflected on our consolidated balance sheet.
In 2012, PayPal's California regulator, the Division of Financial Institutions under the California Department of Business Oversight,
notified PayPal that PayPal's practice of holding the funds underlying U.S. customer balances as an agent on behalf of its customers, rather than
as owner of those funds, meant that PayPal could not treat those funds as liquid assets for purposes of the liquidity rules applicable to California
money transmitter licensees. Based on changes to our U.S. PayPal user agreement effective November 1, 2012, PayPal began holding U.S.
customer balances as direct claims against PayPal, rather than as an agent or custodian on behalf of such PayPal customers. As a result, effective
November 1, 2012, all U.S. PayPal customer balances, which were previously not reported on our consolidated balance sheet, have been
reflected as assets in our consolidated balance sheet under “Funds receivable and customer accounts,” with an associated liability under “Funds
payable and amounts due to customers.” Following this change, PayPal now holds all customer balances (both in the U.S. and internationally) as
direct claims against PayPal.
Note 12 – Related Party Transactions
We have entered into indemnification agreements with each of our directors, executive officers and certain other officers. These
agreements require us to indemnify such individuals, to the fullest extent permitted by Delaware law, for certain liabilities to which they may
become subject as a result of their affiliation with us.
All contracts with related parties are at rates and terms that we believe are comparable with those that could be entered into with
independent third parties. There were no material related party transactions in 2013 . As of December 31, 2013 , there were no material amounts
payable to or amounts receivable from related parties.
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