FACEBOOK INC, 10-K filed on 1/29/2015
Annual Report
Document and Entity Information (USD $)
12 Months Ended
Dec. 31, 2014
Jun. 30, 2014
Jan. 27, 2015
Class A Common Stock
Jan. 27, 2015
Class B Common Stock
Document Information
 
 
 
 
Document Type
10-K 
 
 
 
Amendment Flag
false 
 
 
 
Document Period End Date
Dec. 31, 2014 
 
 
 
Document Fiscal Year Focus
2014 
 
 
 
Document Fiscal Period Focus
FY 
 
 
 
Trading Symbol
FB 
 
 
 
Entity Registrant Name
FACEBOOK INC 
 
 
 
Entity Central Index Key
0001326801 
 
 
 
Current Fiscal Year End Date
--12-31 
 
 
 
Entity Filer Category
Large Accelerated Filer 
 
 
 
Entity Common Stock, Shares Outstanding
 
 
2,236,333,833 
562,677,981 
Entity Public Float
 
$ 143,589,386,032 
 
 
Well-known Seasoned Issuer
Yes 
 
 
 
Entity Voluntary Filers
No 
 
 
 
Entity Current Reporting Status
Yes 
 
 
 
CONSOLIDATED BALANCE SHEETS (USD $)
In Millions, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Current assets:
 
 
Cash and cash equivalents
$ 4,315 
$ 3,323 
Marketable securities
6,884 
8,126 
Accounts receivable, net of allowances for doubtful accounts of $39 and $38 as of December 31, 2014 and December 31, 2013, respectively
1,678 
1,109 
Prepaid expenses and other current assets
793 
512 
Total current assets
13,670 
13,070 
Property and equipment, net
3,967 
2,882 
Intangible assets, net
3,929 
883 
Goodwill
17,981 
839 
Other assets
637 
221 
Total assets
40,184 
17,895 
Current liabilities:
 
 
Accounts payable
176 
87 
Partners payable
202 
181 
Accrued expenses and other current liabilities
866 
555 
Deferred revenue and deposits
66 
38 
Current portion of capital lease obligations
114 
239 
Total current liabilities
1,424 
1,100 
Capital lease obligations, less current portion
119 
237 
Other liabilities
2,545 
1,088 
Total liabilities
4,088 
2,425 
Commitments and contingencies
   
   
Stockholders' equity:
 
 
Common stock, $0.000006 par value; 5,000 million Class A shares authorized, 2,234 million and 1,970 million shares issued and outstanding, including 13 million and 6 million outstanding shares subject to repurchase, as of December 31, 2014 and December 31, 2013, respectively; 4,141 million Class B shares authorized, 563 million and 577 million shares issued and outstanding, including 6 million outstanding shares subject to repurchase, as of December 31, 2014 and December 31, 2013, respectively
0 
0 
Additional paid-in capital
30,225 
12,297 
Accumulated other comprehensive (loss) income
(228)
14 
Retained earnings
6,099 
3,159 
Total stockholders' equity
36,096 
15,470 
Total liabilities and stockholders' equity
$ 40,184 
$ 17,895 
CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)
In Millions, except Share data, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Current assets:
 
 
Accounts receivable, allowances for doubtful accounts
$ 39 
$ 38 
Stockholders' equity:
 
 
Common stock, par value (in dollars per share)
$ 0.000006 
$ 0.000006 
Class A Common Stock
 
 
Stockholders' equity:
 
 
Common stock, par value (in dollars per share)
$ 0.000006 
 
Common stock, shares authorized
5,000,000,000 
5,000,000,000 
Common stock, shares, issued
2,234,113,007 
1,970,000,000 
Common stock, shares, outstanding
2,234,113,007 
1,970,000,000 
Common stock, outstanding shares subject to repurchase
13,000,000 
6,000,000 
Class B Common Stock
 
 
Stockholders' equity:
 
 
Common stock, par value (in dollars per share)
$ 0.000006 
 
Common stock, shares authorized
4,141,000,000 
4,141,000,000 
Common stock, shares, issued
562,792,201 
577,000,000 
Common stock, shares, outstanding
562,792,201 
577,000,000 
Common stock, outstanding shares subject to repurchase
6,000,000 
6,000,000 
CONSOLIDATED STATEMENTS OF INCOME (USD $)
In Millions, except Per Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Revenue
$ 12,466 
$ 7,872 
$ 5,089 
Costs and expenses:
 
 
 
Cost of revenue
2,153 
1,875 
1,364 
Research and development
2,666 
1,415 
1,399 
Marketing and sales
1,680 
997 
896 
General and administrative
973 
781 
892 
Total costs and expenses
7,472 
5,068 
4,551 
Income from operations
4,994 
2,804 
538 
Interest and other income/(expense), net
(84)
(50)
(44)
Income before provision for income taxes
4,910 
2,754 
494 
Provision for income taxes
1,970 
1,254 
441 
Net income
2,940 
1,500 
53 
Less: Net income attributable to participating securities
15 
9 
21 
Net income attributable to Class A and Class B common stockholders
2,925 
1,491 
32 
Earnings per share attributable to Class A and Class B common stockholders:
 
 
 
Basic (in dollars per share)
$ 1.12 
$ 0.62 
$ 0.02 
Diluted (in dollars per share)
$ 1.10 
$ 0.60 
$ 0.01 
Weighted average shares used to compute earnings per share attributable to Class A and Class B common stockholders:
 
 
 
Basic (in shares)
2,614 
2,420 
2,006 
Diluted (in shares)
2,664 
2,517 
2,166 
Share-based compensation expense included in costs and expenses:
 
 
 
Share-based compensation expense
1,837 
906 
1,572 
Cost of revenue
 
 
 
Share-based compensation expense included in costs and expenses:
 
 
 
Share-based compensation expense
62 
42 
88 
Research and development
 
 
 
Share-based compensation expense included in costs and expenses:
 
 
 
Share-based compensation expense
1,328 
604 
843 
Marketing and sales
 
 
 
Share-based compensation expense included in costs and expenses:
 
 
 
Share-based compensation expense
249 
133 
306 
General and administrative
 
 
 
Share-based compensation expense included in costs and expenses:
 
 
 
Share-based compensation expense
$ 198 
$ 127 
$ 335 
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Statement of Comprehensive Income [Abstract]
 
 
 
Net income
$ 2,940 
$ 1,500 
$ 53 
Other comprehensive income (loss):
 
 
 
Change in foreign currency translation adjustment
(239)
11 
9 
Change in unrealized gain/loss on available-for-sale investments, net of tax
(3)
(1)
1 
Change in unrealized gain/loss on derivative, net of tax
0 
2 
(2)
Comprehensive income
$ 2,698 
$ 1,512 
$ 61 
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (USD $)
In Millions, except Share data, unless otherwise specified
Total
Convertible Preferred Stock
Convertible Preferred Stock
Series A - E Preferred Stock
Class A and Class B Common Stock
Class A and Class B Common Stock
Series A - E Preferred Stock
Additional Paid-In Capital
Additional Paid-In Capital
Series A - E Preferred Stock
Accumulated Other Comprehensive (Loss) Income
Retained Earnings
Total Stockholders' Equity
Total Stockholders' Equity
Series A - E Preferred Stock
Common stock, value, outstanding beginning at Dec. 31, 2011
 
 
 
$ 0 
 
 
 
 
 
 
 
Convertible preferred stock, value, outstanding beginning at Dec. 31, 2011
 
615 
 
 
 
 
 
 
 
 
 
Total Stockholders' Equity, beginning at Dec. 31, 2011
 
 
 
 
 
2,684 
 
(6)
1,606 
4,899 
 
Convertible preferred stock, shares, outstanding beginning at Dec. 31, 2011
 
543,000,000 
 
 
 
 
 
 
 
 
 
Common stock, shares outstanding beginning at Dec. 31, 2011
 
 
 
1,330,000,000 
 
 
 
 
 
 
 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
 
 
 
 
 
Issuance of common stock, shares
 
 
 
180,000,000 
 
 
 
 
 
 
 
Issuance of common stock, net of issuance costs, value
 
 
 
0 
 
6,760 
 
 
 
6,760 
 
Issuance of common stock for cash upon exercise of stock options, shares
 
 
 
135,000,000 
 
 
 
 
 
 
 
Issuance of common stock for cash upon exercise of stock options, value
 
 
 
0 
 
17 
 
 
 
17 
 
Issuance of common stock related to nonemployees for past services, shares
 
 
 
0 
 
 
 
 
 
 
 
Issuance of common stock related to nonemployees for past services, value
 
 
 
0 
 
1 
 
 
 
1 
 
Issuance of common stock related to acquisitions, shares
 
 
 
26,000,000 
 
 
 
 
 
 
 
Issuance of common stock related to acquisitions, value
 
 
 
0 
 
274 
 
 
 
274 
 
Issuance of common stock for settlement of restricted stock units (RSUs)
 
 
 
279,000,000 
 
 
 
 
 
0 
 
Shares withheld related to net share settlement, shares
 
 
 
(123,000,000)
 
 
 
 
 
 
 
Shares withheld related to net share settlement, value
 
 
 
 
 
(2,862)
 
 
 
(2,862)
 
Conversion of stock into common stock
 
 
(543,000,000)
 
 
 
 
 
 
 
 
Conversion of stock, amount converted
 
 
(615)
 
 
 
 
 
 
 
 
Conversion of stock, shares
 
 
 
 
545,000,000 
 
 
 
 
 
 
Conversion of stock, value
 
 
 
 
0 
 
615 
 
 
 
0 
Share-based compensation, related to employee share-based awards
 
 
 
 
 
1,572 
 
 
 
1,572 
 
Tax benefit from share-based award activity
 
 
 
 
 
1,033 
 
 
 
1,033 
 
Other comprehensive income
 
 
 
 
 
 
 
8 
 
8 
 
Net income
53 
 
 
 
 
 
 
 
53 
53 
 
Common stock, value, outstanding ending at Dec. 31, 2012
 
 
 
0 
 
 
 
 
 
 
 
Convertible preferred stock, value, outstanding ending at Dec. 31, 2012
 
0 
 
 
 
 
 
 
 
 
 
Total Stockholders' Equity, ending at Dec. 31, 2012
 
 
 
 
 
10,094 
 
2 
1,659 
11,755 
 
Convertible preferred stock, shares, outstanding ending at Dec. 31, 2012
 
0 
 
 
 
 
 
 
 
 
 
Common stock, shares outstanding ending at Dec. 31, 2012
 
 
 
2,372,000,000 
 
 
 
 
 
 
 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
 
 
 
 
 
Issuance of common stock, shares
 
 
 
27,000,000 
 
 
 
 
 
 
 
Issuance of common stock, net of issuance costs, value
 
 
 
0 
 
1,478 
 
 
 
1,478 
 
Issuance of common stock for cash upon exercise of stock options, shares
 
 
 
101,000,000 
 
 
 
 
 
 
 
Issuance of common stock for cash upon exercise of stock options, value
 
 
 
0 
 
26 
 
 
 
26 
 
Issuance of common stock related to nonemployees for past services, shares
 
 
 
0 
 
 
 
 
 
 
 
Issuance of common stock related to nonemployees for past services, value
 
 
 
0 
 
3 
 
 
 
3 
 
Issuance of common stock related to acquisitions, shares
 
 
 
9,000,000 
 
 
 
 
 
 
 
Issuance of common stock related to acquisitions, value
 
 
 
0 
 
77 
 
 
 
77 
 
Issuance of common stock for settlement of restricted stock units (RSUs)
 
 
 
65,000,000 
 
 
 
 
 
0 
 
Shares withheld related to net share settlement, shares
 
 
 
(27,000,000)
 
 
 
 
 
 
 
Shares withheld related to net share settlement, value
 
 
 
 
 
(889)
 
 
 
(889)
 
Share-based compensation, related to employee share-based awards
 
 
 
 
 
906 
 
 
 
906 
 
Tax benefit from share-based award activity
 
 
 
 
 
602 
 
 
 
602 
 
Other comprehensive income
 
 
 
 
 
 
 
12 
 
12 
 
Net income
1,500 
 
 
 
 
 
 
 
1,500 
1,500 
 
Common stock, value, outstanding ending at Dec. 31, 2013
 
 
 
0 
 
 
 
 
 
 
 
Convertible preferred stock, value, outstanding ending at Dec. 31, 2013
 
0 
 
 
 
 
 
 
 
 
 
Total Stockholders' Equity, ending at Dec. 31, 2013
15,470 
 
 
 
 
12,297 
 
14 
3,159 
15,470 
 
Convertible preferred stock, shares, outstanding ending at Dec. 31, 2013
 
0 
 
 
 
 
 
 
 
 
 
Common stock, shares outstanding ending at Dec. 31, 2013
 
 
 
2,547,000,000 
 
 
 
 
 
 
 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
 
 
 
 
 
Issuance of common stock for cash upon exercise of stock options, shares
 
 
 
9,000,000 
 
 
 
 
 
 
 
Issuance of common stock for cash upon exercise of stock options, value
 
 
 
0 
 
18 
 
 
 
18 
 
Issuance of common stock related to acquisitions, shares
 
 
 
201,000,000 
 
 
 
 
 
 
 
Issuance of common stock related to acquisitions, value
 
 
 
0 
 
14,344 
 
 
 
14,344 
 
Issuance of common stock for settlement of restricted stock units (RSUs)
 
 
 
41,000,000 
 
 
 
 
 
0 
 
Shares withheld related to net share settlement, shares
 
 
 
(1,000,000)
 
 
 
 
 
 
 
Shares withheld related to net share settlement, value
 
 
 
 
 
(73)
 
 
 
(73)
 
Share-based compensation, related to employee share-based awards
 
 
 
 
 
1,786 
 
 
 
1,786 
 
Tax benefit from share-based award activity
 
 
 
 
 
1,853 
 
 
 
1,853 
 
Other comprehensive income
 
 
 
 
 
 
 
(242)
 
(242)
 
Net income
2,940 
 
 
 
 
 
 
 
2,940 
2,940 
 
Common stock, value, outstanding ending at Dec. 31, 2014
 
 
 
0 
 
 
 
 
 
 
 
Convertible preferred stock, value, outstanding ending at Dec. 31, 2014
 
0 
 
 
 
 
 
 
 
 
 
Total Stockholders' Equity, ending at Dec. 31, 2014
$ 36,096 
 
 
 
 
$ 30,225 
 
$ (228)
$ 6,099 
$ 36,096 
 
Convertible preferred stock, shares, outstanding ending at Dec. 31, 2014
 
0 
 
 
 
 
 
 
 
 
 
Common stock, shares outstanding ending at Dec. 31, 2014
 
 
 
2,797,000,000 
 
 
 
 
 
 
 
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Cash flows from operating activities
 
 
 
Net income
$ 2,940 
$ 1,500 
$ 53 
Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
1,243 
1,011 
649 
Lease abandonment
(31)
117 
8 
Share-based compensation
1,786 
906 
1,572 
Deferred income taxes
(210)
(37)
(186)
Tax benefit from share-based award activity
1,853 
602 
1,033 
Excess tax benefit from share-based award activity
(1,869)
(609)
(1,033)
Other
7 
56 
15 
Changes in assets and liabilities:
 
 
 
Accounts receivable
(610)
(378)
(170)
Prepaid expenses and other current assets
(123)
355 
(465)
Other assets
(216)
(142)
2 
Accounts payable
31 
26 
1 
Partners payable
(28)
12 
(2)
Accrued expenses and other current liabilities
328 
(38)
152 
Deferred revenue and deposits
10 
8 
(60)
Other liabilities
346 
833 
43 
Net cash provided by operating activities
5,457 
4,222 
1,612 
Cash flows from investing activities
 
 
 
Purchases of property and equipment
(1,831)
(1,362)
(1,235)
Purchases of marketable securities
(9,104)
(7,433)
(10,307)
Sales of marketable securities
8,438 
2,988 
2,100 
Maturities of marketable securities
1,909 
3,563 
3,333 
Acquisitions of businesses, net of cash acquired, and purchases of intangible assets
(4,975)
(368)
(911)
Change in restricted cash and deposits
(348)
(11)
(2)
Other investing activities, net
(2)
(1)
(2)
Net cash used in investing activities
(5,913)
(2,624)
(7,024)
Cash flows from financing activities
 
 
 
Net proceeds from issuance of common stock
0 
1,478 
6,760 
Taxes paid related to net share settlement
(73)
(889)
(2,862)
Proceeds from exercise of stock options
18 
26 
17 
Proceeds from long-term debt, net of issuance cost
0 
0 
1,496 
Repayment of long-term debt
0 
(1,500)
0 
Proceeds from sale and lease-back transactions
0 
0 
205 
Principal payments on capital lease obligations
(243)
(391)
(366)
Excess tax benefit from share-based award activity
1,869 
609 
1,033 
Net cash provided by (used in) financing activities
1,571 
(667)
6,283 
Effect of exchange rate changes on cash and cash equivalents
(123)
8 
1 
Net increase in cash and cash equivalents
992 
939 
872 
Cash and cash equivalents at beginning of period
3,323 
2,384 
1,512 
Cash and cash equivalents at end of period
4,315 
3,323 
2,384 
Cash paid during the period for:
 
 
 
Interest
14 
38 
38 
Income taxes
184 
82 
184 
Cash received during the period for:
 
 
 
Income taxes
6 
421 
131 
Non-cash investing and financing activities:
 
 
 
Fair value of shares issued related to acquisitions of businesses
14,344 
77 
274 
Net change in accounts payable and accrued expenses and other current liabilities
 
 
 
Non-cash investing and financing activities:
 
 
 
Property and equipment incurred but not yet paid
91 
53 
(40)
Property and equipment acquired under capital leases
 
 
 
Non-cash investing and financing activities:
 
 
 
Property and equipment incurred but not yet paid
$ 0 
$ 11 
$ 340 
Summary of Significant Accounting Policies
Summary of Significant Accounting Policies
Summary of Significant Accounting Policies
Organization and Description of Business
Facebook was incorporated in Delaware in July 2004. Our mission is to give people the power to share and make the world more open and connected. We build products that support our mission by creating value for people, marketers, and developers. 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 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 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.
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 our obligations to our customer has occurred;
•
the price is fixed or determinable; and
•
collectability of the related receivable is reasonably assured.
Revenue for the years ended December 31, 2014, 2013, and 2012 consists of the following (in millions):
 
