Earthlink 2001 Annual Report Download - page 27

EITF 00-14. The impact of the adoption is expected to be limited to the classification of expense items within the statements of operations. We
offered sales incentives such as free Internet access on a trial basis, cameras, modems and starter kits as introductory offers. The costs of these
incentives were recorded as sales and marketing expenses. If this standard had been adopted at December 31, 2001, including required
retroactive adjustment of prior periods, cost of revenues would have been increased by $5.5 million, $56.3 million and $67.9 million for the
three years ended December 31, 2001, respectively. Sales and marketing expenses would have been reduced by equal and offsetting amounts
during the same periods. The above reclassifications will have no impact on net loss or net loss per share.
In October 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets ("SFAS 144"). The
statement supersedes SFAS 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, and
supersedes the provisions of APB Opinion 30, Reporting the Results of Operations—Discontinued Events and Extraordinary Items , with
regard to reporting the effects of a disposal of a segment of a business. SFAS 144 provides a single accounting model for long-lived assets to
be disposed of and significantly changes the criteria required to classify an asset as held-for-sale. Under the statement, more dispositions will
qualify for discontinued operations treatment in the income statement, which requires expected future operating losses from discontinued
operations to be displayed in discontinued operations in the period in which the losses are incurred. The statement is effective for fiscal years
beginning after December 15, 2001. We do not expect that the adoption of SFAS 144 will have a material impact on our financial statements
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Item 7a. Quantitative and Qualitative Disclosures about Market Risk.
Interest Rate Sensitivity
The primary objective of our investment activities is to preserve principal while at the same time maximizing the income we receive from
our investments without significantly increasing risk. Some of the securities that we have invested in may be subject to market risk. This means
that a change in prevailing interest rates may cause the fair value of the investments to fluctuate. For example, if we hold a security that was
issued with a fixed interest rate at the then-prevailing rate and the prevailing interest rate later rises, the fair value of our investment may
decline. To minimize this risk, we maintain our portfolio of cash equivalents in a variety of securities, including commercial paper, other non-
government debt securities and money market funds. In general, money market funds are not subject to market risk because the
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interest paid on such funds fluctuates with the prevailing interest rate. In addition, we invest in relatively short-term securities. As of
December 31, 2001, all of our cash equivalents mature in less than 3 months.
The following table presents the amounts of our cash equivalents and short-term investments that are subject to market risk by range of
expected maturity and weighted-
average interest rates as of December 31, 2001. This table does not include money market funds because those
funds are not subject to market risk.
Item 8. Financial Statements And Supplementary Data.
The information required by this item appears in a subsequent section of this Report.
Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure
None.
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Maturing in Three
Months or Less Fair Value
(In thousands)
Included in cash and cash equivalents
$
421,121
$
421,121
Weighted
-
average interest rates
2.67%