EBay on cash and the FDIC…

October 24, 2008

The beginning of Q season and the ongoing credit crisis has made for some very interesting disclosures lately. Take this one that EBay (EBAY) included in its 10Q filed late yesterday:

Our available cash and cash equivalents are held in bank deposits, money market funds and commercial paper. We actively monitor the third-party depository institutions that hold our cash and cash equivalents. Our emphasis is primarily on safety of principal while secondarily maximizing yield on those funds. We diversify our cash and cash equivalents among counterparties to minimize exposure to any one of these entities. To date, we have experienced no material loss or lack of access to our invested cash or cash equivalents; however, we can provide no assurances that access to our invested cash and cash equivalents will not be impacted by adverse conditions in the financial markets.

At any point in time we have funds in our operating accounts and customer accounts that are with third party financial institutions. These balances in the U.S. may exceed the Federal Deposit Insurance Corporation (FDIC) insurance limits. While we monitor the cash balances in our operating accounts and adjusts the cash balances as appropriate, these cash balances could be impacted if the underlying financial institutions fail or could be subject to other adverse conditions in the financial markets.

While this may seem like stating the obvious — one would assume that most companies, even those much smaller than EBay would have cash that exceeds the now $250K limit — it is a new disclosure and the use of “no assurances” as opposed to something a bit more nebulous caught my attention.

Over at FootnotedPro we’ll be posting some additional observations on EBay’s Q that will only be available to subscribers.

Posted in: Disclosures, Financial

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