Year Ended December 31,
 
2014
 
2013
 
2012
Advertising
$
11,492

 
$
6,986

 
$
4,279

Payments and other fees
974

 
886

 
810

Total revenue
$
12,466

 
$
7,872

 
$
5,089

 
Advertising
Advertising revenue is generated by displaying ad products on the Facebook properties, including our mobile applications, and third-party affiliated websites or mobile applications. The arrangements are evidenced by either online acceptance of terms and conditions or contracts that stipulate the types of advertising to be delivered, the timing and the pricing. Marketers pay for ad products either directly or through their relationships with advertising agencies, based on the number of clicks made by our users, the number of actions taken by our users, or the number of impressions delivered. The typical term of an advertising arrangement is approximately 30 days with billing generally occurring after the delivery of the advertisement.
We recognize revenue from the delivery of click-based ads in the period in which a user clicks on the content, and action-based ads in the period in which a user takes the action the marketer contracted for. We recognize revenue from the display of impression-based ads in the contracted period in which the impressions are delivered. Impressions are considered delivered when an ad is displayed to users.
Payments and Other Fees
We enable Payments from people to purchase virtual and digital goods from our developers. People can transact and make payments on the Facebook website by using debit cards and credit cards, PayPal, mobile phone payments, gift cards, or other methods.
When a person engages in a payment transaction for the purchase of a virtual or digital good from a developer, we remit to the developer an amount that is based on the total amount of the transaction less the processing fee that we charge the developer. The price of the purchase is an amount that is solely determined by the developer. Our revenue is the net amount of the transaction, representing our processing fee for the service performed. We record revenue on a net basis as we do not consider ourselves to be the principal in the sale of the virtual or digital good to the person. Additionally, we record all Payments revenue at the time of the purchase of the related virtual goods, net of estimated refunds or chargebacks
Other fees, which includes our ad serving and measurement products and the delivery of virtual reality platform devices, were not material in all periods presented in our financial statements.
Revenue is recognized net of applicable sales and other taxes.
Cost of Revenue
Our cost of revenue consists primarily of expenses associated with the delivery and distribution of our products. These include expenses related to the operation of our data centers such as facility and server equipment depreciation, facility and server equipment rent expense, energy and bandwidth costs, support and maintenance costs, and salaries, benefits, and share-based compensation for employees on our operations teams. Cost of revenue also includes credit card and other transaction fees related to processing customer transactions, amortization of intangible assets, and cost of virtual reality platform device inventory sold.
Share-based Compensation
We account for share-based employee compensation plans under the fair value recognition and measurement provisions of GAAP. Those provisions require all share-based payments to employees, including grants of stock options and restricted stock units (RSUs), to be measured based on the grant date fair value of the awards, with the resulting expense generally recognized on a straight-line basis in our consolidated statements of income over the period during which the employee is required to perform service in exchange for the award. The majority of our awards are earned over a service period of four to five years.
Share-based compensation expense is recorded net of estimated forfeitures in our consolidated statements of income and as such, only those share-based awards that we expect to vest are recorded. We estimate the forfeiture rate based on historical forfeitures of equity awards and adjust the rate to reflect changes in facts and circumstances, if any. We will revise our estimated forfeiture rate if actual forfeitures differ from our initial estimates. 
We have historically issued unvested restricted shares to employee stockholders of certain acquired companies. As these awards are generally subject to continued post-acquisition employment, we have accounted for them as post-acquisition share-based compensation expense. We recognize compensation expense equal to the grant date fair value of the common stock on a straight-line basis over the period during which the employee is required to perform service in exchange for the award.
During the years ended December 31, 2014, 2013, and 2012, we realized tax benefits from share-based award activity of $1.85 billion, $602 million, and $1.03 billion, respectively. These amounts reflect the extent that the total reduction to our income tax liability from share-based award activity was greater than the amount of the deferred tax assets that we had previously recorded in anticipation of these benefits. These amounts are the aggregate of the individual transactions in which the reduction to our income tax liability was greater than the deferred tax assets that we recorded, reduced by any individual transactions in which the reduction to our income tax liability was less than the deferred tax assets that were recorded. These net amounts were recorded as an adjustment to stockholders' equity in each period, as an increase to cash flows from operating activities, and were not recognized in our consolidated statements of income.
In addition, we reported excess tax benefits that decreased our cash flows from operating activities and increased our cash flows from financing activities for the years ended December 31, 2014, 2013, and 2012, by $1.87 billion, $609 million, and $1.03 billion, respectively. The amounts of these excess tax benefits reflect the total of the individual transactions in which the reduction to our income tax liability was greater than the deferred tax assets that were recorded, but were not reduced by any of the individual transactions in which the reduction to our income tax liability was less than the deferred tax assets that were recorded.
Income Taxes
We recognize income taxes under the asset and liability method. We recognize deferred income tax assets and liabilities for the expected future consequences of temporary differences between the financial reporting and tax bases of assets and liabilities. These differences are measured using the enacted statutory tax rates that are expected to apply to taxable income for the years in which differences are expected to reverse. We recognize the effect on deferred income taxes of a change in tax rates in income in the period that includes the enactment date.
We record a valuation allowance to reduce our deferred tax assets to the net amount that we believe is more likely than not to be realized. We consider all available evidence, both positive and negative, including historical levels of income, expectations and risks associated with estimates of future taxable income and ongoing tax planning strategies in assessing the need for a valuation allowance.
We recognize tax benefits from uncertain tax positions only if we believe that it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. We make adjustments to these reserves when facts and circumstances change, such as the closing of a tax audit or the refinement of an estimate. The provision for income taxes includes the effects of any reserves that are considered appropriate, as well as the related net interest and penalties.
Advertising Expense
Advertising costs are expensed when incurred and are included in marketing and sales expenses in the accompanying consolidated statements of income. We incurred advertising expenses of $135 million, $117 million, and $67 million for the years ended December 31, 2014, 2013, and 2012, respectively.
Cash and Cash Equivalents, and Marketable Securities
Cash and cash equivalents primarily consist of cash on deposit with banks and investments in money market funds with maturities of 90 days or less from the date of purchase.
We hold investments in marketable securities, consisting of U.S. government securities, U.S. government agency securities, and corporate debt securities. We classify our marketable securities as available-for-sale investments in our current assets because they represent investments of cash available for current operations. Our available-for-sale investments are carried at estimated fair value with any unrealized gains and losses, net of taxes, included in accumulated other comprehensive (loss) income in stockholders' equity. Unrealized losses are charged against interest and other income/(expense), net when a decline in fair value is determined to be other-than-temporary. We have not recorded any such impairment charge in the periods presented. We determine realized gains or losses on sale of marketable securities on a specific identification method, and record such gains or losses as interest and other income/(expense), net.
We classify certain restricted cash balances within prepaid expenses and other current assets and other assets on the accompanying consolidated balance sheets based upon the term of the remaining restrictions.
Fair Value of Financial Instruments
We apply fair value accounting for all financial assets and liabilities and non-financial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis. We define fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities, which are required to be recorded at fair value, we consider the principal or most advantageous market in which we would transact and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability, such as risks inherent in valuation techniques, transfer restrictions and credit risk. Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:
Level 1-Quoted prices in active markets for identical assets or liabilities.
Level 2-Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3-Inputs that are generally unobservable and typically reflect management's estimate of assumptions that market participants would use in pricing the asset or liability.
Our valuation techniques used to measure the fair value of money market funds and marketable debt securities were derived from quoted market prices or alternative pricing sources and models utilizing market observable inputs. Our valuation technique used to measure the fair value of our contingent consideration liability was based on the present value of probability-weighted future cash flows related to the contingent earn-out criteria and the fair value of our common stock on each reporting date.
Accounts Receivable and Allowance for Doubtful Accounts
Accounts receivable are recorded and carried at the original invoiced amount less an allowance for any potential uncollectible amounts. We make estimates for the allowance for doubtful accounts based upon our assessment of various factors, including historical experience, the age of the accounts receivable balances, credit quality of our customers, current economic conditions, and other factors that may affect customers' ability to pay.
Property and Equipment
Property and equipment, which includes amounts recorded under capital leases, are stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets or the remaining lease term, in the case of a capital lease, whichever is shorter.
The estimated useful lives of property and equipment are described below:
Property and Equipment 
 
Useful Life 
Network equipment
 
Three to five years
Buildings
 
Four to 20 years
Computer software, office equipment and other
 
Three to five years
Leased equipment and leasehold improvements
 
Lesser of estimated useful life or remaining lease term
 
Land and assets held within construction in progress are not depreciated. Construction in progress is related to the construction or development of property and equipment that have not yet been placed in service for their intended use.
The cost of maintenance and repairs is expensed as incurred. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from their respective accounts, and any gain or loss on such sale or disposal is reflected in income from operations.
Lease Obligations
We lease office space, data centers, and equipment under non-cancelable capital and operating leases with various expiration dates through 2030. Certain of the operating lease agreements contain rent holidays, rent escalation provisions, and purchase options. Rent holidays and rent escalation provisions are considered in determining the straight-line rent expense to be recorded over the lease term. The lease term begins on the date of initial possession of the leased property for purposes of recognizing lease expense on a straight-line basis over the term of the lease. We do not assume renewals in our determination of the lease term unless the renewals are deemed to be reasonably assured at lease inception.
Loss Contingencies 
We are involved in various lawsuits, claims, investigations, and proceedings that arise in the ordinary course of business. We record a liability when we believe that it is both probable that a loss has been incurred and the amount can be reasonably estimated. Significant judgment is required to determine both probability and the estimated amount. We review these provisions at least quarterly and adjust these provisions accordingly to reflect the impact of negotiations, settlements, rulings, advice of legal counsel, and updated information.
Business Combinations
We allocate the fair value of purchase consideration to the tangible assets acquired, liabilities assumed and intangible assets acquired based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets. Significant estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from acquired users, acquired technology, and trade names from a market participant perspective, useful lives and discount rates. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. During the measurement period, which is one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings.
Long-Lived Assets, Including Goodwill and Other Acquired Intangible Assets
We evaluate the recoverability of property and equipment and finite-lived intangible assets for possible impairment whenever events or circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of these assets is measured by a comparison of the carrying amounts to the future undiscounted cash flows the assets are expected to generate. If such review indicates that the carrying amount of property and equipment and intangible assets is not recoverable, the carrying amount of such assets is reduced to fair value. We have not recorded any significant impairment charge during the years presented.
We review goodwill for impairment at least annually or more frequently if events or changes in circumstances indicate that the carrying value of goodwill may not be recoverable. We have elected to first assess the qualitative factors to determine whether it is more likely than not that the fair value of our single reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment under Accounting Standards Update (ASU) No. 2011-08, Goodwill and Other (Topic 350): Testing Goodwill for Impairment, issued by the Financial Accounting Standards Board (FASB). If we determine that it is more likely than not that its fair value is less than its carrying amount, then the two-step goodwill impairment test is performed. The first step, identifying a potential impairment, compares the fair value of the reporting unit with its carrying amount. If the carrying amount exceeds its fair value, the second step would need to be performed; otherwise, no further step is required. The second step, measuring the impairment loss, compares the implied fair value of the goodwill with the carrying amount of the goodwill. Any excess of the goodwill carrying amount over the applied fair value is recognized as an impairment loss, and the carrying value of goodwill is written down to fair value. As of December 31, 2014, no impairment of goodwill has been identified.
Acquired finite-lived intangible assets are amortized on a straight-line basis over the estimated useful lives of the assets. The estimated remaining useful lives for intangible assets range from less than one year to 15 years. Acquired indefinite-lived intangible assets related to our in-process research and development (IPR&D) are capitalized and subject to impairment testing until completion or abandonment of the projects. Upon successful completion of each project, we will make a separate determination of useful life of the acquired indefinite-lived intangible assets and the related amortization will be recorded as an expense over the estimated useful life of the specific projects.
In addition to the recoverability assessment, we routinely review the remaining estimated useful lives of property and equipment and finite-lived intangible assets. If we reduce the estimated useful life assumption for any asset, the remaining unamortized balance would be amortized or depreciated over the revised estimated useful life.
Deferred Revenue and Deposits
Deferred revenue consists of billings in advance of revenue recognition. Deposits relate to unused balances held on behalf of our users. Once this balance is utilized by a user, approximately 70% of this amount would then be payable to the developer and the balance would be recognized as revenue.
Deferred revenue and deposits consists of the following (in millions):
 
December 31,
 
2014
 
2013
Deferred revenue
$
38

 
$
13

Deposits
28

 
25

Total deferred revenue and deposits
$
66

 
$
38

 
Foreign Currency
Generally the functional currency of our international subsidiaries is the local currency. We translate the financial statements of these subsidiaries to U.S. dollars using month-end rates of exchange for assets and liabilities, and average rates of exchange for revenue, costs, and expenses. Translation gains and losses are recorded in accumulated other comprehensive (loss) income as a component of stockholders' equity. As of December 31, 2014 and 2013, we had a cumulative translation loss of $227 million and a cumulative translation gain of $12 million, respectively. Net losses resulting from foreign exchange transactions were $87 million, $14 million, and $9 million for the years ended December 31, 2014, 2013, and 2012, respectively. These losses were recorded as interest and other income/(expense), net on our consolidated statements of income.
Credit Risk and Concentration
Financial instruments owned by the company that are potentially subject to concentrations of credit risk consist primarily of cash, cash equivalents, restricted cash, marketable securities, and accounts receivable. Cash equivalents consist of short-term money market funds, which are managed by reputable financial institutions. Marketable securities consist of investments in U.S. government securities, U.S. government agency securities, and corporate debt securities. Our investment policy limits investment instruments to U.S. government securities, U.S. government agency securities, and corporate debt securities with the main objective of preserving capital and maintaining liquidity.
Accounts receivable are typically unsecured and are derived from revenue earned from customers across different industries and countries. We generated 45%, 46%, and 51% of our revenue for the years ended December 31, 2014, 2013, and 2012, respectively, from marketers and developers based in the United States, with the majority of revenue outside of the United States coming from customers located in western Europe, Brazil, Canada, and Australia.
We perform ongoing credit evaluations of our customers, and generally do not require collateral. We maintain an allowance for estimated credit losses. During the years ended December 31, 2014, 2013, and 2012, our bad debt expenses were $19 million, $21 million, and $9 million, respectively. In the event that accounts receivable collection cycles deteriorate, our operating results and financial position could be adversely affected.
No customer represented 10% or more of total revenue during the years ended December 31, 2014, 2013, and 2012.
 Segments
Our chief operating decision-maker is our Chief Executive Officer who makes resource allocation decisions and assesses performance based on financial information presented on a consolidated basis. There are no segment managers who are held accountable by the chief operating decision-maker, or anyone else, for operations, operating results, and planning for levels or components below the consolidated unit level. Accordingly, we have determined that we have a single reportable segment and operating unit structure.
Recently Issued and Adopted Accounting Pronouncement
 In May 2014, the Financial Accounting Standards Board issued guidance related to revenue from contracts with customers. Under this guidance, revenue is recognized when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. The updated standard will replace most existing revenue recognition guidance under GAAP when it becomes effective and permits the use of either the retrospective or cumulative effect transition method. Early adoption is not permitted. The updated standard will be effective for us in the first quarter of 2017. We have not yet selected a transition method and we are currently evaluating the effect that the updated standard will have on our consolidated financial statements and related disclosures.
Acquisitions
Acquisitions
Acquisitions

WhatsApp

In October 2014, we completed our acquisition of WhatsApp Inc. (WhatsApp), a privately-held cross-platform mobile messaging company that is expected to provide us with strategic advantages in the mobile ecosystem and expand our mobile messaging offerings. Pursuant to the merger agreement, we issued approximately 178 million shares of our Class A common stock and paid $4.59 billion in cash. We also granted 46 million RSUs to WhatsApp employees which are recognized as share-based compensation expense over the employees' required service periods.
    
Upon acquisition, WhatsApp became our wholly-owned subsidiary. The acquisition was accounted for as a business combination. This method requires, among other things, that assets acquired and liabilities assumed in a business combination be recognized at their fair values as of the acquisition date.

The following table summarizes the components of the preliminary purchase consideration transferred based on the closing price of $77.56 per share of our common stock as of the acquisition date (in millions):
Cash
$
4,589

Common stock
13,787

Less: post-acquisition share-based compensation and other compensation expense
(1,067
)
Less: cash and promissory notes acquired on acquisition date
(116
)
Purchase consideration
$
17,193


Of the $1.07 billion of share-based compensation and other compensation expense excluded from the purchase consideration above, $188 million was accounted for as share-based compensation expense, of which approximately $50 million was settled in cash, at closing, as a result of the vesting provisions of WhatsApp employee awards on the acquisition date. The remaining $879 million (approximately 8.5 million shares of Class A common stock and $219 million in cash) is subject to continuous employment and will be recognized as share-based compensation and other compensation expense over the required service period of up to three years.
The following unaudited pro forma information presents the combined results of operations as if the acquisition had been completed on January 1, 2013, the beginning of the comparable prior annual reporting period. The unaudited pro forma results include: (i) amortization associated with preliminary estimates for the acquired intangible assets; (ii) recognition of the post-acquisition share-based compensation and other compensation expense; (iii) share-based compensation expense related to the 46 million RSUs granted to WhatsApp employees; and (iv) the associated tax impact on these unaudited pro forma adjustments.
The unaudited pro forma results do not reflect any cost saving synergies from operating efficiencies or the effect of the incremental costs incurred in integrating the two companies. Accordingly, these unaudited pro forma results are presented for informational purpose only and are not necessarily indicative of what the actual results of operations of the combined company would have been if the acquisition had occurred at the beginning of the period presented, nor are they indicative of future results of operations (in millions):
 
Year Ended December 31,
 
2014
 
2013
Revenue
$
12,487

 
$
7,882

Net income
$
1,757

 
$
65

The unaudited pro forma combined net income for the year ended December 31, 2013 includes a non-recurring pro forma adjustment of $188 million of share-based compensation expense recognized at closing as a result of the vesting provisions of WhatsApp employee awards on the acquisition date.
The tax withholdings related to the WhatsApp vested merger consideration were funded by net share settlement. The amount remitted to the tax authorities for the employees' tax obligation to the tax authorities was reflected as a financing activity within our consolidated statements of cash flows.
Oculus
In July 2014, we completed our acquisition of Oculus VR, Inc. (Oculus), a privately-held company developing virtual reality technology that is expected to expand our platform. Pursuant to the merger agreement, we issued 23 million shares of our Class B common stock and paid $400 million in cash. Furthermore, up to an additional three million shares of our Class B common stock and $60 million in cash will be payable contingent upon the completion of certain milestones. We determined the acquisition-date fair value of the contingent consideration liability, based on the likelihood of payment related to the contingent earn-out clauses, as part of the consideration transferred. For contingent consideration to be settled in common stock, we use the fair value of the shares as of the acquisition date, which is remeasured on each reporting date until settlement. See Note 5 “Fair Value Measurements" for subsequent measurements of this contingent liability. The earn-out portion that would be payable to employee equityholders is subject to continuous employment through the applicable payment dates and as such has been excluded from purchase consideration transferred and accounted for as share-based compensation and other compensation expense.
We have accounted for this acquisition as a business combination. This method requires, among other things, that assets acquired and liabilities assumed in a business combination be recognized at their fair values as of the acquisition date and that in-process research and development (IPR&D) be recorded at fair value on the balance sheet regardless of the likelihood of success of the related product or technology.
The following table summarizes the components of the preliminary purchase consideration transferred based on the closing price of our common stock as of the acquisition date (in millions):
Cash
$
400

Common stock
1,601

Less: post-acquisition share-based compensation and other compensation expense
(297
)
Less: cash acquired on acquisition date
(20
)
Total purchase consideration, excluding contingent consideration
$
1,684

Contingent consideration
169

Purchase consideration
$
1,853


Of the $297 million of share-based compensation and other compensation expense excluded from the purchase consideration above, approximately $13 million was recognized as share-based compensation at closing as a result of the vesting provisions of employee replacement awards on the acquisition date. The remaining $284 million is subject to continuous employment and will be recognized as share-based compensation and other compensation expense over the required service period of four years.
Other acquisitions
During the year ended December 31, 2014, we also completed several other business acquisitions for total consideration of $485 million. These acquisitions were not material to our consolidated financial statements either individually or in the aggregate.
We have included the financial results of WhatsApp, Oculus and the other business acquisitions, which are not material, in our consolidated financial statements from their respective dates of acquisition. Pro forma results of operations related to our acquisitions, other than WhatsApp, during the year ended December 31, 2014 have not been presented because they are not material to our consolidated statements of income, either individually or in the aggregate.
The fair value of assets acquired and liabilities assumed from our acquisition of WhatsApp and Oculus was based on a preliminary valuation and our estimates and assumptions are subject to change within the measurement period. The primary areas of the purchase price that are not yet finalized are related to income taxes and residual goodwill. Measurement period adjustments that we determine to be material will be applied retrospectively to the period of acquisition in our consolidated financial statements and, depending on the nature of the adjustments, other periods subsequent to the period of acquisition could also be affected.
The following table summarizes the allocation of estimated fair values of the net assets acquired during the year ended December 31, 2014, including the related estimated useful lives, where applicable:
 
WhatsApp
 
Oculus
 
Other
 
(in millions)
 
Useful lives (in years)
 
(in millions)
 
Useful lives (in years)
 
(in millions)
 
Useful lives (in years)
Finite-lived intangible assets:
 
 
 
 
 
 
 
 
 
 
 
Acquired users
$
2,026

 
7
 
$
—

 
 
 
$
—

 
 
Trade names
448

 
5
 
113

 
7
 
26

 
5
Acquired technology
288

 
5
 
235

 
5
 
68

 
3 - 5
Other
21

 
2
 
19

 
2
 
61

 
5
IPR&D
—

 
 
 
60

 
 
 
—

 
 
(Liabilities assumed) assets acquired
(33
)
 
 
 
—

 
 
 
103

 
 
Deferred tax liabilities
(899
)
 
 
 
(107
)
 
 
 
(48
)
 
 
Net assets acquired
$
1,851

 
 
 
$
320

 
 
 
$
210

 
 
Goodwill
15,342

 
 
 
1,533

 
 
 
275

 
 
Total fair value consideration
$
17,193

 
 
 
$
1,853

 
 
 
$
485

 
 


IPR&D intangible assets represent the value assigned to acquired research and development projects that, as of the acquisition date had not established technological feasibility and had no alternative future use. The IPR&D intangible assets are capitalized and accounted for as indefinite-lived intangible assets and are subject to impairment testing until completion or abandonment of the projects. Upon successful completion of each project and launch of the product, we will make a separate determination of useful life of the IPR&D intangible assets and the related amortization will be recorded as an expense over the estimated useful life of the specific projects.

