EBay (EBAY)

 

We transact business in various foreign currencies and have significant international revenues as well as costs denominated in foreign currencies, subjecting us to foreign currency risks. In addition, we charge our international subsidiaries on a monthly basis for their use of intellectual property and technology and for certain corporate services provided by eBay and by PayPal. These charges are denominated in Euros and these forecasted inter-company transactions represent a foreign currency cash flow exposure. We purchase foreign exchange contracts, generally with maturities of 12 months or less, to reduce the volatility of cash flows related primarily to forecasted revenue and intercompany transactions denominated in certain foreign currencies. The objective of the foreign exchange contracts is to better ensure that the U.S. dollar-equivalent cash flows are not adversely affected by changes in the U.S. dollar/foreign currency exchange rate. Pursuant to Financial Accounting Standards No. 133 “Accounting for Derivative Instruments and Hedging Activities” (FAS 133), we expect the hedge of certain of these forecasted transactions to be highly effective in offsetting potential changes in cash flows attributed to a change in the U.S. dollar/foreign currency exchange rate. Accordingly, the effective portion of the derivative’s gain or loss is initially reported as a component of accumulated other comprehensive income (loss) and subsequently reclassified into the financial statements line item in which the hedged item is recorded in the same period the forecasted transaction affects earnings.

 

During the year ended December 31, 2008 the realized gains on these hedges were $17.1 million. During the years ended December 31, 2007 and 2006, the realized gains and losses related to these hedges were not significant. The notional amount of our economic hedges designated for hedge accounting treatment was $428.9 million and $515.7 as of December 31, 2008 and 2007, respectively. As of December 31, 2008, net of losses, our unrealized gains related to economic hedges recorded to accumulated other comprehensive income was $40.5 million. The loss, net of gains, recorded to accumulated other comprehensive income as of December 31, 2007 was not significant. We did not have any economic hedges in place as of December 31, 2006.

 

 

We transact business in various foreign currencies and have
significant international revenues as well as costs denominated
in foreign currencies, subjecting us to foreign currency risks.
In addition, we charge our international subsidiaries on a
monthly basis for their use of intellectual property and
technology and for certain corporate services provided by eBay
and by PayPal. These charges are denominated in Euros and these
forecasted inter-company transactions represent a foreign
currency cash flow exposure. We purchase foreign exchange
contracts, generally with maturities of 12 months or less,
to reduce the volatility of cash flows related primarily to
forecasted revenue and intercompany transactions denominated in
certain foreign currencies. The objective of the foreign
exchange contracts is to better ensure that the
U.S. dollar-equivalent cash flows are not adversely
affected by changes in the U.S. dollar/foreign currency
exchange rate. Pursuant to Financial Accounting Standards
No. 133 “Accounting for Derivative Instruments and
Hedging Activities” (FAS 133), we expect the hedge of
certain of these forecasted transactions to be highly effective
in offsetting potential changes in cash flows attributed to a
change in the U.S. dollar/foreign currency exchange rate.
Accordingly, the effective portion of the derivative’s gain
or loss is initially reported as a component of accumulated
other comprehensive income (loss) and subsequently reclassified
into the financial statements line item in which the hedged item
is recorded in the same period the forecasted transaction
affects earnings.

 

During the year ended December 31, 2008 the realized gains
on these hedges were $17.1 million. During the years ended
December 31, 2007 and 2006, the realized gains and losses
related to these hedges were not significant. The notional
amount of our economic hedges designated for hedge accounting
treatment was $428.9 million and $515.7 as of
December 31, 2008 and 2007, respectively. As of
December 31, 2008, net of losses, our unrealized gains
related to economic hedges recorded to accumulated other
comprehensive income was $40.5 million. The loss, net of
gains, recorded to accumulated other comprehensive income as of
December 31, 2007 was not significant. We did not have any
economic hedges in place as of December 31, 2006.

 

 

We transact business in various foreign currencies and have significant international revenues as well as costs denominated in foreign currencies, subjecting us to foreign currency risk. In addition, we charge our international subsidiaries on a monthly basis for their use of intellectual property and technology and for certain corporate services provided by eBay and by PayPal. These charges are denominated in Euros and these forecasted inter-company transactions represent a foreign currency cash flow exposure. We purchase foreign exchange contracts, generally with maturities of 12 months or less, to reduce the volatility of cash flows primarily related to forecasted revenue and intercompany transactions denominated in certain foreign currencies. The objective of the foreign exchange contracts is to better ensure that the U.S. dollar-equivalent cash flows are not adversely affected by changes in the U.S. dollar/foreign currency exchange rate. Pursuant to Financial Accounting Standards No. 133 “Accounting for Derivative Instruments and Hedging Activities” (“FAS 133”), we expect the hedge of certain of these forecasted transactions to be highly effective in offsetting potential changes in cash flows attributed to a change in the U.S. dollar/foreign currency exchange rate. Accordingly, the effective portion of the derivative’s gain or loss is initially reported as a component of accumulated other comprehensive income (loss) and subsequently reclassified into the financial statements line item in which the hedged item is recorded in the same period the forecasted transaction affects earnings.

