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EBAY » Topics » Provisions for Doubtful Accounts and Authorized Credits

These excerpts taken from the EBAY 10-K filed Feb 29, 2008.
Provisions for Doubtful Accounts and Authorized Credits
 
We are exposed to losses due to uncollectible accounts and credits to sellers. Provisions for these items represent our estimate of actual losses and credits based on our historical experience, are monitored monthly, and are made at the time the related revenue is recognized. The provision for doubtful accounts is recorded as a charge to operating expense, while the authorized credits are recorded as a reduction of revenues. The following table illustrates the provision related to doubtful accounts and authorized credits as a percentage of net revenues for 2005, 2006, and 2007 (in thousands, except percentages):
 
                         
    Year Ended December 31,  
    2005     2006     2007  
 
Net revenues
  $ 4,552,401     $ 5,969,741     $ 7,672,329  
Provision for doubtful accounts and authorized credits
  $ 89,499     $ 100,729     $ 96,461  
Provision for doubtful accounts and authorized credits as a % of net revenues
    1.97 %     1.69 %     1.26 %
 
Historically, our actual losses and credits have been consistent with these provisions. However, future changes in trends could result in a material impact to future consolidated statements of income and cash flows. Based on our results for the year ended December 31, 2007, a 25 basis point deviation from our estimates would have resulted in


64

Table of Contents

an increase or decrease in operating income of approximately $19.2 million. The following analysis demonstrates, for illustrative purposes only, the potential effect a 25 basis point deviation from our estimates would have upon our consolidated financial statements and is not intended to provide a range of exposure or expected deviation (in thousands, except per share data):
 
                         
    −25 Basis
 		          +25 Basis
 		 
    Points     2007     Points  
 
Provision for doubtful accounts and related authorized credits
  $ 77,280     $ 96,461     $ 115,642  
Income from operations
    632,361       613,180       593,999  
Net income
    367,432       348,251       329,070  
Diluted earnings per share
  $ 0.27     $ 0.25     $ 0.24  
 
Provisions
for Doubtful Accounts and Authorized Credits


 



We are exposed to losses due to uncollectible accounts and
credits to sellers. Provisions for these items represent our
estimate of actual losses and credits based on our historical
experience, are monitored monthly, and are made at the time the
related revenue is recognized. The provision for doubtful
accounts is recorded as a charge to operating expense, while the
authorized credits are recorded as a reduction of revenues. The
following table illustrates the provision related to doubtful
accounts and authorized credits as a percentage of net revenues
for 2005, 2006, and 2007 (in thousands, except percentages):


 






















































































                         

 

 

Year Ended December 31,

 

 

 

2005

 

 

2006

 

 

2007

 
 


Net revenues


 

$

4,552,401

 

 

$

5,969,741

 

 

$

7,672,329

 


Provision for doubtful accounts and authorized credits


 

$

89,499

 

 

$

100,729

 

 

$

96,461

 


Provision for doubtful accounts and authorized credits as
a % of net revenues


 

 

1.97

%

 

 

1.69

%

 

 

1.26

%






 



Historically, our actual losses and credits have been consistent
with these provisions. However, future changes in trends could
result in a material impact to future consolidated statements of
income and cash flows. Based on our results for the year ended
December 31, 2007, a 25 basis point deviation from our
estimates would have resulted in





64




Table of Contents






an increase or decrease in operating income of approximately
$19.2 million. The following analysis demonstrates, for
illustrative purposes only, the potential effect a 25 basis
point deviation from our estimates would have upon our
consolidated financial statements and is not intended to provide
a range of exposure or expected deviation (in thousands,
except per share data):


 











































































































                         

 

 

−25 Basis



 

 

 

 

 

+25 Basis



 

 

 

Points

 

 

2007

 

 

Points

 
 


Provision for doubtful accounts and related authorized credits


 

$

77,280

 

 

$

96,461

 

 

$

115,642

 


Income from operations


 

 

632,361

 

 

 

613,180

 

 

 

593,999

 


Net income


 

 

367,432

 

 

 

348,251

 

 

 

329,070

 


Diluted earnings per share


 

$

0.27

 

 

$

0.25

 

 

$

0.24

 






 




This excerpt taken from the EBAY 10-K filed Feb 28, 2007.
Provisions for Doubtful Accounts and Authorized Credits
 
We are exposed to losses due to uncollectible accounts and credits to sellers. Provisions for these items represent our estimate of actual losses and credits based on our historical experience, are monitored monthly, and are made at the time the related revenue is recognized. The provision for doubtful accounts is recorded as a charge to operating expense, while the authorized credits are recorded as a reduction of revenues. The following table illustrates the provision related to doubtful accounts and authorized credits as a percentage of net revenues for 2004, 2005, and 2006 (in thousands, except percentages):
 
                         
    Year Ended December 31,  
    2004     2005     2006  
 
Net revenues
  $ 3,271,309     $ 4,552,401     $ 5,969,741  
Provision for doubtful accounts and authorized credits
  $ 90,942     $ 89,499     $ 100,729  
Provision for doubtful accounts and authorized credits as a % of net revenues
    2.78 %     1.97 %     1.69 %
 
Historically, our actual losses and credits have been consistent with these provisions. However, future changes in trends could result in a material impact to future consolidated statements of income and cash flows. Based on our results for the year ended December 31, 2006, a 25 basis point deviation from our estimates would have resulted in an increase or decrease in operating income of approximately $14.9 million. The following analysis demonstrates, for illustrative purposes only, the potential effect a 25 basis point deviation from our estimates would have upon our consolidated financial statements and is not intended to provide a range of exposure or expected deviation (in thousands, except per share data):
 
                         
    −25 Basis
 		          +25 Basis
 		 
    Points     2006     Points  
 
Provision for doubtful accounts and related authorized credits
  $ 85,805     $ 100,729     $ 115,653  
Income from operations
    1,437,880       1,422,956       1,408,032  
Net income
    1,140,563       1,125,639       1,110,715  
Diluted earnings per share
  $ 0.80     $ 0.79     $ 0.78  
 

EXCERPTS ON THIS PAGE:

10-K (2 sections)
Feb 29, 2008
10-K
Feb 28, 2007

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