Goodwill generated from the WhatsApp acquisition is primarily attributable to expected synergies from future growth, from potential monetization opportunities, from strategic advantages provided in the mobile ecosystem, and from expansion of our mobile messaging offerings. Goodwill generated from all other business acquisitions completed during the year ended December 31, 2014 is primarily attributable to expected synergies from future growth, from potential monetization opportunities and, also for Oculus, as a potential to expand our platform. All goodwill generated during this period is not deductible for tax purposes.
Earnings per Share
Earnings per Share
Earnings per Share
We compute earnings per share (EPS) of Class A and Class B common stock using the two-class method required for participating securities. We consider restricted stock awards to be participating securities because holders of such shares have non-forfeitable dividend rights in the event of our declaration of a dividend for common shares.
Undistributed earnings allocated to participating securities are subtracted from net income in determining net income attributable to common stockholders. Basic EPS is computed by dividing net income attributable to common stockholders by the weighted-average number of shares of our Class A and Class B common stock outstanding, adjusted for outstanding shares that are subject to repurchase.
For the calculation of diluted EPS, net income attributable to common stockholders for basic EPS is adjusted by the effect of dilutive securities, including awards under our equity compensation plans. In addition, the computation of the diluted EPS of Class A common stock assumes the conversion of our Class B common stock to Class A common stock, while the diluted EPS of Class B common stock does not assume the conversion of those shares to Class A common stock. Diluted EPS attributable to common stockholders is computed by dividing the resulting net income attributable to common stockholders by the weighted-average number of fully diluted common shares outstanding.
Basic and dilutive securities in our basic and diluted EPS calculation for the year ended December 31, 2014 do not include contingent earn-out shares resulting from our acquisition of Oculus. Issuance of these earn-out shares is dependent upon the completion of certain milestones. These milestones were not met as of December 31, 2014 and accordingly, these shares are excluded from the effect of basic and dilutive securities.
We have also excluded 14 million, 1 million, and 15 million RSUs for the years ended December 31, 2014, 2013, and 2012, respectively, because the impact would be anti-dilutive.
Basic and diluted EPS are the same for each class of common stock because they are entitled to the same liquidation and dividend rights.
The numerators and denominators of the basic and diluted EPS computations for our common stock are calculated as follows (in millions, except per share amounts):
 
Year Ended December 31,
 
2014
 
2013
 
2012
 
Class
A
 
Class
B
 
Class
A
 
Class
B
 
Class
A
 
Class
B 
Basic EPS:
 
 
 
 
 
 
 
 
 
 
 
Numerator
 
 
 
 
 
 
 
 
 
 
 
Net income
$
2,308

 
$
632

 
$
1,114

 
$
386

 
$
18

 
$
35

Less: Net income attributable to participating securities
12

 
3

 
7

 
2

 
7

 
14

Net income attributable to common stockholders
$
2,296

 
$
629

 
$
1,107

 
$
384

 
$
11

 
$
21

Denominator
 
 
 
 
 
 
 
 
 
 
 
Weighted average shares outstanding
2,059

 
568

 
1,803

 
631

 
668

 
1,344

Less: Shares subject to repurchase
6

 
7

 
5

 
9

 
1

 
5

Number of shares used for basic EPS computation
2,053

 
561

 
1,798

 
622

 
667

 
1,339

Basic EPS
$
1.12

 
$
1.12

 
$
0.62

 
$
0.62

 
$
0.02

 
$
0.02

Diluted EPS:
 
 
 
 
 
 
 
 
 
 
 
Numerator
 
 
 
 
 
 
 
 
 
 
 
Net income attributable to common stockholders
$
2,296

 
$
629

 
$
1,107

 
$
384

 
$
11

 
$
21

Reallocation of net income attributable to participating securities
15

 
—

 
9

 
—

 
—

 
—

Reallocation of net income as a result of conversion of Class B to Class A common stock
629

 
—

 
384

 
—

 
21

 
—

Reallocation of net income to Class B common stock
—

 
23

 
—

 
39

 
—

 
1

Net income attributable to common stockholders for diluted EPS
$
2,940

 
$
652

 
$
1,500

 
$
423

 
$
32

 
$
22

Denominator
 
 
 
 
 
 
 
 
 
 
 
Number of shares used for basic EPS computation
2,053

 
561

 
1,798

 
622

 
667

 
1,339

Conversion of Class B to Class A common stock
561

 
—

 
622

 
—

 
1,339

 
—

Weighted average effect of dilutive securities:
 
 
 
 
 
 
 
 
 
 
 
Employee stock options
13

 
13

 
65

 
65

 
134

 
134

RSUs
30

 
13

 
25

 
15

 
23

 
23

Shares subject to repurchase
7

 
4

 
7

 
7

 
3

 
3

Number of shares used for diluted EPS computation
2,664

 
591

 
2,517

 
709

 
2,166

 
1,499

Diluted EPS
$
1.10

 
$
1.10

 
$
0.60

 
$
0.60

 
$
0.01

 
$
0.01

Cash and Cash Equivalents, and Marketable Securities
Cash and Cash Equivalents, and Marketable Securities
Cash and Cash Equivalents, and Marketable Securities
The following table sets forth the cash, cash equivalents, and marketable securities (in millions):
 
December 31,
 
2014
 
2013
Cash and cash equivalents:
 
 
 
Cash
$
2,162

 
$
1,044

Money market funds
2,153

 
2,279

Total cash and cash equivalents
4,315

 
3,323

Marketable securities:
 
 
 
U.S. government securities
2,830

 
5,687

U.S. government agency securities
2,710

 
2,439

Corporate debt securities
1,344

 
—

Total marketable securities
6,884

 
8,126

Total cash, cash equivalents and marketable securities
$
11,199

 
$
11,449


The gross unrealized gains or losses on our marketable securities as of December 31, 2014 and 2013 were not significant. In addition, there were no securities in a continuous loss position for 12 months or longer as of December 31, 2014 and 2013.
The following table classifies our marketable securities by contractual maturities (in millions):
 
December 31,
 
2014
 
2013
Due in one year
$
3,422

 
$
4,704

Due in one to two years
3,462

 
3,422

Total
$
6,884

 
$
8,126

Fair Value Measurements
Fair Value Measurements
Fair Value Measurement
The following table summarizes, for assets or liabilities measured at fair value, the respective fair value and the classification by level of input within the fair value hierarchy (in millions):
 
 
 
 
Fair Value Measurement at
Reporting Date Using
Description 
 
December 31,
2014
 
Quoted
Prices in
Active
Markets for
Identical
Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Cash equivalents:
 
 
 
 
 
 
 
 
Money market funds
 
$
2,153

 
$
2,153

 
$
—

 
$
—

Marketable securities:
 
 
 
 
 
 
 
 
U.S. government securities
 
2,830

 
2,830

 
—

 
—

U.S. government agency securities
 
2,710

 
2,710

 
—

 
—

Corporate debt securities
 
1,344

 
—

 
1,344

 
—

Total cash equivalents and marketable securities
 
$
9,037

 
$
7,693

 
$
1,344

 
$
—

 
 
 
 
 
 
 
 
 
Other liabilities:
 
 
 
 
 
 
 
 
Contingent consideration liability
 
$
191

 
$
—

 
$
—

 
$
191

 
 
 
 
Fair Value Measurement at
Reporting Date Using
Description
 
December 31,
2013
 
Quoted
Prices in
Active
Markets for
Identical
Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3 
Cash equivalents:
 
 
 
 
 
 
 
 
Money market funds
 
$
2,279

 
$
2,279

 
$
—

 
$
—

Marketable securities:
 

 
 
 
 
 
 
U.S. government securities
 
5,687

 
5,687

 
—

 
—

U.S. government agency securities
 
2,439

 
2,439

 
—

 
—

Total cash equivalents and marketable securities
 
$
10,405

 
$
10,405

 
$
—

 
$
—


We classify our cash equivalents and marketable securities within Level 1 or Level 2 because we use quoted market prices or alternative pricing sources and models utilizing market observable inputs to determine their fair value.
We classify our contingent consideration liability in connection with our acquisition of Oculus within Level 3 as factors used to develop the estimated fair value are unobservable inputs that are not supported by market activity. We estimate the fair value of our contingent consideration liability based on the present value of probability-weighted future cash flows related to the contingent earn-out criteria and the fair value of our common stock on each reporting date. Our fair value estimate of this liability was $169 million at the date of acquisition and changes in the fair value of the contingent consideration liability subsequent to the acquisition date, such as changes in the probability assessment and the fair value of our common stock, are recognized in earnings in the period when the change in the estimated fair value occurs. During the year ended December 31, 2014, we recognized a $22 million change in the fair value of our contingent consideration liability in research and development expense in our consolidated statements of income primarily due to the change in the fair value of our common stock.
Property and Equipment
Property and Equipment
Property and Equipment
Property and equipment consists of the following (in millions):
 
December 31,
 
2014
 
2013
Land
$
153

 
$
45

Buildings
1,420

 
1,071

Leasehold improvements
304

 
203

Network equipment
3,020

 
2,351

Computer software, office equipment and other
149

 
95

Construction in progress
738

 
377

Total
5,784

 
4,142

Less: Accumulated depreciation
(1,817
)
 
(1,260
)
Property and equipment, net
$
3,967

 
$
2,882

 
Depreciation expense on property and equipment was $923 million, $857 million, and $566 million during 2014, 2013, and 2012, respectively.
Property and equipment at December 31, 2014 and 2013 includes $700 million and $976 million, respectively, acquired under capital lease agreements of which the majority is included in network equipment. Accumulated depreciation of property and equipment acquired under these capital leases was $425 million and $527 million at December 31, 2014 and 2013, respectively.
Construction in progress includes costs primarily related to the expansion of our corporate headquarters in Menlo Park, California, construction of data centers, and network equipment infrastructure to support our data centers around the world. No interest was capitalized during the year ended December 31, 2014. Interest capitalized during the years ended December 31, 2013 and 2012 was not material.
Goodwill and Intangible Assets
Goodwill and Intangible Assets
Goodwill and Intangible Assets
The changes in carrying amount of goodwill for the years ended December 31, 2014 and 2013 are as follows (in millions):
Balance as of December 31, 2012
$
587

Goodwill acquired
252

Balance as of December 31, 2013
$
839

Goodwill acquired
17,150

Effect of currency translation adjustment
(8
)
Balance as of December 31, 2014
$
17,981


Intangible assets consist of the following (in millions):
 
 
 
December 31, 2014
 
December 31, 2013
 
Useful lives from date of acquisitions (in years)
 
Gross Carrying Amount
 
Accumulated Amortization
 
Net Carrying Amount
 
Gross Carrying Amount
 
Accumulated Amortization
 
Net Carrying Amount
Finite-lived intangible assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
Acquired users
3 - 7
 
$
2,056

 
$
(85
)
 
$
1,971

 
$
30

 
$
(6
)
 
$
24

Acquired technology
2 - 10
 
813

 
(144
)
 
669

 
227

 
(65
)
 
162

Acquired patents
2 - 18
 
773

 
(239
)
 
534

 
773

 
(142
)
 
631

Trade names
2 - 7
 
632

 
(46
)
 
586

 
45

 
(8
)
 
37

Other
2 - 10
 
164

 
(55
)
 
109

 
63

 
(34
)
 
29

Total finite-lived intangible assets
 
 
$
4,438

 
$
(569
)
 
$
3,869

 
$
1,138

 
$
(255
)
 
$
883

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Indefinite-lived intangible assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
IPR&D
 
 
$
60

 
$
—

 
$
60

 
$
—

 
$
—

 
$
—

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total intangible assets
 
 
$
4,498

 
$
(569
)
 
$
3,929

 
$
1,138

 
$
(255
)
 
$
883

 
Amortization expense of intangible assets for the years ended December 31, 2014, 2013, and 2012 was $319 million, $145 million, and $78 million, respectively.
As of December 31, 2014, expected amortization expense for the unamortized acquired intangible assets for the next five years and thereafter is as follows (in millions):
2015
$
710

2016
691

2017
648

2018
600

2019
518

Thereafter
702

Total
$
3,869

Liabilities
Liabilities
Liabilities
The components of accrued expenses and other current liabilities are as follows (in millions):
 
December 31,
 
2014
 
2013
Accrued compensation and benefits
$
322

 
$
196

Accrued property and equipment
164

 
87

Other current liabilities
380

 
272

Accrued expenses and other current liabilities
$
866

 
$
555


The components of other liabilities are as follows (in millions):
 
December 31,
 
2014
 
2013
Income tax payable
$
1,190

 
$
886

Deferred tax liabilities
987

 
47

Other liabilities
368

 
155

Other liabilities
$
2,545

 
$
1,088

Long-term Debt
Long-term Debt
Long-term Debt
In August 2013, we entered into a five-year senior unsecured revolving credit facility (2013 Revolving Credit Facility) that allows us to borrow up to $6.5 billion to fund working capital and general corporate purposes with interest payable on the borrowed amounts set at LIBOR plus 1.0%, as well as an annual commitment fee of 0.10% on the daily undrawn balance of the facility. We paid origination fees at closing of the 2013 Revolving Credit Facility, which fees are being amortized over the term of the facility. Any amounts outstanding under this facility will be due and payable on August 15, 2018. As of December 31, 2014, no amounts had been drawn down and we were in compliance with the covenants under this facility.
Commitments and Contingencies
Commitments and Contingencies
Commitments and Contingencies
Commitments
Leases
We entered into various capital lease arrangements to obtain property and equipment for our operations. Additionally, on occasion we have purchased property and equipment for which we have subsequently obtained capital financing under sale-leaseback transactions. These agreements are typically for three years, except for a building lease which are for 15 years, with interest rates ranging from 1% to 13%. The leases are secured by the underlying leased buildings, leasehold improvements, and equipment. We have also entered into various non-cancelable operating lease agreements for certain of our offices, equipment, land and data centers with original lease periods expiring between 2015 and 2030. We are committed to pay a portion of the related actual operating expenses under certain of these lease agreements. Certain of these arrangements have free rent periods or escalating rent payment provisions, and we recognize rent expense under such arrangements on a straight-line basis.
The following is a schedule, by years, of the future minimum lease payments required under non-cancelable capital and operating leases as of December 31, 2014 (in millions):
 
Capital
Leases
 
Operating
Leases
2015
$
124

 
$
155

2016
20

 
161

2017
15

 
158

2018
16

 
143

2019
16

 
125

Thereafter
112

 
359

Total minimum lease payments
$
303

 
$
1,101

Less: amount representing interest and taxes
(70
)
 
 
Less: current portion of the present value of minimum lease payments
(114
)
 
 
Capital lease obligations, net of current portion
$
119

 
 

