FACEBOOK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies
Organization and Description of Business
Facebook was incorporated in Delaware in July 2004. Our mission is to make the world more open and
connected. We build products that support our mission by providing utility to Facebook users, Platform
developers, and marketers. We generate substantially all of our revenue from advertising and from fees
associated with our Payments infrastructure that enables users to purchase virtual and digital goods from our
Platform developers.
Basis of Presentation
We prepared the consolidated financial statements in accordance with U.S. generally accepted accounting
principles (GAAP). The consolidated financial statements include the accounts of Facebook, Inc. and its wholly
owned subsidiaries. All intercompany balances and transactions have been eliminated.
Use of Estimates
Conformity with GAAP requires the use of estimates and judgments that affect the reported amounts in the
consolidated financial statements and accompanying notes. These estimates form the basis for judgments we
make about the carrying values of our assets and liabilities, which are not readily apparent from other sources.
We base our estimates and judgments on historical information and on various other assumptions that we believe
are reasonable under the circumstances. GAAP requires us to make estimates and judgments in several areas,
including, but not limited to, those related to revenue recognition, collectability of accounts receivable,
contingent liabilities, fair value of share-based awards, fair value of financial instruments, fair value of acquired
intangible assets and goodwill, useful lives of intangible assets and property and equipment, and income taxes.
These estimates are based on management's knowledge about current events and expectations about actions we
may undertake in the future. Actual results could differ materially from those estimates.
Reclassifications
We have reclassified certain prior period amounts within our consolidated statements of income and cash
flows to conform to our current year presentation. These reclassifications did not affect previously reported
revenue, total costs and expenses, income from operations, net income in the consolidated statements of income,
or net cash provided by operating activities in the consolidated statements of cash flows.
Revenue Recognition
We generate substantially all of our revenue from advertising and payment processing fees. We recognize
revenue once all of the following criteria have been met:
·
persuasive evidence of an arrangement exists;
·
delivery of Facebook's obligations to our customer has occurred;
·
the price is fixed or determinable; and
·
collectability of the related receivable is reasonably assured.
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