Sohu.com (SOHU)

COSTS AND EXPENSES

Prior to 2007, most of the costs and expenses of the game department were related to product development and research. Accordingly, we recorded all such costs and expenses in product development expenses in the statements of operations. In 2007, in order to better present operating results and to enhance comparability with industry peers, we reclassify expenses in relation to game operations, mainly salary and benefits of game masters, from product development expenses to cost of online game revenues. To conform to current period presentations, the relevant amounts for prior periods have been reclassified. Such reclassification amounted to $1.3 million for the year ended December 31, 2006.

COSTS AND EXPENSES

COSTS AND EXPENSES

In the quarters prior to April 1, 2007, most of the costs and expenses of the game department were related to product development and research. Accordingly, we recorded all such costs and expenses in product development expenses in the statements of operations. Beginning April 1, 2007, in order to better present operating results and to enhance comparability with industry peers, we reclassify expenses in relation to game operations, mainly salary and benefits of game masters, from product development expenses to cost of online game revenues. To conform with current period presentations, the relevant amounts for prior periods have been reclassified. Such reclassification amounted to $275,000 for the three months ended March 31, 2007.

COSTS AND EXPENSES

Prior to 2007, most of the costs and expenses of the game department were related to product development and research. Accordingly, we recorded all such costs and expenses in product development expenses in the statements of operations. In 2007, in order to better present operating results and to enhance comparability with industry peers, we reclassify expenses in relation to game operations, mainly salary and benefits of game masters, from product development expenses to cost of online game revenues. To conform with current period presentations, the relevant amounts for prior periods have been reclassified. Such reclassification amounted to $1.3 million and $0.9 million for the years ended December 31, 2006 and 2005.

COSTS AND EXPENSES

Prior to 2007, most of the costs and expenses of the game department were related to product development and research. Accordingly, we recorded all
such costs and expenses in product development expenses in the statements of operations. In 2007, in order to better present operating results and to enhance comparability with industry peers, we reclassify expenses in relation to game operations,
mainly salary and benefits of game masters, from product development expenses to cost of online game revenues. To conform with current period presentations, the relevant amounts for prior periods have been reclassified. Such reclassification
amounted to $1.3 million and $0.9 million for the years ended December 31, 2006 and 2005.

COSTS AND EXPENSES

In quarters prior to April 1, 2007, costs and expenses associated with our online game segment were related to product development and research and an insignificant amount was related to online game operations. Accordingly, we had recorded all such costs and expenses in product development expenses in its statements of operations. Beginning April 1, 2007, in order to better present results of operations to enhance comparability with industry peers, we decided to reclassify the costs and expenses associated with our online game operations, which mainly consist of salaries and benefits of game masters, from product development expenses to cost of online game revenues. To conform with current period presentations, the relevant amounts for prior periods have been reclassified accordingly. Such reclassification amounted to $296,000 for the three months ended September 30, 2006, and $938,000 for the nine months ended September 30, 2006.

COSTS AND EXPENSES

In previous quarters, costs and expenses associated with the online game segment were related to product development and research and an insignificant amount was related to online game operations. Accordingly, we had recorded all such costs and expenses in product development expenses in the statements of operations. Beginning April 1, 2007, in order to better present results of operation to enhance comparability with industry peers, we decided to reclassify costs and expenses associated with online game operations, which mainly consist of salaries and benefits of game masters, from product development expenses to cost of online game revenues. To conform with current period presentations, the relevant amounts for prior periods have been reclassified accordingly. Such reclassification amounted to $275,000 and $319,000 for the three months ended March 31, 2007 and June 30, 2006, respectively, and $642,000 for the six months ended June 30, 2006.