Operating lease expenses totaled $125 million, $130 million, and $196 million for the years ended December 31, 2014, 2013 and 2012, respectively.
Other contractual commitments
We also have $1.03 billion of non-cancelable contractual commitments as of December 31, 2014, primarily related to network infrastructure for our data center operations and, to a lesser extent, construction of our data center sites. The majority of these commitments are due within five years.
Contingencies
Legal Matters
Beginning on May 22, 2012, multiple putative class actions, derivative actions, and individual actions were filed in state and federal courts in the United States and in other jurisdictions against us, our directors, and/or certain of our officers alleging violation of securities laws or breach of fiduciary duties in connection with our initial public offering (IPO) and seeking unspecified damages. We believe these lawsuits are without merit, and we intend to continue to vigorously defend them. The vast majority of the cases in the United States, along with multiple cases filed against The NASDAQ OMX Group, Inc. and The Nasdaq Stock Market LLC (collectively referred to herein as NASDAQ) alleging technical and other trading-related errors by NASDAQ in connection with our IPO, were ordered centralized for coordinated or consolidated pre-trial proceedings in the U.S. District Court for the Southern District of New York. In a series of rulings in 2013 and 2014, the court denied our motion to dismiss the consolidated securities class action and granted our motions to dismiss the derivative actions against our directors and certain of our officers. The plaintiffs in four of these derivative actions have filed notices of appeal. On December 23, 2014, the plaintiffs in the consolidated securities class action filed their motion for class certification. In addition, the events surrounding our IPO became the subject of various state and federal government inquiries. In May 2014, the Securities and Exchange Commission (SEC) notified us that it had terminated its inquiry and that no enforcement action had been recommended by the SEC.
We are also party to various legal proceedings and claims that arise in the ordinary course of business. With respect to our outstanding legal matters, we believe that the amount or estimable range of reasonably possible loss will not, either individually or in the aggregate, have a material adverse effect on our business, consolidated financial position, results of operations, or cash flows. However, the outcome of litigation is inherently uncertain. Therefore, if one or more of these legal matters were resolved against us for amounts in excess of management's expectations, our results of operations and financial condition, including in a particular reporting period, could be materially adversely affected.
Indemnifications
In the normal course of business, to facilitate transactions of services and products, we have agreed to indemnify certain parties with respect to certain matters. We have agreed to hold certain parties harmless against losses arising from a breach of representations or covenants, or out of intellectual property infringement or other claims made by third parties. These agreements may limit the time within which an indemnification claim can be made and the amount of the claim. In addition, we have entered into indemnification agreements with our officers, directors, and certain employees, and our certificate of incorporation and bylaws contain similar indemnification obligations.
It is not possible to determine the maximum potential amount under these indemnification agreements due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular agreement. Historically, payments made by us under these agreements have not had a material impact on our consolidated financial position, results of operations or cash flows. In our opinion, as of December 31, 2014, there was not at least a reasonable possibility we had incurred a material loss with respect to indemnification of such parties. We have not recorded any liability for costs related to indemnification through December 31, 2014.
Stockholders' Equity
Stockholders' Equity
Stockholders' Equity
Initial Public Offering
In May 2012, we completed our IPO in which we issued and sold 180,000,000 shares of Class A common stock at a public offering price of $38.00 per share and the selling stockholders sold 241,233,615 shares of Class A common stock. We did not receive any proceeds from the sale of shares by the selling stockholders. The total net proceeds received from the IPO were $6.76 billion after deducting underwriting discounts and commissions of $75 million and other offering expenses of approximately $7 million.
Follow-on Offering
In December 2013, we completed a follow-on offering in which we issued and sold 27,004,761 shares of Class A common stock at a public offering price of $55.05 per share and the selling stockholders sold 42,995,239 shares of Class A common stock. We did not receive any proceeds from the sale of shares by the selling stockholders. The total net proceeds received from the follow-on offering were $1.48 billion after deducting underwriting discounts and commissions of $7 million and other offering expenses of approximately $1 million.
Common Stock
Our certificate of incorporation authorizes the issuance of Class A common stock and Class B common stock. As of December 31, 2014, we are authorized to issue 5,000,000,000 shares of Class A common stock and 4,141,000,000 shares of Class B common stock, each with a par value of $0.000006 per share. Holders of our Class A common stock and Class B common stock are entitled to dividends when, as and if, declared by our board of directors, subject to the rights of the holders of all classes of stock outstanding having priority rights to dividends. As of December 31, 2014, we did not declare any dividends and our credit facility contains restrictions on our ability to pay dividends. The holder of each share of Class A common stock is entitled to one vote, while the holder of each share of Class B common stock is entitled to ten votes. Shares of our Class B common stock are convertible into an equivalent number of shares of our Class A common stock and generally convert into shares of our Class A common stock upon transfer. Class A common stock and Class B common stock are referred to as common stock throughout the notes to these financial statements, unless otherwise noted.
As of December 31, 2014, there were 2,234,113,007 shares and 562,792,201 shares of Class A common stock and Class B common stock, respectively, issued and outstanding.
Share-based Compensation Plans
We maintain two share-based employee compensation plans: the 2012 Plan and the 2005 Stock Plan (collectively, Stock Plans). Our 2012 Plan serves as the successor to our 2005 Stock Plan and provides for the issuance of incentive and nonstatutory stock options, restricted stock awards, stock appreciation rights, RSUs, performance shares and stock bonuses to qualified employees, directors and consultants. Outstanding awards under the 2005 Stock Plan continue to be subject to the terms and conditions of the 2005 Stock Plan.
We initially reserved 25,000,000 shares of our Class A common stock for issuance under our 2012 Plan. The number of shares reserved for issuance under our 2012 Plan will increase automatically on the first day of January of each of 2013 through 2022 by a number of shares of Class A common stock equal to the lesser of (i) 2.5% of the total outstanding shares of our common stock as of the immediately preceding December 31st or (ii) a number of shares determined by the board of directors. Our board of directors elected not to increase the number of shares reserved for issuance in 2014 and 2013. In addition, shares available for grant under the 2005 Stock Plan, which were reserved but not issued or subject to outstanding awards under the 2005 Stock Plan as of the effective date of our IPO, were added to the reserves of the 2012 Plan and shares that are withheld in connection with the net settlement of RSUs are also added to the reserves of the 2012 Plan. In January 2014, we began requiring that employees sell a portion of the shares that they receive upon the vesting of RSUs in order to cover any required withholding taxes, rather than our previous approach of net share settlement. The maximum term for stock options granted under the 2012 Plan may not exceed ten years from the date of grant. Our 2012 Plan will terminate ten years from the date of approval unless it is terminated earlier by our compensation committee.
In connection with our acquisition of WhatsApp in October 2014, we granted inducement awards covering an aggregate of 37,475,271 RSUs to the WhatsApp founders. These awards are excluded from the Stock Plans and are subject to the terms, restrictions, and conditions of a separate non-plan RSU award agreement. In addition, these awards are earned over a service period of four years.
In February 2014, we terminated our 2005 Officers' Stock Plan as the only outstanding option issued under this plan had been exercised in full.
The following table summarizes stock option award activities under the Stock Plans for the year ended December 31, 2014:
 
Shares Subject to Options Outstanding
 
Number of
Shares
 
Weighted
Average
Exercise
Price
 
Weighted
Average
Remaining
Contractual
Term
 
Aggregate
Intrinsic
Value(1)
 
(in thousands)
 
 
 
(in years)
 
(in millions)
Balance as of December 31, 2013
22,102

 
$
3.56

 
 
 
 
Stock options exercised
(9,118
)
 
1.82

 
 
 
 
Balance as of December 31, 2014
12,984

 
$
4.78

 
3.79
 
$
951

Stock options vested and expected to vest as of December 31, 2014
12,980

 
$
4.78

 
3.79
 
$
951

Stock options exercisable as of December 31, 2014
9,850

 
$
2.49

 
3.20
 
$
744

 
(1)
The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying stock option awards and the closing price of our Class A common stock of $78.02 on December 31, 2014.
There were no options granted, forfeited, or canceled for the years ended December 31, 2014. The aggregate intrinsic value of the options exercised in the years ended December 31, 2014, 2013, and 2012 was $624 million, $4.58 billion, and $4.23 billion, respectively. The total grant date fair value of stock options vested during the years ended December 31, 2014, 2013, and 2012 was $7 million, $7 million, and $5 million, respectively.
The following table summarizes additional information regarding outstanding and exercisable options under the Stock Plans at December 31, 2014:
 
 
Options Outstanding 
 
Options Exercisable 
Exercise
Price (Range) 
 
Number of
Shares
 
Weighted
Average
Remaining
Contractual
Term
 
Weighted
Average
Exercise
Price 
 
Number of
Shares 
 
Weighted
Average
Exercise
Price 
 
 
(in thousands)
 
(in years)
 
 
 
(in thousands)
 
 
$0.06
 
191
 
0.99
 
$
0.06

 
191

 
$
0.06

0.10 - 0.18
 
1,784
 
1.44
 
0.10

 
1,784

 
0.10

0.29 - 0.33
 
3,509
 
2.29
 
0.30

 
3,509

 
0.30

1.85
 
1,605
 
4.03
 
1.85

 
1,605

 
1.85

2.95
 
1,195
 
4.63
 
2.95

 
1,195

 
2.95

10.39
 
3,500
 
5.56
 
10.39

 
1,458

 
10.39

15.00
 
1,200
 
5.80
 
15.00

 
108

 
15.00

 
 
12,984
 
3.79
 
$
4.78

 
9,850

 
$
2.49


The following table summarizes the activities for our unvested RSUs for the year ended December 31, 2014:
 
Unvested RSUs
 
Number of Shares
 
Weighted Average Grant Date Fair Value
 
(in thousands)
 
 
Unvested at December 31, 2013
103,971

 
$
27.30

Granted
84,606

 
74.03

Vested
(41,233
)
 
25.76

Forfeited
(9,289
)
 
34.80

Unvested at December 31, 2014
138,055

 
$
55.89



The fair value as of the respective vesting dates of RSUs during the years ended December 31, 2014, 2013, and 2012 was $2.77 billion, $1.55 billion, and $1.99 billion, respectively.
The majority of our RSUs that were settled during the year ended December 31, 2014 were settled on a gross basis. We require that employees sell a portion of the shares that they receive upon the vesting of RSUs in order to cover any required minimum withholding taxes. However, during the year ended December 31, 2013 and 2012, the majority of RSUs were net share settled. Under net settlement procedures, upon each settlement date, RSUs were withheld to cover the required withholding tax, which is based on the value of the RSU on the settlement date as determined by the closing price of our common stock on the trading day immediately preceding the applicable settlement date. The remaining amounts are delivered to the recipient as shares of our common stock. The amount remitted to the tax authorities for the employees' tax obligation to the tax authorities was reflected as a financing activity within our consolidated statements of cash flows. These shares withheld by us as a result of the net settlement of RSUs are no longer considered issued and outstanding, thereby reducing our shares outstanding used to calculate earnings per share. These shares were returned to the reserves and are available for future issuance under the 2012 Plan.
As of December 31, 2014, there was $7.96 billion of unrecognized share-based compensation expense, of which $6.96 billion is related to RSUs, and $999 million is related to restricted shares, shares with performance conditions related to our contingent consideration liability, and stock options. This unrecognized compensation expense is expected to be recognized over a weighted-average period of approximately three years.
Interest and other income/(expense), net
Interest and other income/(expense), net
Interest and other income/(expense), net
The following table presents the detail of interest and other income/(expense), net, for the periods presented (in millions):
 
Year Ended December 31,
 
2014
 
2013
 
2012
Interest expense
$
(23
)
 
$
(56
)
 
$
(51
)
Interest income
27

 
19

 
14

Foreign currency exchange losses, net
(87
)
 
(14
)
 
(9
)
Other
(1
)
 
1

 
2

Interest and other income/(expense), net
$
(84
)
 
$
(50
)
 
$
(44
)
Income Taxes
Income Taxes
Income Taxes
The components of income before provision for income taxes for the years ended December 31, 2014, 2013, and 2012 are as follows (in millions):
 
Year Ended December 31, 
 
2014
 
2013
 
2012
Domestic
$
4,918

 
$
3,197

 
$
1,062

Foreign
(8
)
 
(443
)
 
(568
)
Income before provision for income taxes
$
4,910

 
$
2,754

 
$
494


The provision for income taxes consisted of the following (in millions):
 
Year Ended December 31, 
 
2014
 
2013
 
2012
Current:
 
 
 
 
 
Federal
$
1,999

 
$
1,154

 
$
559

State
130

 
69

 
45

Foreign
96

 
68

 
22

Total current tax expense
2,225

 
1,291

 
626

Deferred:
 
 
 
 
 
Federal
(240
)
 
(28
)
 
(172
)
State
(14
)
 
(7
)
 
(6
)
Foreign
(1
)
 
(2
)
 
(7
)
Total deferred tax benefit
(255
)
 
(37
)
 
(185
)
Provision for income taxes
$
1,970

 
$
1,254

 
$
441

 
A reconciliation of the U.S. federal statutory income tax rate of 35.0% to our effective tax rate is as follows (in percentages):
 
Year Ended December 31, 
 
2014
 
2013
 
2012
U.S. federal statutory income tax rate
35.0
 %
 
35.0
 %
 
35.0
%
State income taxes, net of federal benefit
1.4

 
1.6

 
6.2

Research tax credits
(1.1
)
 
(4.7
)
 
—

Share-based compensation
6.5

 
5.2

 
19.2

Effect of non-U.S. operations
(3.6
)
 
6.8

 
26.9

Other
1.9

 
1.6

 
2.0

Effective tax rate
40.1
 %
 
45.5
 %
 
89.3
%
 
Excess tax benefits associated with stock option exercises and other equity awards are credited to stockholders' equity. The income tax benefits resulting from stock awards that were credited to stockholders' equity were $1.85 billion, $602 million and $1.03 billion for the years ended December 31, 2014, 2013, and 2012, respectively.
Our deferred tax assets (liabilities) are as follows (in millions):
 
December 31, 
 
2014
 
2013
Deferred tax assets:
 
 
 
Net operating loss carryforward
$
130

 
$
6

Tax credit carryforward
190

 
164

Share-based compensation
225

 
120

Accrued expenses and other liabilities
136

 
141

Other
21

 
5

Total deferred tax assets
702

 
436

Less: valuation allowance
(101
)
 
(82
)
Deferred tax assets, net of valuation allowance
601

 
354

 
 
 
 
Deferred tax liabilities:
 
 
 
Depreciation and amortization
(101
)
 
(68
)
Purchased intangible assets
(1,190
)
 
(90
)
Deferred foreign taxes
—

 
(43
)
Total deferred tax liabilities
(1,291
)
 
(201
)
Net deferred tax (liabilities) assets
$
(690
)
 
$
153


The valuation allowance was approximately $101 million and $82 million as of December 31, 2014 and 2013, respectively, related to state tax credits that we do not believe will ultimately be realized.
As of December 31, 2014, the U.S. federal and state net operating loss carryforwards were approximately $4.53 billion and $4.46 billion, which will begin to expire in 2028 and 2021, respectively, if not utilized. If realized, the impact of the net operating loss carryforwards will be recognized as a benefit of approximately $1.47 billion through additional paid in capital. We have federal and state tax credit carryforwards of $800 million and $753 million, respectively, which will begin to expire in 2032.
Utilization of our net operating loss and tax credit carryforwards may be subject to substantial annual limitations due to the ownership change limitations provided by the Internal Revenue Code and similar state provisions. Such annual limitations could result in the expiration of the net operating loss and tax credit carryforwards before their utilization. The events that may cause ownership changes include, but are not limited to, a cumulative stock ownership change of greater than 50% over a three-year period.
Our net foreign pretax losses include jurisdictions with both pretax earnings and pretax losses. Our consolidated financial statements provide taxes for all related tax liabilities that would arise upon repatriation of earnings in the foreign jurisdictions where we do not intend to indefinitely reinvest those earnings outside the United States, and the amount of taxes provided for has been insignificant.
The following table reflects changes in the gross unrecognized tax benefits (in millions):
 
Year Ended December 31, 
 
2014
 
2013
 
2012
Gross unrecognized tax benefits-beginning of period
$
1,316

 
$
164

 
$
63

Increases related to prior year tax positions
24

 
425

 
13

Decreases related to prior year tax positions
—

 
(13
)
 
(16
)
Increases related to current year tax positions
346

 
740

 
104

Decreases related to settlements of prior year tax positions
(4
)
 
—

 
—

Gross unrecognized tax benefits-end of period
$
1,682

 
$
1,316

 
$
164


During all years presented, we recognized interest and penalties related to unrecognized tax benefits within the provision for income taxes on the consolidated statements of income. The amount of interest and penalties accrued as of December 31, 2014 and 2013 was not material.
If the balance of gross unrecognized tax benefits of $1.68 billion as of December 31, 2014 was realized in a future period, this would result in a tax benefit of $1.16 billion within our provision of income taxes at such time.
We are subject to taxation in the United States and various other state and foreign jurisdictions. The material jurisdictions in which we are subject to potential examination include the United States and Ireland. We are under examination by the Internal Revenue Service (IRS) for our 2008 through 2010 tax years. We believe that adequate amounts have been reserved for any adjustments that may ultimately result from these examinations and we do not anticipate a significant impact to our gross unrecognized tax benefits within the next 12 months related to these years. Our 2011 through 2014 tax years remain subject to examination by the IRS and all tax years starting in 2008 remain subject to examination in Ireland.
Although the timing of the resolution, settlement, and closure of any audits is highly uncertain, it is reasonably possible that the balance of gross unrecognized tax benefits could significantly change in the next 12 months. However, given the number of years remaining that are subject to examination, we are unable to estimate the full range of possible adjustments to the balance of gross unrecognized tax benefits.
Geographical Information
Geographical Information
Geographical Information
Revenue by geography is based on the billing address of the advertiser or developer. The following table sets forth revenue and property and equipment, net by geographic area (in millions):
 
Year Ended December 31, 
 
2014
 
2013
 
2012
Revenue:
 
 
 
 
 
United States
$
5,649

 
$
3,613

 
$
2,578

Rest of the world(1)
6,817

 
4,259

 
2,511

Total revenue
$
12,466

 
$
7,872

 
$
5,089

 
(1)
No individual country, other than disclosed above, exceeded 10% of our total revenue for any period presented
 
 
December 31,
 
2014
 
2013
Property and equipment, net:
 
 
 
United States
$
3,256

 
$
2,368

Sweden
514

 
415

Rest of the world
197

 
99

Total property and equipment, net
$
3,967

 
$
2,882

Summary of Significant Accounting Policies (Policies)
Basis of Presentation 
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 
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 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.
Revenue Recognition 
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 our obligations to our customer has occurred;
•
the price is fixed or determinable; and
•
collectability of the related receivable is reasonably assured.
Revenue for the years ended December 31, 2014, 2013, and 2012 consists of the following (in millions):
 