 

During the years ended December 31, 2007, 2006 and 2005, the realized gains and losses related to these hedges were not significant. The notional amount of our economic hedges receiving hedge accounting treatment was $515.7 million and $203.0 million as of December 31, 2007 and 2005, respectively. The loss, net of gains, recorded to accumulated other comprehensive income as of December 31, 2007 and 2005 was not significant. We did not have any economic hedges in place as of December 31, 2006.

 

 

We transact business in various foreign currencies and have
significant international revenues as well as costs denominated
in foreign currencies, subjecting us to foreign currency risk.
In addition, we charge our international subsidiaries on a
monthly basis for their use of intellectual property and
technology and for certain corporate services provided by eBay
and by PayPal. These charges are denominated in Euros and these
forecasted inter-company transactions represent a foreign
currency cash flow exposure. We purchase foreign exchange
contracts, generally with maturities of 12 months or less,
to reduce the volatility of cash flows primarily related to
forecasted revenue and intercompany transactions denominated in
certain foreign currencies. The objective of the foreign
exchange contracts is to better ensure that the
U.S. dollar-equivalent cash flows are not adversely
affected by changes in the U.S. dollar/foreign currency
exchange rate. Pursuant to Financial Accounting Standards
No. 133 “Accounting for Derivative Instruments and
Hedging Activities” (“FAS 133”), we expect
the hedge of certain of these forecasted transactions to be
highly effective in offsetting potential changes in cash flows
attributed to a change in the U.S. dollar/foreign currency
exchange rate. Accordingly, the effective portion of the
derivative’s gain or loss is initially reported as a
component of accumulated other comprehensive income (loss) and
subsequently reclassified into the financial statements line
item in which the hedged item is recorded in the same period the
forecasted transaction affects earnings.

 

During the years ended December 31, 2007, 2006 and 2005,
the realized gains and losses related to these hedges were not
significant. The notional amount of our economic hedges
receiving hedge accounting treatment was $515.7 million and
$203.0 million as of December 31, 2007 and 2005,
respectively. The loss, net of gains, recorded to accumulated
other comprehensive income as of December 31, 2007 and 2005
was not significant. We did not have any economic hedges in
place as of December 31, 2006.

 

 

We enter into various intercompany arrangements primarily denominated in Euros and British pounds. To reduce foreign exchange risk related to these inter-company arrangements for 2007, we entered into foreign exchange contracts during the three and nine months ended September 30, 2007. The objective of the foreign exchange contracts is to ensure that the U.S. dollar-equivalent cash flows are not adversely affected by changes in the Euro/U.S. dollar or the British pound/U.S. dollar exchange rates. Pursuant to SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” we expect the hedge of certain of these forecasted transactions using the foreign exchange contracts to be highly effective in offsetting potential changes in cash flows attributed to a change in the Euro/U.S. dollar or the British pound/U.S. dollar exchange rates. During the three and nine months ended September 30, 2006 and 2007, the realized gains and losses related to these hedges were not significant. The

 

We enter into various intercompany arrangements primarily denominated in Euros and British pounds. To reduce foreign exchange risk related to these inter-company arrangements for fiscal 2007, we entered into foreign exchange contracts during the three and six months ended June 30, 2007. The objective of the foreign exchange contracts is to ensure that the U.S. dollar-equivalent cash flows are not adversely affected by changes in the Euro/U.S. dollar and the British pound/U.S. dollar exchange rates. Pursuant to SFAS No. 133 “Accounting for Derivative Instruments and Hedging Activities” (“FAS 133”), we expect the hedge of certain of these forecasted transactions using the foreign exchange contracts to be highly effective in offsetting potential changes in cash flows attributed to a change in the Euro/U.S. dollar and the British pound/U.S. dollar exchange rates. During the three and six months ended June 30, 2006 and 2007, the realized gains and losses related to these hedges were not significant. The notional amount of our hedges receiving cash flow hedge accounting treatment was $241.4 million and the net loss related to these hedges recorded to accumulated other comprehensive income as of June 30, 2007 was not significant.