Year Ended December 31,
 
2014
 
2013
 
2012
Advertising
$
11,492

 
$
6,986

 
$
4,279

Payments and other fees
974

 
886

 
810

Total revenue
$
12,466

 
$
7,872

 
$
5,089

 
Advertising
Advertising revenue is generated by displaying ad products on the Facebook properties, including our mobile applications, and third-party affiliated websites or mobile applications. The arrangements are evidenced by either online acceptance of terms and conditions or contracts that stipulate the types of advertising to be delivered, the timing and the pricing. Marketers pay for ad products either directly or through their relationships with advertising agencies, based on the number of clicks made by our users, the number of actions taken by our users, or the number of impressions delivered. The typical term of an advertising arrangement is approximately 30 days with billing generally occurring after the delivery of the advertisement.
We recognize revenue from the delivery of click-based ads in the period in which a user clicks on the content, and action-based ads in the period in which a user takes the action the marketer contracted for. We recognize revenue from the display of impression-based ads in the contracted period in which the impressions are delivered. Impressions are considered delivered when an ad is displayed to users.
Payments and Other Fees
We enable Payments from people to purchase virtual and digital goods from our developers. People can transact and make payments on the Facebook website by using debit cards and credit cards, PayPal, mobile phone payments, gift cards, or other methods.
When a person engages in a payment transaction for the purchase of a virtual or digital good from a developer, we remit to the developer an amount that is based on the total amount of the transaction less the processing fee that we charge the developer. The price of the purchase is an amount that is solely determined by the developer. Our revenue is the net amount of the transaction, representing our processing fee for the service performed. We record revenue on a net basis as we do not consider ourselves to be the principal in the sale of the virtual or digital good to the person. Additionally, we record all Payments revenue at the time of the purchase of the related virtual goods, net of estimated refunds or chargebacks
Other fees, which includes our ad serving and measurement products and the delivery of virtual reality platform devices, were not material in all periods presented in our financial statements.
Revenue is recognized net of applicable sales and other taxes.
Cost of Revenue 
Cost of Revenue
Our cost of revenue consists primarily of expenses associated with the delivery and distribution of our products. These include expenses related to the operation of our data centers such as facility and server equipment depreciation, facility and server equipment rent expense, energy and bandwidth costs, support and maintenance costs, and salaries, benefits, and share-based compensation for employees on our operations teams. Cost of revenue also includes credit card and other transaction fees related to processing customer transactions, amortization of intangible assets, and cost of virtual reality platform device inventory sold.
Share-based Compensation 
Share-based Compensation
We account for share-based employee compensation plans under the fair value recognition and measurement provisions of GAAP. Those provisions require all share-based payments to employees, including grants of stock options and restricted stock units (RSUs), to be measured based on the grant date fair value of the awards, with the resulting expense generally recognized on a straight-line basis in our consolidated statements of income over the period during which the employee is required to perform service in exchange for the award. The majority of our awards are earned over a service period of four to five years.
Share-based compensation expense is recorded net of estimated forfeitures in our consolidated statements of income and as such, only those share-based awards that we expect to vest are recorded. We estimate the forfeiture rate based on historical forfeitures of equity awards and adjust the rate to reflect changes in facts and circumstances, if any. We will revise our estimated forfeiture rate if actual forfeitures differ from our initial estimates. 
We have historically issued unvested restricted shares to employee stockholders of certain acquired companies. As these awards are generally subject to continued post-acquisition employment, we have accounted for them as post-acquisition share-based compensation expense. We recognize compensation expense equal to the grant date fair value of the common stock on a straight-line basis over the period during which the employee is required to perform service in exchange for the award.
During the years ended December 31, 2014, 2013, and 2012, we realized tax benefits from share-based award activity of $1.85 billion, $602 million, and $1.03 billion, respectively. These amounts reflect the extent that the total reduction to our income tax liability from share-based award activity was greater than the amount of the deferred tax assets that we had previously recorded in anticipation of these benefits. These amounts are the aggregate of the individual transactions in which the reduction to our income tax liability was greater than the deferred tax assets that we recorded, reduced by any individual transactions in which the reduction to our income tax liability was less than the deferred tax assets that were recorded. These net amounts were recorded as an adjustment to stockholders' equity in each period, as an increase to cash flows from operating activities, and were not recognized in our consolidated statements of income.
In addition, we reported excess tax benefits that decreased our cash flows from operating activities and increased our cash flows from financing activities for the years ended December 31, 2014, 2013, and 2012, by $1.87 billion, $609 million, and $1.03 billion, respectively. The amounts of these excess tax benefits reflect the total of the individual transactions in which the reduction to our income tax liability was greater than the deferred tax assets that were recorded, but were not reduced by any of the individual transactions in which the reduction to our income tax liability was less than the deferred tax assets that were recorded.
Income Taxes 
Income Taxes
We recognize income taxes under the asset and liability method. We recognize deferred income tax assets and liabilities for the expected future consequences of temporary differences between the financial reporting and tax bases of assets and liabilities. These differences are measured using the enacted statutory tax rates that are expected to apply to taxable income for the years in which differences are expected to reverse. We recognize the effect on deferred income taxes of a change in tax rates in income in the period that includes the enactment date.
We record a valuation allowance to reduce our deferred tax assets to the net amount that we believe is more likely than not to be realized. We consider all available evidence, both positive and negative, including historical levels of income, expectations and risks associated with estimates of future taxable income and ongoing tax planning strategies in assessing the need for a valuation allowance.
We recognize tax benefits from uncertain tax positions only if we believe that it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. We make adjustments to these reserves when facts and circumstances change, such as the closing of a tax audit or the refinement of an estimate. The provision for income taxes includes the effects of any reserves that are considered appropriate, as well as the related net interest and penalties.
Advertising Expense 
Advertising Expense
Advertising costs are expensed when incurred and are included in marketing and sales expenses in the accompanying consolidated statements of income. We incurred advertising expenses of $135 million, $117 million, and $67 million for the years ended December 31, 2014, 2013, and 2012, respectively.
Cash and Cash Equivalents, and Marketable Securities 
Cash and Cash Equivalents, and Marketable Securities
Cash and cash equivalents primarily consist of cash on deposit with banks and investments in money market funds with maturities of 90 days or less from the date of purchase.
We hold investments in marketable securities, consisting of U.S. government securities, U.S. government agency securities, and corporate debt securities. We classify our marketable securities as available-for-sale investments in our current assets because they represent investments of cash available for current operations. Our available-for-sale investments are carried at estimated fair value with any unrealized gains and losses, net of taxes, included in accumulated other comprehensive (loss) income in stockholders' equity. Unrealized losses are charged against interest and other income/(expense), net when a decline in fair value is determined to be other-than-temporary. We have not recorded any such impairment charge in the periods presented. We determine realized gains or losses on sale of marketable securities on a specific identification method, and record such gains or losses as interest and other income/(expense), net.
We classify certain restricted cash balances within prepaid expenses and other current assets and other assets on the accompanying consolidated balance sheets based upon the term of the remaining restrictions.
Fair Value of Financial Instruments 
Fair Value of Financial Instruments
We apply fair value accounting for all financial assets and liabilities and non-financial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis. We define fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities, which are required to be recorded at fair value, we consider the principal or most advantageous market in which we would transact and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability, such as risks inherent in valuation techniques, transfer restrictions and credit risk. Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:
Level 1-Quoted prices in active markets for identical assets or liabilities.
Level 2-Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3-Inputs that are generally unobservable and typically reflect management's estimate of assumptions that market participants would use in pricing the asset or liability.
Our valuation techniques used to measure the fair value of money market funds and marketable debt securities were derived from quoted market prices or alternative pricing sources and models utilizing market observable inputs. Our valuation technique used to measure the fair value of our contingent consideration liability was based on the present value of probability-weighted future cash flows related to the contingent earn-out criteria and the fair value of our common stock on each reporting date.
Accounts Receivable and Allowance for Doubtful Accounts 
Accounts Receivable and Allowance for Doubtful Accounts
Accounts receivable are recorded and carried at the original invoiced amount less an allowance for any potential uncollectible amounts. We make estimates for the allowance for doubtful accounts based upon our assessment of various factors, including historical experience, the age of the accounts receivable balances, credit quality of our customers, current economic conditions, and other factors that may affect customers' ability to pay.
Property and Equipment 
Property and Equipment
Property and equipment, which includes amounts recorded under capital leases, are stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets or the remaining lease term, in the case of a capital lease, whichever is shorter.
The estimated useful lives of property and equipment are described below:
Property and Equipment 
 
Useful Life 
Network equipment
 
Three to five years
Buildings
 
Four to 20 years
Computer software, office equipment and other
 
Three to five years
Leased equipment and leasehold improvements
 
Lesser of estimated useful life or remaining lease term
 
Land and assets held within construction in progress are not depreciated. Construction in progress is related to the construction or development of property and equipment that have not yet been placed in service for their intended use.
The cost of maintenance and repairs is expensed as incurred. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from their respective accounts, and any gain or loss on such sale or disposal is reflected in income from operations.
Lease Obligations 
Lease Obligations
We lease office space, data centers, and equipment under non-cancelable capital and operating leases with various expiration dates through 2030. Certain of the operating lease agreements contain rent holidays, rent escalation provisions, and purchase options. Rent holidays and rent escalation provisions are considered in determining the straight-line rent expense to be recorded over the lease term. The lease term begins on the date of initial possession of the leased property for purposes of recognizing lease expense on a straight-line basis over the term of the lease. We do not assume renewals in our determination of the lease term unless the renewals are deemed to be reasonably assured at lease inception.
Loss Contingencies 
Loss Contingencies 
We are involved in various lawsuits, claims, investigations, and proceedings that arise in the ordinary course of business. We record a liability when we believe that it is both probable that a loss has been incurred and the amount can be reasonably estimated. Significant judgment is required to determine both probability and the estimated amount. We review these provisions at least quarterly and adjust these provisions accordingly to reflect the impact of negotiations, settlements, rulings, advice of legal counsel, and updated information.
Business Combinations 
Business Combinations
We allocate the fair value of purchase consideration to the tangible assets acquired, liabilities assumed and intangible assets acquired based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets. Significant estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from acquired users, acquired technology, and trade names from a market participant perspective, useful lives and discount rates. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. During the measurement period, which is one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings.
Long-Lived Assets, Including Goodwill and Other Acquired Intangible Assets 
Long-Lived Assets, Including Goodwill and Other Acquired Intangible Assets
We evaluate the recoverability of property and equipment and finite-lived intangible assets for possible impairment whenever events or circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of these assets is measured by a comparison of the carrying amounts to the future undiscounted cash flows the assets are expected to generate. If such review indicates that the carrying amount of property and equipment and intangible assets is not recoverable, the carrying amount of such assets is reduced to fair value. We have not recorded any significant impairment charge during the years presented.
We review goodwill for impairment at least annually or more frequently if events or changes in circumstances indicate that the carrying value of goodwill may not be recoverable. We have elected to first assess the qualitative factors to determine whether it is more likely than not that the fair value of our single reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment under Accounting Standards Update (ASU) No. 2011-08, Goodwill and Other (Topic 350): Testing Goodwill for Impairment, issued by the Financial Accounting Standards Board (FASB). If we determine that it is more likely than not that its fair value is less than its carrying amount, then the two-step goodwill impairment test is performed. The first step, identifying a potential impairment, compares the fair value of the reporting unit with its carrying amount. If the carrying amount exceeds its fair value, the second step would need to be performed; otherwise, no further step is required. The second step, measuring the impairment loss, compares the implied fair value of the goodwill with the carrying amount of the goodwill. Any excess of the goodwill carrying amount over the applied fair value is recognized as an impairment loss, and the carrying value of goodwill is written down to fair value. As of December 31, 2014, no impairment of goodwill has been identified.
Acquired finite-lived intangible assets are amortized on a straight-line basis over the estimated useful lives of the assets. The estimated remaining useful lives for intangible assets range from less than one year to 15 years. Acquired indefinite-lived intangible assets related to our in-process research and development (IPR&D) are capitalized and subject to impairment testing until completion or abandonment of the projects. Upon successful completion of each project, we will make a separate determination of useful life of the acquired indefinite-lived intangible assets and the related amortization will be recorded as an expense over the estimated useful life of the specific projects.
In addition to the recoverability assessment, we routinely review the remaining estimated useful lives of property and equipment and finite-lived intangible assets. If we reduce the estimated useful life assumption for any asset, the remaining unamortized balance would be amortized or depreciated over the revised estimated useful life.
Deferred Revenue and Deposits 
Deferred Revenue and Deposits
Deferred revenue consists of billings in advance of revenue recognition. Deposits relate to unused balances held on behalf of our users. Once this balance is utilized by a user, approximately 70% of this amount would then be payable to the developer and the balance would be recognized as revenue.
Deferred revenue and deposits consists of the following (in millions):
 
December 31,
 
2014
 
2013
Deferred revenue
$
38

 
$
13

Deposits
28

 
25

Total deferred revenue and deposits
$
66

 
$
38

Foreign Currency 
Foreign Currency
Generally the functional currency of our international subsidiaries is the local currency. We translate the financial statements of these subsidiaries to U.S. dollars using month-end rates of exchange for assets and liabilities, and average rates of exchange for revenue, costs, and expenses. Translation gains and losses are recorded in accumulated other comprehensive (loss) income as a component of stockholders' equity. As of December 31, 2014 and 2013, we had a cumulative translation loss of $227 million and a cumulative translation gain of $12 million, respectively. Net losses resulting from foreign exchange transactions were $87 million, $14 million, and $9 million for the years ended December 31, 2014, 2013, and 2012, respectively. These losses were recorded as interest and other income/(expense), net on our consolidated statements of income.
Credit Risk and Concentration 
Credit Risk and Concentration
Financial instruments owned by the company that are potentially subject to concentrations of credit risk consist primarily of cash, cash equivalents, restricted cash, marketable securities, and accounts receivable. Cash equivalents consist of short-term money market funds, which are managed by reputable financial institutions. Marketable securities consist of investments in U.S. government securities, U.S. government agency securities, and corporate debt securities. Our investment policy limits investment instruments to U.S. government securities, U.S. government agency securities, and corporate debt securities with the main objective of preserving capital and maintaining liquidity.
Accounts receivable are typically unsecured and are derived from revenue earned from customers across different industries and countries. We generated 45%, 46%, and 51% of our revenue for the years ended December 31, 2014, 2013, and 2012, respectively, from marketers and developers based in the United States, with the majority of revenue outside of the United States coming from customers located in western Europe, Brazil, Canada, and Australia.
We perform ongoing credit evaluations of our customers, and generally do not require collateral. We maintain an allowance for estimated credit losses. During the years ended December 31, 2014, 2013, and 2012, our bad debt expenses were $19 million, $21 million, and $9 million, respectively. In the event that accounts receivable collection cycles deteriorate, our operating results and financial position could be adversely affected.
No customer represented 10% or more of total revenue during the years ended December 31, 2014, 2013, and 2012.
Segments 
 Segments
Our chief operating decision-maker is our Chief Executive Officer who makes resource allocation decisions and assesses performance based on financial information presented on a consolidated basis. There are no segment managers who are held accountable by the chief operating decision-maker, or anyone else, for operations, operating results, and planning for levels or components below the consolidated unit level. Accordingly, we have determined that we have a single reportable segment and operating unit structure.
Recently Issued and Adopted Accounting Pronouncement 
Recently Issued and Adopted Accounting Pronouncement
 In May 2014, the Financial Accounting Standards Board issued guidance related to revenue from contracts with customers. Under this guidance, revenue is recognized when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. The updated standard will replace most existing revenue recognition guidance under GAAP when it becomes effective and permits the use of either the retrospective or cumulative effect transition method. Early adoption is not permitted. The updated standard will be effective for us in the first quarter of 2017. We have not yet selected a transition method and we are currently evaluating the effect that the updated standard will have on our consolidated financial statements and related disclosures.
Summary of Significant Accounting Policies (Tables)
Revenue by type 
Revenue for the years ended December 31, 2014, 2013, and 2012 consists of the following (in millions):
 
Year Ended December 31,
 
2014
 
2013
 
2012
Advertising
$
11,492

 
$
6,986

 
$
4,279

Payments and other fees
974

 
886

 
810

Total revenue
$
12,466

 
$
7,872

 
$
5,089

Estimated useful lives of property and equipment 
The estimated useful lives of property and equipment are described below:
Property and Equipment 
 
Useful Life 
Network equipment
 
Three to five years
Buildings
 
Four to 20 years
Computer software, office equipment and other
 
Three to five years
Leased equipment and leasehold improvements
 
Lesser of estimated useful life or remaining lease term
 
Deferred revenue and deposits 
Deferred revenue and deposits consists of the following (in millions):
 
December 31,
 
2014
 
2013
Deferred revenue
$
38

 
$
13

Deposits
28

 
25

Total deferred revenue and deposits
$
66

 
$
38

Acquisitions (Tables)
Schedule of Business Acquisitions, Assets Acquired and Liabilities Assumed 
The following table summarizes the allocation of estimated fair values of the net assets acquired during the year ended December 31, 2014, including the related estimated useful lives, where applicable:
 
WhatsApp
 
Oculus
 
Other
 
(in millions)
 
Useful lives (in years)
 
(in millions)
 
Useful lives (in years)
 
(in millions)
 
Useful lives (in years)
Finite-lived intangible assets:
 
 
 
 
 
 
 
 
 
 
 
Acquired users
$
2,026

 
7
 
$
—

 
 
 
$
—

 
 
Trade names
448

 
5
 
113

 
7
 
26

 
5
Acquired technology
288

 
5
 
235

 
5
 
68

 
3 - 5
Other
21

 
2
 
19

 
2
 
61

 
5
IPR&D
—

 
 
 
60

 
 
 
—

 
 
(Liabilities assumed) assets acquired
(33
)
 
 
 
—

 
 
 
103

 
 
Deferred tax liabilities
(899
)
 
 
 
(107
)
 
 
 
(48
)
 
 
Net assets acquired
$
1,851

 
 
 
$
320

 
 
 
$
210

 
 
Goodwill
15,342

 
 
 
1,533

 
 
 
275

 
 
Total fair value consideration
$
17,193

 
 
 
$
1,853

 
 
 
$
485

 
 
Schedule of the Components of Consideration Transferred 
The following table summarizes the components of the preliminary purchase consideration transferred based on the closing price of $77.56 per share of our common stock as of the acquisition date (in millions):
Cash
$
4,589

Common stock
13,787

Less: post-acquisition share-based compensation and other compensation expense
(1,067
)
Less: cash and promissory notes acquired on acquisition date
(116
)
Purchase consideration
$
17,193

Business Acquisition, Pro Forma Information 
Accordingly, these unaudited pro forma results are presented for informational purpose only and are not necessarily indicative of what the actual results of operations of the combined company would have been if the acquisition had occurred at the beginning of the period presented, nor are they indicative of future results of operations (in millions):
 
Year Ended December 31,
 
2014
 
2013
Revenue
$
12,487

 
$
7,882

Net income
$
1,757

 
$
65

Schedule of the Components of Consideration Transferred 
The following table summarizes the components of the preliminary purchase consideration transferred based on the closing price of our common stock as of the acquisition date (in millions):
Cash
$
400

Common stock
1,601

Less: post-acquisition share-based compensation and other compensation expense
(297
)
Less: cash acquired on acquisition date
(20
)
Total purchase consideration, excluding contingent consideration
$
1,684

Contingent consideration
169

Purchase consideration
$
1,853

Earnings per Share (Tables)
Numerators and Denominators of Basic and Diluted EPS Computations for Common Stock
The numerators and denominators of the basic and diluted EPS computations for our common stock are calculated as follows (in millions, except per share amounts):
 
Year Ended December 31,
 
2014
 
2013
 
2012
 
Class
A
 
Class
B
 
Class
A
 
Class
B
 
Class
A
 
Class
B 
Basic EPS:
 
 
 
 
 
 
 
 
 
 
 
Numerator
 
 
 
 
 
 
 
 
 
 
 
Net income
$
2,308

 
$
632

 
$
1,114

 
$
386

 
$
18

 
$
35

Less: Net income attributable to participating securities
12

 
3

 
7

 
2

 
7

 
14

Net income attributable to common stockholders
$
2,296

 
$
629

 
$
1,107

 
$
384

 
$
11

 
$
21

Denominator
 
 
 
 
 
 
 
 
 
 
 
Weighted average shares outstanding
2,059

 
568

 
1,803

 
631

 
668

 
1,344

Less: Shares subject to repurchase
6

 
7

 
5

 
9

 
1

 
5

Number of shares used for basic EPS computation
2,053

 
561

 
1,798

 
622

 
667

 
1,339

Basic EPS
$
1.12

 
$
1.12

 
$
0.62

 
$
0.62

 
$
0.02

 
$
0.02

Diluted EPS:
 
 
 
 
 
 
 
 
 
 
 
Numerator
 
 
 
 
 
 
 
 
 
 
 
Net income attributable to common stockholders
$
2,296

 
$
629

 
$
1,107

 
$
384

 
$
11

 
$
21

Reallocation of net income attributable to participating securities
15

 
—

 
9

 
—

 
—

 
—

Reallocation of net income as a result of conversion of Class B to Class A common stock
629

 
—

 
384

 
—

 
21

 
—

Reallocation of net income to Class B common stock
—

 
23

 
—

 
39

 
—

 
1

Net income attributable to common stockholders for diluted EPS
$
2,940

 
$
652

 
$
1,500

 
$
423

 
$
32

 
$
22

Denominator
 
 
 
 
 
 
 
 
 
 
 
Number of shares used for basic EPS computation
2,053

 
561

 
1,798

 
622

 
667

 
1,339

Conversion of Class B to Class A common stock
561

 
—

 
622

 
—

 
1,339

 
—

Weighted average effect of dilutive securities:
 
 
 
 
 
 
 
 
 
 
 
Employee stock options
13

 
13

 
65

 
65

 
134

 
134

RSUs
30

 
13

 
25

 
15

 
23

 
23

Shares subject to repurchase
7

 
4

 
7

 
7

 
3

 
3

Number of shares used for diluted EPS computation
2,664

 
591

 
2,517

 
709

 
2,166

 
1,499

Diluted EPS
$
1.10

 
$
1.10

 
$
0.60

 
$
0.60

 
$
0.01

 
$
0.01

Cash and Cash Equivalents, and Marketable Securities (Tables)
Cash, Cash Equivalents and Marketable Securities 
The following table sets forth the cash, cash equivalents, and marketable securities (in millions):
 
December 31,
 
2014
 
2013
Cash and cash equivalents:
 
 
 
Cash
$
2,162

 
$
1,044

Money market funds
2,153

 
2,279

Total cash and cash equivalents
4,315

 
3,323

Marketable securities:
 
 
 
U.S. government securities
2,830

 
5,687

U.S. government agency securities
2,710

 
2,439

Corporate debt securities
1,344

 
—

Total marketable securities
6,884

 
8,126

Total cash, cash equivalents and marketable securities
$
11,199

 
$
11,449

Marketable Securities by Contractual Maturities 
The following table classifies our marketable securities by contractual maturities (in millions):
 
December 31,
 
2014
 
2013
Due in one year
$
3,422

 
$
4,704

Due in one to two years
3,462

 
3,422

Total
$
6,884

 
$
8,126

Fair Value Measurements (Tables)
Assets and Liabilities Measured at Fair Value on Recurring Basis
The following table summarizes, for assets or liabilities measured at fair value, the respective fair value and the classification by level of input within the fair value hierarchy (in millions):
 
 
 
 
Fair Value Measurement at
Reporting Date Using
Description 
 
December 31,
2014
 
Quoted
Prices in
Active
Markets for
Identical
Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Cash equivalents:
 
 
 
 
 
 
 
 
Money market funds
 
$
2,153

 
$
2,153

 
$
—

 
$
—

Marketable securities:
 
 
 
 
 
 
 
 
U.S. government securities
 
2,830

 
2,830

 
—

 
—

U.S. government agency securities
 
2,710

 
2,710

 
—

 
—

Corporate debt securities
 
1,344

 
—

 
1,344

 
—

Total cash equivalents and marketable securities
 
$
9,037

 
$
7,693

 
$
1,344

 
$
—

 
 
 
 
 
 
 
 
 
Other liabilities:
 
 
 
 
 
 
 
 
Contingent consideration liability
 
$
191

 
$
—

 
$
—

 
$
191

 
 
 
 
Fair Value Measurement at
Reporting Date Using
Description
 
December 31,
2013
 
Quoted
Prices in
Active
Markets for
Identical
Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3 
Cash equivalents:
 
 
 
 
 
 
 
 
Money market funds
 
$
2,279

 
$
2,279

 
$
—

 
$
—

Marketable securities:
 

 
 
 
 
 
 
U.S. government securities
 
5,687

 
5,687

 
—

 
—

U.S. government agency securities
 
2,439

 
2,439

 
—

 
—

Total cash equivalents and marketable securities
 
$
10,405

 
$
10,405

 
$
—

 
$
—

Property and Equipment (Tables)
Property and equipment
Property and equipment consists of the following (in millions):
 
December 31,
 
2014
 
2013
Land
$
153

 
$
45

Buildings
1,420

 
1,071

Leasehold improvements
304

 
203

Network equipment
3,020

 
2,351

Computer software, office equipment and other
149

 
95

Construction in progress
738

 
377

Total
5,784

 
4,142

Less: Accumulated depreciation
(1,817
)
 
(1,260
)
Property and equipment, net
$
3,967

 
$
2,882

Goodwill and Intangible Assets (Tables)
Changes in Carrying Amount of Goodwill 
The changes in carrying amount of goodwill for the years ended December 31, 2014 and 2013 are as follows (in millions):
Balance as of December 31, 2012
$
587

Goodwill acquired
252

Balance as of December 31, 2013
$
839

Goodwill acquired
17,150

Effect of currency translation adjustment
(8
)
Balance as of December 31, 2014
$
17,981

Intangible Assets 
Intangible assets consist of the following (in millions):
 
 
 
December 31, 2014
 
December 31, 2013
 
Useful lives from date of acquisitions (in years)
 
Gross Carrying Amount
 
Accumulated Amortization
 
Net Carrying Amount
 
Gross Carrying Amount
 
Accumulated Amortization
 
Net Carrying Amount
Finite-lived intangible assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
Acquired users
3 - 7
 
$
2,056

 
$
(85
)
 
$
1,971

 
$
30

 
$
(6
)
 
$
24

Acquired technology
2 - 10
 
813

 
(144
)
 
669

 
227

 
(65
)
 
162

Acquired patents
2 - 18
 
773

 
(239
)
 
534

 
773

 
(142
)
 
631

Trade names
2 - 7
 
632

 
(46
)
 
586

 
45

 
(8
)
 
37

Other
2 - 10
 
164

 
(55
)
 
109

 
63

 
(34
)
 
29

Total finite-lived intangible assets
 
 
$
4,438

 
$
(569
)
 
$
3,869

 
$
1,138

 
$
(255
)
 
$
883

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Indefinite-lived intangible assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
IPR&D
 
 
$
60

 
$
—

 
$
60

 
$
—

 
$
—

 
$
—

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total intangible assets
 
 
$
4,498

 
$
(569
)
 
$
3,929

 
$
1,138

 
$
(255
)
 
$
883

Estimated Amortization Expense for Unamortized Acquired Intangible Assets 
As of December 31, 2014, expected amortization expense for the unamortized acquired intangible assets for the next five years and thereafter is as follows (in millions):
2015
$
710

2016
691

2017
648

2018
600

2019
518

Thereafter
702

Total
$
3,869

Liabilities (Tables)
Schedule of Accrued Expenses and Other Current Liabilities 
The components of accrued expenses and other current liabilities are as follows (in millions):
 
December 31,
 
2014
 
2013
Accrued compensation and benefits
$
322

 
$
196

Accrued property and equipment
164

 
87

Other current liabilities
380

 
272

Accrued expenses and other current liabilities
$
866

 
$
555

Other Liabilities 
The components of other liabilities are as follows (in millions):
 
December 31,
 
2014
 
2013
Income tax payable
$
1,190

 
$
886

Deferred tax liabilities
987

 
47

Other liabilities
368

 
155

Other liabilities
$
2,545

 
$
1,088

Commitments and Contingencies (Tables)
Schedule of Future Minimum Lease Payments for Capital and Operating Leases
The following is a schedule, by years, of the future minimum lease payments required under non-cancelable capital and operating leases as of December 31, 2014 (in millions):
 
Capital
Leases
 
Operating
Leases
2015
$
124

 
$
155

2016
20

 
161

2017
15

 
158

2018
16

 
143

2019
16

 
125

Thereafter
112

 
359

Total minimum lease payments
$
303

 
$
1,101

Less: amount representing interest and taxes
(70
)
 
 
Less: current portion of the present value of minimum lease payments
(114
)
 
 
Capital lease obligations, net of current portion
$
119

 
 
Stockholders' Equity (Tables)
Stock Option Activity under Stock Plans 
The following table summarizes stock option award activities under the Stock Plans for the year ended December 31, 2014:
 
Shares Subject to Options Outstanding
 
Number of
Shares
 
Weighted
Average
Exercise
Price
 
Weighted
Average
Remaining
Contractual
Term
 
Aggregate
Intrinsic
Value(1)
 
(in thousands)
 
 
 
(in years)
 
(in millions)
Balance as of December 31, 2013
22,102

 
$
3.56

 
 
 
 
Stock options exercised
(9,118
)
 
1.82

 
 
 
 
Balance as of December 31, 2014
12,984

 
$
4.78

 
3.79
 
$
951

Stock options vested and expected to vest as of December 31, 2014
12,980

 
$
4.78

 
3.79
 
$
951

Stock options exercisable as of December 31, 2014
9,850

 
$
2.49

 
3.20
 
$
744

 
(1)
The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying stock option awards and the closing price of our Class A common stock of $78.02 on December 31, 2014.
Outstanding and Exercisable Options Under Stock Plans 
The following table summarizes additional information regarding outstanding and exercisable options under the Stock Plans at December 31, 2014:
 
 
Options Outstanding 
 
Options Exercisable 
Exercise
Price (Range) 
 
Number of
Shares
 
Weighted
Average
Remaining
Contractual
Term
 
Weighted
Average
Exercise
Price 
 
Number of
Shares 
 
Weighted
Average
Exercise
Price 
 
 
(in thousands)
 
(in years)
 
 
 
(in thousands)
 
 
$0.06
 
191
 
0.99
 
$
0.06

 
191

 
$
0.06

0.10 - 0.18
 
1,784
 
1.44
 
0.10

 
1,784

 
0.10

0.29 - 0.33
 
3,509
 
2.29
 
0.30

 
3,509

 
0.30

1.85
 
1,605
 
4.03
 
1.85

 
1,605

 
1.85

2.95
 
1,195
 
4.63
 
2.95

 
1,195

 
2.95

10.39
 
3,500
 
5.56
 
10.39

 
1,458

 
10.39

15.00
 
1,200
 
5.80
 
15.00

 
108

 
15.00

 
 
12,984
 
3.79
 
$
4.78

 
9,850

 
$
2.49

Restricted Stock Units Award Activity 
The following table summarizes the activities for our unvested RSUs for the year ended December 31, 2014:
 
Unvested RSUs
 
Number of Shares
 
Weighted Average Grant Date Fair Value
 
(in thousands)
 
 
Unvested at December 31, 2013
103,971

 
$
27.30

Granted
84,606

 
74.03

Vested
(41,233
)
 
25.76

Forfeited
(9,289
)
 
34.80

Unvested at December 31, 2014
138,055

 
$
55.89

Interest and Other Income (Expense), Net (Tables)
Schedule of Interest and Other Income (Expense), Net
The following table presents the detail of interest and other income/(expense), net, for the periods presented (in millions):
 
Year Ended December 31,
 
2014
 
2013
 
2012
Interest expense
$
(23
)
 
$
(56
)
 
$
(51
)
Interest income
27

 
19

 
14

Foreign currency exchange losses, net
(87
)
 
(14
)
 
(9
)
Other
(1
)
 
1

 
2

Interest and other income/(expense), net
$
(84
)
 
$
(50
)
 
$
(44
)
Income Taxes (Tables)
Components of Income Before Provision for Income Taxes 
The components of income before provision for income taxes for the years ended December 31, 2014, 2013, and 2012 are as follows (in millions):
 
Year Ended December 31, 
 
2014
 
2013
 
2012
Domestic
$
4,918

 
$
3,197

 
$
1,062

Foreign
(8
)
 
(443
)
 
(568
)
Income before provision for income taxes
$
4,910

 
$
2,754

 
$
494

Schedule of Provision for Income Taxes 
The provision for income taxes consisted of the following (in millions):
 
Year Ended December 31, 
 
2014
 
2013
 
2012
Current:
 
 
 
 
 
Federal
$
1,999

 
$
1,154

 
$
559

State
130

 
69

 
45

Foreign
96

 
68

 
22

Total current tax expense
2,225

 
1,291

 
626

Deferred:
 
 
 
 
 
Federal
(240
)
 
(28
)
 
(172
)
State
(14
)
 
(7
)
 
(6
)
Foreign
(1
)
 
(2
)
 
(7
)
Total deferred tax benefit
(255
)
 
(37
)
 
(185
)
Provision for income taxes
$
1,970

 
$
1,254

 
$
441

Reconciliation of U.S. Federal Statutory Income Tax Rate to Effective Tax Rate 
A reconciliation of the U.S. federal statutory income tax rate of 35.0% to our effective tax rate is as follows (in percentages):
 
Year Ended December 31, 
 
2014
 
2013
 
2012
U.S. federal statutory income tax rate
35.0
 %
 
35.0
 %
 
35.0
%
State income taxes, net of federal benefit
1.4

 
1.6

 
6.2

Research tax credits
(1.1
)
 
(4.7
)
 
—

Share-based compensation
6.5

 
5.2

 
19.2

Effect of non-U.S. operations
(3.6
)
 
6.8

 
26.9

Other
1.9

 
1.6

 
2.0

Effective tax rate
40.1
 %
 
45.5
 %
 
89.3
%
Schedule of Deferred Tax Assets and Liabilities 
Our deferred tax assets (liabilities) are as follows (in millions):
 
December 31, 
 
2014
 
2013
Deferred tax assets:
 
 
 
Net operating loss carryforward
$
130

 
$
6

Tax credit carryforward
190

 
164

Share-based compensation
225

 
120

Accrued expenses and other liabilities
136

 
141

Other
21

 
5

Total deferred tax assets
702

 
436

Less: valuation allowance
(101
)
 
(82
)
Deferred tax assets, net of valuation allowance
601

 
354

 
 
 
 
Deferred tax liabilities:
 
 
 
Depreciation and amortization
(101
)
 
(68
)
Purchased intangible assets
(1,190
)
 
(90
)
Deferred foreign taxes
—

 
(43
)
Total deferred tax liabilities
(1,291
)
 
(201
)
Net deferred tax (liabilities) assets
$
(690
)
 
$
153

Schedule of Gross Unrecognized Tax Benefits Roll Forward 
The following table reflects changes in the gross unrecognized tax benefits (in millions):
 
Year Ended December 31, 
 
2014
 
2013
 
2012
Gross unrecognized tax benefits-beginning of period
$
1,316

 
$
164

 
$
63

Increases related to prior year tax positions
24

 
425

 
13

Decreases related to prior year tax positions
—

 
(13
)
 
(16
)
Increases related to current year tax positions
346

 
740

 
104

Decreases related to settlements of prior year tax positions
(4
)
 
—

 
—

Gross unrecognized tax benefits-end of period
$
1,682

 
$
1,316

 
$
164

Geographical Information (Tables)
Revenue and Property and Equipment by Geographic Area
Revenue by geography is based on the billing address of the advertiser or developer. The following table sets forth revenue and property and equipment, net by geographic area (in millions):
 
Year Ended December 31, 
 
2014
 
2013
 
2012
Revenue:
 
 
 
 
 
United States
$
5,649

 
$
3,613

 
$
2,578

Rest of the world(1)
6,817

 
4,259

 
2,511

Total revenue
$
12,466

 
$
7,872

 
$
5,089

 
(1)
No individual country, other than disclosed above, exceeded 10% of our total revenue for any period presented
 
 
December 31,
 
2014
 
2013
Property and equipment, net:
 
 
 
United States
$
3,256

 
$
2,368

Sweden
514

 
415

Rest of the world
197

 
99

Total property and equipment, net
$
3,967

 
$
2,882




Summary of Significant Accounting Policies - Revenue Recognition (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Accounting Policies [Abstract]
 
 
 
Advertising
$ 11,492 
$ 6,986 
$ 4,279 
Payments and other fees
974 
886 
810 
Total revenue
$ 12,466 
$ 7,872 
$ 5,089 
Payment Transaction Claim, Term
30 days 
 
 
Summary of Significant Accounting Policies - Share-based Compensation (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Share-based Compensation Arrangement by Share-based Payment Award
 
 
 
Tax benefit from share-based award activity
$ 1,853 
$ 602 
$ 1,033 
Excess tax benefit from share-based award activity
$ 1,869 
$ 609 
$ 1,033 
Min |
Restricted Stock Units (RSUs)
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award
 
 
 
Service period
4 years 
 
 
Max |
Restricted Stock Units (RSUs)
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award
 
 
 
Service period
5 years 
 
 
Summary of Significant Accounting Policies - Property & Equipment and Lease Obligations (Details)
12 Months Ended
Dec. 31, 2014
Network equipment |
Min
 
Property, Plant and Equipment
 
Useful life of property and equipment
3 years 
Network equipment |
Max
 
Property, Plant and Equipment
 
Useful life of property and equipment
5 years 
Buildings |
Min
 
Property, Plant and Equipment
 
Useful life of property and equipment
4 years 
Buildings |
Max
 
Property, Plant and Equipment
 
Useful life of property and equipment
20 years 
Computer software, office equipment and other |
Min
 
Property, Plant and Equipment
 
Useful life of property and equipment
3 years 
Computer software, office equipment and other |
Max
 
Property, Plant and Equipment
 
Useful life of property and equipment
5 years 
Summary of Significant Accounting Policies - Intangible Assets (Details) (USD $)
12 Months Ended
Dec. 31, 2014
Intangible Assets
 
Goodwill, Impairment Loss
$ 0 
Remaining amortization period
1 year 
Max
 
Intangible Assets
 
Remaining amortization period
15 years 
Summary of Significant Accounting Policies - Other Policies (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Accounting Policies [Abstract]
 
 
 
Advertising expense
$ 135 
$ 117 
$ 67 
Deferred Revenue & Deposits [Abstract]
 
 
 
Deferred Revenue, rate payable to developer upon utilization of virtual currency
70.00% 
 
 
Deferred revenue
38 
13 
 
Deposits
28 
25 
 
Total deferred revenue and deposits
$ 66 
$ 38 
 
Max
 
 
 
Operating Leased Assets [Line Items]
 
 
 
Lease expiration year
2030 
 
 
Summary of Significant Accounting Policies - Foreign Currency (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Foreign Currency [Abstract]
 
 
 
Cumulative translation gain (loss)
$ (227)
$ 12 
 
Foreign currency exchange losses, net
$ (87)
$ (14)
$ (9)
Summary of Significant Accounting Policies - Credit Risk and Concentration (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Concentration Risk
 
 
 
Provision for Doubtful Accounts
$ 19 
$ 21 
$ 9 
Major customer percentage
10.00% 
10.00% 
10.00% 
Geographic concentration risk |
Sales revenue |
United States
 
 
 
Concentration Risk
 
 
 
Concentration risk percentage
45.00% 
46.00% 
51.00% 
Customer concentration risk
 
 
 
Concentration Risk
 
 
 
Number of major customer
0 
0 
0 
Acquisitions - WhatsApp (Details) (USD $)
In Millions, except Share data, unless otherwise specified
12 Months Ended 1 Months Ended 12 Months Ended 1 Months Ended 12 Months Ended
Dec. 31, 2014
Class A Common Stock
Dec. 23, 2013
Class A Common Stock
May 17, 2012
Class A Common Stock
Dec. 31, 2014
Restricted Stock Units (RSUs)
Oct. 31, 2014
WhatsApp
Dec. 31, 2014
WhatsApp
Dec. 31, 2013
WhatsApp
Oct. 6, 2014
WhatsApp
Oct. 31, 2014
WhatsApp
Class A Common Stock
Dec. 31, 2014
WhatsApp
Restricted Stock Units (RSUs)
Business Acquisition [Line Items]
 
 
 
 
 
 
 
 
 
 
Number of shares issued
 
 
 
 
 
 
 
 
178,000,000 
 
Payments to acquire business
 
 
 
 
$ 4,589 
 
 
 
 
 
RSUs issued
 
 
 
84,606,000 
 
 
 
 
 
46,000,000 
Share price
$ 78.02 
$ 55.05 
$ 38.00 
 
 
 
 
$ 77.56 
 
 
Consideration transferred
 
 
 
 
 
 
 
 
 
 
Cash
 
 
 
 
4,589 
 
 
 
 
 
Common stock
 
 
 
 
13,787 
 
 
 
 
 
Less: post-acquisition share-based compensation and other compensation expense
 
 
 
 
(1,067)
 
 
 
 
 
Less: cash and promissory notes acquired on acquisition date
 
 
 
 
(116)
 
 
 
 
 
Purchase consideration
 
 
 
 
17,193 
 
 
 
 
 
Post-acquisition share-based compensation and other compensation expense
 
 
 
 
1,067 
 
 
 
 
 
Share-based compensation recognized
 
 
 
 
188 
 
 
 
 
 
Cash used to settle share-based compensation
 
 
 
 
50 
 
 
 
 
 
Deferred compensation arrangement to be recognized
 
 
 
 
879 
 
 
 
 
 
Deferred compensation, Shares issued
 
 
 
 
8,500,000 
 
 
 
 
 
Deferred compensation, Cash award
 
 
 
 
219 
 
 
 
 
 
Deferred compensation, Requisite service period
 
 
 
 
3 years 
 
 
 
 
 
Business Acquisition, Pro Forma Information [Abstract]
 
 
 
 
 
 
 
 
 
 
Revenue
 
 
 
 
 
12,487 
7,882 
 
 
 
Net income
 
 
 
 
 
$ 1,757 
$ 65 
 
 
 
Acquisitions Acquisitions - Oculus (Details) (USD $)
In Millions, unless otherwise specified
1 Months Ended
Jul. 31, 2014
Business Acquisition [Line Items]
 
Contingent consideration liability
$ 169 
Consideration transferred
 
Contingent consideration liability
169 
Oculus
 
Business Acquisition [Line Items]
 
Payments to acquire business
400 
Contingent consideration liability
169 
Consideration transferred
 