 

 

We enter into various intercompany arrangements primarily denominated in Euros and British pounds. To reduce foreign exchange risk related to these inter-company arrangements for fiscal 2007, we entered into foreign exchange contracts during the three months ended March 31, 2007. The objective of the foreign exchange contracts is to ensure that the U.S. dollar-equivalent cash flows are not adversely affected by changes in the U.S. dollar/Euro and the U.S. dollar/British pound exchange rates. Pursuant to SFAS No. 133 “Accounting for Derivative Instruments and Hedging Activities” (FAS 133), we expect the hedge of certain of these forecasted transactions using the foreign exchange contracts to be highly effective in offsetting potential changes in cash flows attributed to a change in the U.S. dollar/Euro and the U.S. dollar/British pound exchange rates. During the three months ended March 31, 2006 and 2007, the realized gains and losses related to these hedges were not significant. The notional amount of our hedges receiving cash flow hedge accounting treatment was $348.1 million and the net loss related to these hedges recorded to accumulated other comprehensive income as of March 31, 2007 was not significant.

 

 

We currently charge our international subsidiaries on a monthly basis for their use of intellectual property and technology and for certain corporate services provided by eBay and by PayPal. These charges are denominated in Euros and these forecasted inter-company transactions represent a foreign currency cash flow exposure. To reduce foreign exchange risk relating to these forecasted inter-company transactions, we entered into forward foreign exchange contracts during the year ended December 31, 2006. The objective of the forward contracts is to better ensure that the U.S. dollar-equivalent cash flows are not adversely affected by changes in the U.S. dollar/Euro exchange rate. Pursuant to Financial Accounting Standards No. 133 “Accounting for Derivative Instruments and Hedging Activities” (FAS 133), we expect the hedge of certain of these forecasted transactions to be highly effective in offsetting potential changes in cash flows attributed to a change in the U.S. dollar/Euro exchange rate. Accordingly, we record as a component of accumulated other comprehensive income all unrealized gains and losses related to the forward contracts that receive hedge accounting treatment. We record all unrealized gains and losses in interest and other income, net, related to the forward contracts that do not receive hedge accounting treatment pursuant to FAS 133. During the years ended December 31, 2005 and 2006, the realized gains and losses related to these hedges were not significant. The notional amount of our economic hedges receiving hedge accounting treatment and the losses, net of gains, recorded to accumulated other comprehensive income as of December 31, 2005 was $203 million and $200,000, respectively. We did not have any economic hedges in place as of December 31, 2006.

 

 

We currently charge our international subsidiaries on a monthly basis for their use of intellectual property and technology and for certain corporate services provided by eBay and PayPal. These charges are denominated in Euros and these forecasted inter-company transactions represent a foreign currency cash flow exposure. To reduce foreign exchange risk relating to these forecasted inter-company transactions, we entered into forward foreign exchange contracts during the three months ended June 30, 2006. The objective of the forward contracts is to ensure that the U.S. dollar-equivalent cash flows are not adversely affected by changes in the U.S. dollar/Euro exchange rate. Pursuant to Statement of Financial Accounting Standards No. 133 “Accounting for Derivative Instruments and Hedging Activities” (FAS 133), we expect the hedge of certain of these forecasted transactions using the forward contracts to be highly effective in offsetting potential changes in cash flows attributed to a change in the U.S. dollar/Euro exchange rate. Accordingly, we record as a component of other comprehensive income all unrealized gains and losses related to the forward contracts that receive hedge accounting treatment. We record all unrealized gains and losses in interest and accumulated other income, net, related to the forward contracts that do not receive hedge accounting treatment pursuant to FAS 133. During the three and six months ended June 30, 2005 and 2006, the realized gains and losses related to these hedges were not significant. The notional amount of our economic hedges receiving hedge accounting treatment and the loss, net of gains, recorded to accumulated other comprehensive income as of June 30, 2006 were $67.7 million and $2.9 million, respectively.

 

 

(a) Evaluation of disclosure controls and procedures.  Based on the evaluation of our disclosure controls and procedures (as defined in Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) required by Securities Exchange Act Rules 13a-15(b) or 15d-15(b), our Chief Executive Officer and our Chief Financial Officer have concluded that as of the end of the period covered by this report, our disclosure controls and procedures were effective.

 

(b) Changes in internal controls.  There were no changes in our internal control over financial reporting that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.