Cash
400 
Common stock
1,601 
Less: post-acquisition share-based compensation and other compensation expense
(297)
Less: cash acquired on acquisition date
(20)
Total purchase consideration, excluding contingent consideration
1,684 
Contingent consideration liability
169 
Purchase consideration
1,853 
Post-acquisition share-based compensation and other compensation expense
297 
Share-based compensation recognized
13 
Deferred compensation arrangement to be recognized
284 
Deferred compensation, Requisite service period
4 years 
Oculus |
Class B Common Stock
 
Business Acquisition [Line Items]
 
Business Acquisitions Contingent Liabilities, Number of Shares Issuable
3 
Oculus |
Cash
 
Business Acquisition [Line Items]
 
Contingent consideration liability
60 
Consideration transferred
 
Contingent consideration liability
$ 60 
Oculus |
Class B Common Stock
 
Business Acquisition [Line Items]
 
Number of shares issued
23 
Acquisitions Acquisitions - Other (Details) (USD $)
In Millions, unless otherwise specified
1 Months Ended 1 Months Ended 1 Months Ended 12 Months Ended 12 Months Ended 12 Months Ended 12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Oct. 31, 2014
WhatsApp
Oct. 31, 2014
WhatsApp
Acquired users
Oct. 31, 2014
WhatsApp
Tradename
Oct. 31, 2014
WhatsApp
Acquired technology
Oct. 31, 2014
WhatsApp
Other intangible assets
Oct. 31, 2014
WhatsApp
IPR&D
Jul. 31, 2014
Oculus
Jul. 31, 2014
Oculus
Acquired users
Jul. 31, 2014
Oculus
Tradename
Jul. 31, 2014
Oculus
Acquired technology
Jul. 31, 2014
Oculus
Other intangible assets
Jul. 31, 2014
Oculus
IPR&D
Dec. 31, 2014
Other
Dec. 31, 2014
Other
Acquired users
Dec. 31, 2014
Other
Tradename
Dec. 31, 2014
Other
Acquired technology
Dec. 31, 2014
Other
Other intangible assets
Dec. 31, 2014
Other
IPR&D
Dec. 31, 2014
Other
Min
Acquired technology
Dec. 31, 2014
Other
Max
Acquired technology
Business Combination, Recognized Identifiable Assets Acquired, Goodwill, and Liabilities Assumed, Net [Abstract]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Finite-lived intangible assets
 
 
 
 
$ 2,026 
$ 448 
$ 288 
$ 21 
$ 0 
 
$ 0 
$ 113 
$ 235 
$ 19 
$ 60 
 
$ 0 
$ 26 
$ 68 
$ 61 
$ 0 
 
 
Finite-lived intangible assets - Useful life
 
 
 
 
7 years 
5 years 
5 years 
2 years 
 
 
 
7 years 
5 years 
2 years 
 
 
 
5 years 
 
5 years 
 
3 years 
5 years 
(Liabilities assumed) assets acquired
 
 
 
(33)
 
 
 
 
 
0 
 
 
 
 
 
103 
 
 
 
 
 
 
 
Deferred tax liabilities
 
 
 
(899)
 
 
 
 
 
(107)
 
 
 
 
 
(48)
 
 
 
 
 
 
 
Net assets acquired
 
 
 
1,851 
 
 
 
 
 
320 
 
 
 
 
 
210 
 
 
 
 
 
 
 
Goodwill
17,981 
839 
587 
15,342 
 
 
 
 
 
1,533 
 
 
 
 
 
275 
 
 
 
 
 
 
 
Total fair value consideration
 
 
 
17,193 
 
 
 
 
 
1,684 
 
 
 
 
 
485 
 
 
 
 
 
 
 
Total fair value consideration
 
 
 
 
 
 
 
 
 
$ 1,853 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earnings per Share (Details) (USD $)
In Millions, except Per Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Numerator
 
 
 
Net income
$ 2,940 
$ 1,500 
$ 53 
Less: Net income attributable to participating securities
15 
9 
21 
Net income attributable to common stockholders
2,925 
1,491 
32 
Denominator
 
 
 
Number of shares used for basic EPS computation (in shares)
2,614 
2,420 
2,006 
Basic EPS (in dollars per share)
$ 1.12 
$ 0.62 
$ 0.02 
Numerator
 
 
 
Net income attributable to common stockholders
2,925 
1,491 
32 
Denominator
 
 
 
Number of shares used for basic EPS computation (in shares)
2,614 
2,420 
2,006 
Number of shares used for diluted EPS computation (in shares)
2,664 
2,517 
2,166 
Diluted EPS (in dollars per share)
$ 1.10 
$ 0.60 
$ 0.01 
Class A Common Stock
 
 
 
Numerator
 
 
 
Net income
2,308 
1,114 
18 
Less: Net income attributable to participating securities
12 
7 
7 
Net income attributable to common stockholders
2,296 
1,107 
11 
Denominator
 
 
 
Weighted average shares outstanding (in shares)
2,059 
1,803 
668 
Less: Shares subject to repurchase (in shares)
6 
5 
1 
Number of shares used for basic EPS computation (in shares)
2,053 
1,798 
667 
Basic EPS (in dollars per share)
$ 1.12 
$ 0.62 
$ 0.02 
Numerator
 
 
 
Net income attributable to common stockholders
2,296 
1,107 
11 
Reallocation of net income attributable to participating securities
15 
9 
0 
Reallocation of net income as a result of conversion of Class B to Class A common stock
629 
384 
21 
Reallocation of net income to Class B common stock
0 
0 
0 
Net income attributable to common stockholders for diluted EPS
2,940 
1,500 
32 
Denominator
 
 
 
Number of shares used for basic EPS computation (in shares)
2,053 
1,798 
667 
Conversion of Class B to Class A common stock (in shares)
561 
622 
1,339 
Shares subject to repurchase (in shares)
7 
7 
3 
Number of shares used for diluted EPS computation (in shares)
2,664 
2,517 
2,166 
Diluted EPS (in dollars per share)
$ 1.10 
$ 0.60 
$ 0.01 
Class A Common Stock |
Employee Stock Option
 
 
 
Denominator
 
 
 
Share based payment arrangements (in shares)
13 
65 
134 
Class A Common Stock |
Restricted Stock Units (RSUs)
 
 
 
Denominator
 
 
 
Share based payment arrangements (in shares)
30 
25 
23 
Class B Common Stock
 
 
 
Numerator
 
 
 
Net income
632 
386 
35 
Less: Net income attributable to participating securities
3 
2 
14 
Net income attributable to common stockholders
629 
384 
21 
Denominator
 
 
 
Weighted average shares outstanding (in shares)
568 
631 
1,344 
Less: Shares subject to repurchase (in shares)
7 
9 
5 
Number of shares used for basic EPS computation (in shares)
561 
622 
1,339 
Basic EPS (in dollars per share)
$ 1.12 
$ 0.62 
$ 0.02 
Numerator
 
 
 
Net income attributable to common stockholders
629 
384 
21 
Reallocation of net income attributable to participating securities
0 
0 
0 
Reallocation of net income as a result of conversion of Class B to Class A common stock
0 
0 
0 
Reallocation of net income to Class B common stock
23 
39 
1 
Net income attributable to common stockholders for diluted EPS
$ 652 
$ 423 
$ 22 
Denominator
 
 
 
Number of shares used for basic EPS computation (in shares)
561 
622 
1,339 
Conversion of Class B to Class A common stock (in shares)
0 
0 
0 
Shares subject to repurchase (in shares)
4 
7 
3 
Number of shares used for diluted EPS computation (in shares)
591 
709 
1,499 
Diluted EPS (in dollars per share)
$ 1.10 
$ 0.60 
$ 0.01 
Class B Common Stock |
Employee Stock Option
 
 
 
Denominator
 
 
 
Share based payment arrangements (in shares)
13 
65 
134 
Class B Common Stock |
Restricted Stock Units (RSUs)
 
 
 
Denominator
 
 
 
Share based payment arrangements (in shares)
13 
15 
23 
Restricted Stock Units (RSUs)
 
 
 
Earnings Per Share, Basic, by Common Class, Including Two Class Method
 
 
 
Antidilutive securities excluded from computation of earnings per share (in shares)
14 
1 
15 
Cash, Cash Equivalents and Marketable Securities (Details) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2014
security
Dec. 31, 2013
security
Dec. 31, 2012
Dec. 31, 2011
Cash, Cash Equivalents and Marketable Securities
 
 
 
 
Cash
$ 2,162 
$ 1,044 
 
 
Money market funds
2,153 
2,279 
 
 
Total cash and cash equivalents
4,315 
3,323 
2,384 
1,512 
Marketable securities
6,884 
8,126 
 
 
Total cash, cash equivalents and marketable securities
11,199 
11,449 
 
 
Number of positions in a continuous loss position for 12 months or longer
0 
0 
 
 
U.S. government securities
 
 
 
 
Cash, Cash Equivalents and Marketable Securities
 
 
 
 
Marketable securities
2,830 
5,687 
 
 
U.S. government agency securities
 
 
 
 
Cash, Cash Equivalents and Marketable Securities
 
 
 
 
Marketable securities
2,710 
2,439 
 
 
Corporate debt securities
 
 
 
 
Cash, Cash Equivalents and Marketable Securities
 
 
 
 
Marketable securities
$ 1,344 
$ 0 
 
 
Cash and Cash Equivalents, and Marketable Securities - Contractual Maturities of Debt Securities (Details) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Cash and Cash Equivalents, and Marketable Securities [Abstract]
 
 
Due in one year
$ 3,422 
$ 4,704 
Due in one to two years
3,462 
3,422 
Total Marketable securities
$ 6,884 
$ 8,126 
Fair Value Measurements (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Jul. 31, 2014
Dec. 31, 2013
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
 
 
 
Marketable securities
$ 6,884 
 
$ 8,126 
Contingent consideration liability
 
169 
 
Change in value of contingent consideration liability
22 
 
 
Fair Value, Measurements, Recurring
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
 
 
 
Total cash equivalents and marketable securities
9,037 
 
10,405 
Contingent consideration liability
191 
 
 
Fair Value, Measurements, Recurring |
Quoted Prices in Active Markets for Identical Assets (Level 1)
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
 
 
 
Total cash equivalents and marketable securities
7,693 
 
10,405 
Contingent consideration liability
0 
 
 
Fair Value, Measurements, Recurring |
Significant Other Observable Inputs (Level 2)
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
 
 
 
Total cash equivalents and marketable securities
1,344 
 
0 
Contingent consideration liability
0 
 
 
Fair Value, Measurements, Recurring |
Significant Unobservable Inputs (Level 3)
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
 
 
 
Total cash equivalents and marketable securities
0 
 
0 
Contingent consideration liability
191 
 
 
U.S. government securities
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
 
 
 
Marketable securities
2,830 
 
5,687 
U.S. government securities |
Fair Value, Measurements, Recurring
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
 
 
 
Marketable securities
2,830 
 
5,687 
U.S. government securities |
Fair Value, Measurements, Recurring |
Quoted Prices in Active Markets for Identical Assets (Level 1)
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
 
 
 
Marketable securities
2,830 
 
5,687 
U.S. government securities |
Fair Value, Measurements, Recurring |
Significant Other Observable Inputs (Level 2)
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
 
 
 
Marketable securities
0 
 
0 
U.S. government securities |
Fair Value, Measurements, Recurring |
Significant Unobservable Inputs (Level 3)
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
 
 
 
Marketable securities
0 
 
0 
U.S. government agency securities
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
 
 
 
Marketable securities
2,710 
 
2,439 
U.S. government agency securities |
Fair Value, Measurements, Recurring
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
 
 
 
Marketable securities
2,710 
 
2,439 
U.S. government agency securities |
Fair Value, Measurements, Recurring |
Quoted Prices in Active Markets for Identical Assets (Level 1)
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
 
 
 
Marketable securities
2,710 
 
2,439 
U.S. government agency securities |
Fair Value, Measurements, Recurring |
Significant Other Observable Inputs (Level 2)
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
 
 
 
Marketable securities
0 
 
0 
U.S. government agency securities |
Fair Value, Measurements, Recurring |
Significant Unobservable Inputs (Level 3)
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
 
 
 
Marketable securities
0 
 
0 
Corporate debt securities
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
 
 
 
Marketable securities
1,344 
 
0 
Corporate debt securities |
Fair Value, Measurements, Recurring
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
 
 
 
Marketable securities
1,344 
 
 
Corporate debt securities |
Fair Value, Measurements, Recurring |
Quoted Prices in Active Markets for Identical Assets (Level 1)
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
 
 
 
Marketable securities
0 
 
 
Corporate debt securities |
Fair Value, Measurements, Recurring |
Significant Other Observable Inputs (Level 2)
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
 
 
 
Marketable securities
1,344 
 
 
Corporate debt securities |
Fair Value, Measurements, Recurring |
Significant Unobservable Inputs (Level 3)
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
 
 
 
Marketable securities
0 
 
 
Money market funds |
Fair Value, Measurements, Recurring
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
 
 
 
Cash equivalents
2,153 
 
2,279 
Money market funds |
Fair Value, Measurements, Recurring |
Quoted Prices in Active Markets for Identical Assets (Level 1)
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
 
 
 
Cash equivalents
2,153 
 
2,279 
Money market funds |
Fair Value, Measurements, Recurring |
Significant Other Observable Inputs (Level 2)
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
 
 
 
Cash equivalents
0 
 
0 
Money market funds |
Fair Value, Measurements, Recurring |
Significant Unobservable Inputs (Level 3)
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
 
 
 
Cash equivalents
$ 0 
 
$ 0 
Property and Equipment (Detail) (USD $)
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Property, Plant and Equipment
 
 
 
Property and equipment, gross
$ 5,784,000,000 
$ 4,142,000,000 
 
Less: Accumulated depreciation
(1,817,000,000)
(1,260,000,000)
 
Property and equipment, net
3,967,000,000 
2,882,000,000 
 
Depreciation expense
923,000,000 
857,000,000 
566,000,000 
Assets acquired under capital lease agreements
700,000,000 
976,000,000 
 
Accumulated depreciation of property and equipment acquired under capital leases
425,000,000 
527,000,000 
 
Interest costs capitalized
0 
 
 
Land
 
 
 
Property, Plant and Equipment
 
 
 
Property and equipment, gross
153,000,000 
45,000,000 
 
Buildings
 
 
 
Property, Plant and Equipment
 
 
 
Property and equipment, gross
1,420,000,000 
1,071,000,000 
 
Leasehold improvements
 
 
 
Property, Plant and Equipment
 
 
 
Property and equipment, gross
304,000,000 
203,000,000 
 
Network equipment
 
 
 
Property, Plant and Equipment
 
 
 
Property and equipment, gross
3,020,000,000 
2,351,000,000 
 
Computer software, office equipment and other
 
 
 
Property, Plant and Equipment
 
 
 
Property and equipment, gross
149,000,000 
95,000,000 
 
Construction in progress
 
 
 
Property, Plant and Equipment
 
 
 
Property and equipment, gross
$ 738,000,000 
$ 377,000,000 
 
Goodwill and Intangible Assets Goodwill (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Goodwill [Roll Forward]
 
 
Goodwill beginning
$ 839 
$ 587 
Goodwill acquired
17,150 
252 
Effect of currency translation adjustment
(8)
 
Goodwill ending
$ 17,981 
$ 839 
Intangible Assets (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Intangible Assets, Net (Excluding Goodwill) [Abstract]
 
 
 
Gross Carrying Amount
$ 4,438 
$ 1,138 
 
Accumulated Amortization
(569)
(255)
 
Net Carrying Amount
3,869 
883 
 
Indefinite-lived intangible assets
60 
0 
 
Total intangible assets, Gross
4,498 
1,138 
 
Total intangible assets, Net
3,929 
883 
 
Amortization expense
319 
145 
78 
Acquired users
 
 
 
Intangible Assets, Net (Excluding Goodwill) [Abstract]
 
 
 
Gross Carrying Amount
2,056 
30 
 
Accumulated Amortization
(85)
(6)
 
Net Carrying Amount
1,971 
24 
 
Acquired technology
 
 
 
Intangible Assets, Net (Excluding Goodwill) [Abstract]
 
 
 
Gross Carrying Amount
813 
227 
 
Accumulated Amortization
(144)
(65)
 
Net Carrying Amount
669 
162 
 
Acquired patents
 
 
 
Intangible Assets, Net (Excluding Goodwill) [Abstract]
 
 
 
Gross Carrying Amount
773 
773 
 
Accumulated Amortization
(239)
(142)
 
Net Carrying Amount
534 
631 
 
Tradename
 
 
 
Intangible Assets, Net (Excluding Goodwill) [Abstract]
 
 
 
Gross Carrying Amount
632 
45 
 
Accumulated Amortization
(46)
(8)
 
Net Carrying Amount
586 
37 
 
Other intangible assets
 
 
 
Intangible Assets, Net (Excluding Goodwill) [Abstract]
 
 
 
Gross Carrying Amount
164 
63 
 
Accumulated Amortization
(55)
(34)
 
Net Carrying Amount
$ 109 
$ 29 
 
Min |
Acquired users
 
 
 
Intangible Assets, Net (Excluding Goodwill) [Abstract]
 
 
 
Finite-lived intangible asset, Useful life
3 years 
 
 
Min |
Acquired technology
 
 
 
Intangible Assets, Net (Excluding Goodwill) [Abstract]
 
 
 
Finite-lived intangible asset, Useful life
2 years 
 
 
Min |
Acquired patents
 
 
 
Intangible Assets, Net (Excluding Goodwill) [Abstract]
 
 
 
Finite-lived intangible asset, Useful life
2 years 
 
 
Min |
Tradename
 
 
 
Intangible Assets, Net (Excluding Goodwill) [Abstract]
 
 
 
Finite-lived intangible asset, Useful life
2 years 
 
 
Min |
Other intangible assets
 
 
 
Intangible Assets, Net (Excluding Goodwill) [Abstract]
 
 
 
Finite-lived intangible asset, Useful life
2 years 
 
 
Max |
Acquired users
 
 
 
Intangible Assets, Net (Excluding Goodwill) [Abstract]
 
 
 
Finite-lived intangible asset, Useful life
7 years 
 
 
Max |
Acquired technology
 
 
 
Intangible Assets, Net (Excluding Goodwill) [Abstract]
 
 
 
Finite-lived intangible asset, Useful life
10 years 
 
 
Max |
Acquired patents
 
 
 
Intangible Assets, Net (Excluding Goodwill) [Abstract]
 
 
 
Finite-lived intangible asset, Useful life
18 years 
 
 
Max |
Tradename
 
 
 
Intangible Assets, Net (Excluding Goodwill) [Abstract]
 
 
 
Finite-lived intangible asset, Useful life
7 years 
 
 
Max |
Other intangible assets
 
 
 
Intangible Assets, Net (Excluding Goodwill) [Abstract]
 
 
 
Finite-lived intangible asset, Useful life
10 years 
 
 
Goodwill and Intangible Assets Amortization Expense (Details) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Finite-Lived Intangible Assets, Amortization Expense, Maturity Schedule [Abstract]
 
 
2015
$ 710 
 
2016
691 
 
2017
648 
 
2018
600 
 
2019
518 
 
Thereafter
702 
 
Net Carrying Amount
$ 3,869 
$ 883 
Liabilities (Details) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Accrued Liabilities and Other Current Liabilities [Abstract]
 
 
Accrued compensation and benefits
$ 322 
$ 196 
Accrued property and equipment
164 
87 
Other current liabilities
380 
272 
Accrued expenses and other current liabilities
866 
555 
Other Liabilities [Abstract]
 
 
Income tax payable
1,190 
886 
Deferred Tax Liabilities
987 
47 
Other liabilities
368 
155 
Other liabilities
$ 2,545 
$ 1,088 
Long-term Debt - Borrowings (Details) (Revolving Credit Facility, 2013 Revolving Credit Facility, USD $)
1 Months Ended
Aug. 31, 2013
Dec. 31, 2014
Revolving Credit Facility |
2013 Revolving Credit Facility
 
 
Debt Instrument
 
 
Term loan facility, term period
5 years 
 
Line of credit facility, maximum borrowing capacity
$ 6,500,000,000.0 
 
Debt instrument, interest rate during period
LIBOR 
 
Basis spread on variable rate
1.00% 
 
Line of credit facility, unused capacity, commitment fee percentage
0.10% 
 
Line of credit facility, amount outstanding
 
$ 0 
Commitments and Contingencies (Details) (USD $)
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Leases [Abstract]
 
 
 
Capital lease agreement period
3 years 
 
 
Capital Leases, Future Minimum Payments Due
 
 
 
2015
$ 124,000,000 
 
 
2016
20,000,000 
 
 
2017
15,000,000 
 
 
2018
16,000,000 
 
 
2019
16,000,000 
 
 
Thereafter
112,000,000 
 
 
Total minimum lease payments
303,000,000 
 
 
Less: amount representing interest and taxes
(70,000,000)
 
 
Less: current portion of the present value of minimum lease payments
(114,000,000)
(239,000,000)
 
Capital lease obligations, less current portion
119,000,000 
237,000,000 
 
Operating Leases, Future Minimum Payments Due
 
 
 
2015
155,000,000 
 
 
2016
161,000,000 
 
 
2017
158,000,000 
 
 
2018
143,000,000 
 
 
2019
125,000,000 
 
 
Thereafter
359,000,000 
 
 
Total minimum lease payments
1,101,000,000 
 
 
Operating lease expense
125,000,000 
130,000,000 
196,000,000 
Other contractual commitments
 
 
 
Other contractual commitments
$ 1,030,000,000 
 
 
Contractual Obligation, Period
5 years 
 
 
Min
 
 
 
Leases [Abstract]
 
 
 
Interest rate
1.00% 
 
 
Lease expiration year
2015 
 
 
Max
 
 
 
Leases [Abstract]
 
 
 
Interest rate
13.00% 
 
 
Lease expiration year
2030 
 
 
Buildings
 
 
 
Leases [Abstract]
 
 
 
Capital lease agreement period
15 years 
 
 
Stockholders' Equity - Initial Public Offering (Details) (USD $)
In Millions, except Share data, unless otherwise specified
1 Months Ended 12 Months Ended 1 Months Ended
Dec. 31, 2013
May 31, 2012
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2013
Class A Common Stock
May 31, 2012
Class A Common Stock
Dec. 31, 2014
Class A Common Stock
Dec. 23, 2013
Class A Common Stock
May 17, 2012
Class A Common Stock
Class of Stock
 
 
 
 
 
 
 
 
 
 
Issuance of common stock, shares
 
 
 
 
 
27,004,761 
180,000,000 
 
 
 
Share price
 
 
 
 
 
 
 
$ 78.02 
$ 55.05 
$ 38.00 
Sale of stock, sold by stockholders
 
 
 
 
 
42,995,239 
241,233,615 
 
 
 
Net proceeds from issuance of common stock
$ 1,480 
$ 6,760 
$ 0 
$ 1,478 
$ 6,760 
 
 
 
 
 
Underwriting discounts and commissions
7 
75 
 
 
 
 
 
 
 
 
Other offering costs
$ 1 
$ 7 
 
 
 
 
 
 
 
 
Stockholders' Equity - Follow-on Offering (Details) (USD $)
In Millions, except Share data, unless otherwise specified
1 Months Ended 12 Months Ended 1 Months Ended
Dec. 31, 2013
May 31, 2012
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2013
Class A Common Stock
May 31, 2012
Class A Common Stock
Dec. 31, 2014
Class A Common Stock
Dec. 23, 2013
Class A Common Stock
May 17, 2012
Class A Common Stock
Class of Stock
 
 
 
 
 
 
 
 
 
 
Issuance of common stock, shares
 
 
 
 
 
27,004,761 
180,000,000 
 
 
 
Share price
 
 
 
 
 
 
 
$ 78.02 
$ 55.05 
$ 38.00 
Sale of stock, sold by stockholders
 
 
 
 
 
42,995,239 
241,233,615 
 
 
 
Net proceeds from issuance of common stock
$ 1,480 
$ 6,760 
$ 0 
$ 1,478 
$ 6,760 
 
 
 
 
 
Underwriting discounts and commissions
7 
75 
 
 
 
 
 
 
 
 
Other offering costs
$ 1 
$ 7 
 
 
 
 
 
 
 
 
Stockholders' Equity - Common Stock (Details) (USD $)
Dec. 31, 2014
Dec. 31, 2013
Class of Stock
 
 
Common stock, par value
$ 0.000006 
$ 0.000006 
Class A Common Stock
 
 
Class of Stock
 
 
Common stock, shares authorized
5,000,000,000 
5,000,000,000 
Common stock, par value
$ 0.000006 
 
Common stock, number of votes by class
1 
 
Common stock, shares, issued
2,234,113,007 
1,970,000,000 
Common stock, shares, outstanding
2,234,113,007 
1,970,000,000 
Class B Common Stock
 
 
Class of Stock
 
 
Common stock, shares authorized
4,141,000,000 
4,141,000,000 
Common stock, par value
$ 0.000006 
 
Common stock, number of votes by class
10 
 
Common stock, shares, issued
562,792,201 
577,000,000 
Common stock, shares, outstanding
562,792,201 
577,000,000 
Stockholders' Equity - Share-based Compensation Plans (Detail)
1 Months Ended 12 Months Ended
Oct. 31, 2014
Dec. 31, 2014
Share-based Compensation Arrangement by Share-based Payment Award
 
 
Share-based employee compensation plans, number
 
2 
2012 Plan
 
 
Share-based Compensation Arrangement by Share-based Payment Award
 
 
2012 equity incentive plan shares authorized
 
25,000,000 
Shares reserved for issuance increase percentage
 
2.50% 
Share-based compensation arrangement by share-based payment award, expiration period (in years)
 
10 years 
Share-based compensation arrangement by share-based payment award, expiration period for plan (in years)
 
10 years 
2012 Plan |
Min
 
 
Share-based Compensation Arrangement by Share-based Payment Award
 
 
Shares reserved for issuance increase date range
 
Jan. 01, 2013 
2012 Plan |
Max
 
 
Share-based Compensation Arrangement by Share-based Payment Award
 
 
Shares reserved for issuance increase date range
 
Jan. 01, 2022 
Inducement awards
 
 
Share-based Compensation Arrangement by Share-based Payment Award
 
 
Granted (in shares)
37,475,271 
 
Deferred compensation, Requisite service period
 
4 years 
Stockholders' Equity - Stock Option Award Activity (Details) (USD $)
In Millions, except Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2014
Employee Stock Option
Dec. 31, 2014
Class A Common Stock
Dec. 23, 2013
Class A Common Stock
May 17, 2012
Class A Common Stock
Number of Shares
 
 
 
 
 
 
 
Beginning balance (in shares)
 
 
 
22,102,000 
 
 
 
Stock options exercised (in shares)
 
 
 
(9,118,000)
 
 
 
Ending balance (in shares)
12,984,000 
 
 
12,984,000 
 
 
 
Stock options vested and expected to vest as of period end (in shares)
 
 
 
12,980,000 
 
 
 
Stock options exercisable as of period end (in shares)
 
 
 
9,850,000 
 
 
 
Weighted Average Exercise Price
 
 
 
 
 
 
 
Beginning Balance (in dollars per share)
 
 
 
$ 3.56 
 
 
 
Stock options exercised (in dollars per share)
 
 
 
$ 1.82 
 
 
 
Ending Balance (in dollars per share)
 
 
 
$ 4.78 
 
 
 
Stock options vested and expected to vest as of period end (in dollars per share)
 
 
 
$ 4.78 
 
 
 
Stock options exercisable as of period end (in dollars per share)
 
 
 
$ 2.49 
 
 
 
Weighted Average Remaining Contractual Term
 
 
 
 
 
 
 
Balance at period end (in years)
 
 
 
3 years 9 months 16 days 
 
 
 
Stock options vested and expected to vest as of period end (in years)
 
 
 
3 years 9 months 16 days 
 
 
 
Stock options exercisable as of period end (in years)
 
 
 
3 years 2 months 13 days 
 
 
 
Aggregate Intrinsic Value
 
 
 
 
 
 
 
Balance at period end
 
 
 
$ 951 
 
 
 
Stock options vested and expected to vest as of period end
 
 
 
951 
 
 
 
Stock options exercisable as of period end
 
 
 
744 
 
 
 
Share price
 
 
 
 
$ 78.02 
$ 55.05 
$ 38.00 
Options granted in period
 
 
 
0 
 
 
 
Aggregate intrinsic value of the options exercised
624 
4,580 
4,230 
 
 
 
 
Total grant date fair value of stock options vested
$ 7 
$ 7 
$ 5 
 
 
 
 
Stockholders' Equity - Stock Options Additional Disclosures (Details) (USD $)
In Thousands, except Per Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range
 
Number of shares
12,984 
Options Outstanding, Weighted-Average Remaining Contractual Term
3 years 9 months 16 days 
Options Outstanding, Weighted-Average Exercise Price
$ 4.78 
Options Exercisable, Number of Shares
9,850 
Options Exercisable, Weighted-Average Exercise Price
$ 2.49 
Exercise Price Range 0.06
 
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range
 
Exercise Price, maximum
$ 0.06 
Number of shares
191 
Options Outstanding, Weighted-Average Remaining Contractual Term
0 years 11 months 25 days 
Options Outstanding, Weighted-Average Exercise Price
$ 0.06 
Options Exercisable, Number of Shares
191 
Options Exercisable, Weighted-Average Exercise Price
$ 0.06 
Exercise Price Range 0.10 - 0.18
 
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range
 
Exercise Price, minimum
$ 0.10 
Exercise Price, maximum
$ 0.18 
Number of shares
1,784 
Options Outstanding, Weighted-Average Remaining Contractual Term
1 year 5 months 10 days 
Options Outstanding, Weighted-Average Exercise Price
$ 0.10 
Options Exercisable, Number of Shares
1,784 
Options Exercisable, Weighted-Average Exercise Price
$ 0.10 
Exercise Price Range 0.29 - 0.33
 
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range
 
Exercise Price, minimum
$ 0.29 
Exercise Price, maximum
$ 0.33 
Number of shares
3,509 
Options Outstanding, Weighted-Average Remaining Contractual Term
2 years 2 months 46 days 
Options Outstanding, Weighted-Average Exercise Price
$ 0.30 
Options Exercisable, Number of Shares
3,509 
Options Exercisable, Weighted-Average Exercise Price
$ 0.30 
Exercise Price Range 1.85
 
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range
 
Exercise Price, maximum
$ 1.85 
Number of shares
1,605 
Options Outstanding, Weighted-Average Remaining Contractual Term
4 years 0 months 10 days 
Options Outstanding, Weighted-Average Exercise Price
$ 1.85 
Options Exercisable, Number of Shares
1,605 
Options Exercisable, Weighted-Average Exercise Price
$ 1.85 
Exercise Price Range 2.95
 
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range
 
Exercise Price, maximum
$ 2.95 
Number of shares
1,195 
Options Outstanding, Weighted-Average Remaining Contractual Term
4 years 7 months 18 days 
Options Outstanding, Weighted-Average Exercise Price
$ 2.95 
Options Exercisable, Number of Shares
1,195 
Options Exercisable, Weighted-Average Exercise Price
$ 2.95 
Exercise Price Range 10.39
 
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range
 
Exercise Price, maximum
$ 10.39 
Number of shares
3,500 
Options Outstanding, Weighted-Average Remaining Contractual Term
5 years 6 months 22 days 
Options Outstanding, Weighted-Average Exercise Price
$ 10.39 
Options Exercisable, Number of Shares
1,458 
Options Exercisable, Weighted-Average Exercise Price
$ 10.39 
Exercise Price Range 15.00
 
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range
 
Exercise Price, maximum
$ 15.00 
Number of shares
1,200 
Options Outstanding, Weighted-Average Remaining Contractual Term
5 years 9 months 20 days 
Options Outstanding, Weighted-Average Exercise Price
$ 15.00 
Options Exercisable, Number of Shares
108 
Options Exercisable, Weighted-Average Exercise Price
$ 15.00 
Stockholders' Equity - RSU Award Activity (Details) (Restricted Stock Units (RSUs), USD $)
In Billions, except Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Restricted Stock Units (RSUs)
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
Fair value of vested RSUs
$ 2.77 
$ 1.55 
$ 1.99 
Number of Shares
 
 
 
Unvested at beginning of period (in shares)
103,971,000 
 
 
Granted (in shares)
84,606,000 
 
 
Vested (in shares)
(41,233,000)
 
 
Forfeited (in shares)
(9,289,000)
 
 
Unvested at end of period (in shares)
138,055,000 
103,971,000 
 
Weighted Average Grant Date Fair Value
 
 
 
Unvested at beginning of period (in dollars per share)
$ 27.30 
 
 
Granted (in dollars per share)
$ 74.03 
 
 
Vested (in dollars per share)
$ 25.76 
 
 
Forfeited (in dollars per share)
$ 34.80 
 
 
Unvested at end of period (in dollars per share)
$ 55.89 
$ 27.30 
 
Stockholders' Equity - Additional Award Disclosures (Details) (USD $)
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Share-based Compensation Arrangement by Share-based Payment Award
 
 
 
Future period share-based compensation expense
$ 7,960,000,000 
 
 
Future period share-based compensation expense period of recognition (in years)
3 years 
 
 
Restricted Stock Units (RSUs)
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award
 
 
 
Fair value of vested RSUs
2,770,000,000 
1,550,000,000 
1,990,000,000 
Future period share-based compensation expense
6,960,000,000 
 
 
Other Awards
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award
 
 
 
Future period share-based compensation expense
$ 999,000,000 
 
 
Interest and other income/(expense), net (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Nonoperating Income (Expense) [Abstract]
 
 
 
Interest expense
$ (23)
$ (56)
$ (51)
Interest income
27 
19 
14 
Foreign currency exchange losses, net
(87)
(14)
(9)
Other
(1)
1 
2 
Interest and other income (expense), net
$ (84)
$ (50)
$ (44)
Income Taxes - Schedule for Income Before Income Tax (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Income Tax Disclosure [Abstract]
 
 
 
Domestic
$ 4,918 
$ 3,197 
$ 1,062 
Foreign
(8)
(443)
(568)
Income before provision for income taxes
$ 4,910 
$ 2,754 
$ 494 
Income Taxes - Provision for Income Taxes (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Current:
 
 
 
Federal
$ 1,999 
$ 1,154 
$ 559 
State
130 
69 
45 
Foreign
96 
68 
22 
Total current tax expense
2,225 
1,291 
626 
Deferred:
 
 
 
Federal
(240)
(28)
(172)
State
(14)
(7)
(6)
Foreign
(1)
(2)
(7)
Total deferred tax benefit
(255)
(37)
(185)
Provision for income taxes
$ 1,970 
$ 1,254 
$ 441 
Income Taxes - Effective Income Tax Rate Reconciliation (Details)
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Effective Income Tax Rate, Continuing Operations, Tax Rate Reconciliation [Abstract]
 
 
 
U.S. federal statutory income tax rate
35.00% 
35.00% 
35.00% 
State income taxes, net of federal benefit
1.40% 
1.60% 
6.20% 
Research tax credits
(1.10%)
(4.70%)
0.00% 
Share-based compensation
6.50% 
5.20% 
19.20% 
Effect of non-U.S. operations
(3.60%)
6.80% 
26.90% 
Other
1.90% 
1.60% 
2.00% 
Effective tax rate
40.10% 
45.50% 
89.30% 
Income Taxes - Deferred Tax Assets and Liabilities (Details) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Deferred tax assets:
 
 
Net operating loss carryforward
$ 130 
$ 6 
Tax credit carryforward
190 
164 
Share-based compensation
225 
120 
Accrued expenses and other liabilities
136 
141 
Other
21 
5 
Total deferred tax assets
702 
436 
Less: valuation allowance
(101)
(82)
Deferred tax assets, net of valuation allowance
601 
354 
Deferred tax liabilities:
 
 
Depreciation and amortization
(101)
(68)
Purchased intangible assets
(1,190)
(90)
Deferred foreign taxes
0 
(43)
Total deferred tax liabilities
(1,291)
(201)
Net deferred tax (liabilities) assets
$ (690)
$ 153 
Income Taxes - Unrecognized Tax Benefits (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Reconciliation of Unrecognized Tax Benefits
 
 
 
Gross unrecognized tax benefits-beginning of period
$ 1,316 
$ 164 
$ 63 
Increases related to prior year tax positions
24 
425 
13 
Decreases related to prior year tax positions
0 
(13)
(16)
Increases related to current year tax positions
346 
740 
104 
Decreases related to settlements of prior year tax positions
(4)
0 
0 
Gross unrecognized tax benefits-end of period
$ 1,682 
$ 1,316 
$ 164 
Income Taxes - Narrative (Detail) (USD $)
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Income Tax Disclosure
 
 
 
 
U.S. federal statutory income tax rate
35.00% 
35.00% 
35.00% 
 
Tax benefit from share-based award activity
$ 1,853,000,000 
$ 602,000,000 
$ 1,033,000,000 
 
Valuation allowance, deferred tax assets
101,000,000 
82,000,000 
 
 
Tax-effected benefit to be recognized in additional paid in capital if net operating loss carryforward is utilized
1,470,000,000 
 
 
 
Cumulative stock ownership change threshold
50.00% 
 
 
 
Change in ownership percentage over period
3 years 
 
 
 
Unrecognized tax benefits
1,682,000,000 
1,316,000,000 
164,000,000 
63,000,000 
Unrecognized tax benefits that would impact effective tax rate
1,160,000,000 
 
 
 
Internal Revenue Service (IRS)
 
 
 
 
Income Tax Disclosure
 
 
 
 
Operating loss carryforwards
4,530,000,000 
 
 
 
Operating Loss Carryforwards Expiration Year
2028 
 
 
 
Tax credit carryforward
800,000,000 
 
 
 
Tax Credit Carryforward Expiration Year
2032 
 
 
 
State and Local Jurisdiction
 
 
 
 
Income Tax Disclosure
 
 
 
 
Operating loss carryforwards
4,460,000,000 
 
 
 
Operating Loss Carryforwards Expiration Year
2021 
 
 
 
Tax credit carryforward
$ 753,000,000 
 
 
 
Tax Credit Carryforward Expiration Year
2032 
 
 
 
Geographical Information - Revenue (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Revenue by Geographical Area
 
 
 
Revenue
$ 12,466 
$ 7,872 
$ 5,089 
United States
 
 
 
Revenue by Geographical Area
 
 
 
Revenue
5,649 
3,613 
2,578 
Rest of the world
 
 
 
Revenue by Geographical Area
 
 
 
Revenue
$ 6,817 1
$ 4,259 1
$ 2,511 1
Geographical Information - Property and Equipment (Details) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Long-Lived Assets, by Geographical Area
 
 
Property and equipment, net
$ 3,967 
$ 2,882 
United States
 
 
Long-Lived Assets, by Geographical Area
 
 
Property and equipment, net
3,256 
2,368 
Sweden
 
 
Long-Lived Assets, by Geographical Area
 
 
Property and equipment, net
514 
415 
Rest of the world
 
 
Long-Lived Assets, by Geographical Area
 
 
Property and equipment, net
$ 197 
$ 99