calculate Nopat and Feat for the year 2019

The sales for 2019 were 161,857 attached are more clear notes to the financial statements

CONSOLIDATED STATEMENTS OF INCOME (In millions, except per share amounts) Year Ender 151 857 5 136,819 1917 110 855 5 $ Revenues Costs and expenses: Cost of revenues Research and development Sales and marketing General and administrative European Commission fines Total costs and expenses Income from operations Other income (expense), net 45.583 15.525 12,893 5.840 2,736 84,677 26,178 1,015 27,193 14,531 12,662 59.549 21.419 16.333 5.923 5.071 109. 295 27 524 7 389 34 913 4.177 30.736 71.896 25.018 18.454 9.551 1.697 127.526 34,231 5.394 39,625 5.282 34 343 s 5 $ 49.59 49.16 $ $ 44.22 43.70 5 $ Income before income taxes Provision for income taxes Net income 18.27 18.00 $ s Basic net income per share of Class A and B common stock and Class C capital stock Diluted net income per share of Class A and B common stock and Class C capital stock See accompanying notes. 51 ch che gov 84753F92655042AAF482AB21F2C378 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME in millions) 31 12.662 5 30.735 1.543 (751) 1.511 Net income Other comprehensive income (loss): Change in foreign currency translation adjustment Available-for-sale investments: Change in net unrealized gains (losses) Less: reclassification adjustment for net (gains) losses included in net income Net change (net of tax effect of $0, $156, and $221) Cash flow hedges: Change in net unrealized gains (losses) Less: reclassification adjustment for net (gains) losses included in net income Net change (net of tax effect of $247. $103, and $42) comprehensive income (loss) rehensive income See accompanying notes. 307 TOS 412 88 1911) 1823 1,500 290 (638) 93 (545) (299) (277) 1,104 35,447 1.410 398 (1.215) 29.520 $ 14,072 52 Other Income (Expense), Net 2013 Interest income Interest expense Foreign currency exchange gain (loss), net Gain (loss) on debt securities, net Gain (loss) on equity securities.net Performance fees Other 411 fa 14) Year End 11 11 1312 5 1878 2.4ZT (109) 100) 1125) (80) 103 (110) 1.190 149 5.450 2.549 (32) (1.203 1325) Gain (loss) and impairment from equity method investments, net (155) (120) 390 158 375 102 Other income (expense), not 1,015 5 7399 5 5,354 Interest expense is net of interest capitalured of 548 million, 592 millon, and $167 million for the years anded December 31, 2017, 2018 and 2010. godine Our foreign currency exchange gain (los), net are related to the option premium costs and forwards points for our foreign currency hedging mach out for a chance transaction gains and losses from the conversion of the transaction currency to the functional currency, affuet by the foreign currency hedging contractors and gain. The not foreign currency transaction losses were 5226 million, 5195 milion, and 5166 million for the years ended December 31, 2017, 2018, and 2015, recively During the year anded December 31, 2018, the terms of a non-marketable debt security were modified resulting in an unrealized $13 bilion gain Performance fees were reclassified for prior periods from general and administrative expenses to other income (expense net to conform with current and presentation Note 8. Acquisitions 2019 Acquisitions Looker In December 2019, we obtained all regulatory clearances necessary to close the acquisition of Looker, a unified platform for business intelligence, data applications and embedded analytics for $2.4 billion, with integration pending approval from a UK regulatory review. The addition of Locker to Google Cloud expected to help customers accelerate how they analyze data, deliver business intelligence, and build data-driven applications The fair value of assets acquired and liabilities assumed was recorded based on a preliminary valuation and our estimates and assumptions are subject to change within the measurement period. The $2.4 billion purchase price includes our previously held equity interest and excludes post acquisition compensation arrangements. In aggregate, 891 million was cash acquired, $290 million was attributed to intangible assets. $1.9 billion to goodwill and 348 million tonettes acquired. Goodwill was recorded in the Google segment and primarily attributable to synergies expected to arise after the acquisition Goodwil is not expected to be deductible for tax purposes. Other Acquisitions During the year ended December 31, 2019, we completed other acquisitions and purchases of intangible assets for total consideration of approximately 51.0 billion. In aggregate, $28 million was cash acquired, $282 million was attributed to intangible assets. $904 million to goodwill and 5185 million tonetas assumed. These acquisitions generally enhance the breadth and depth of our offerings and expand our expertise in engineering and cthar functional armas 700000 og 10.4.2019.68473F32655042AAF452A52F207s The components of other Income (openso), net, were as follows (in millions I JIM LOUICIJU I RI YURG von WTWO CAPULCO. Fair Value of Financial Instruments Our financial assets and liabilities that are measured at fair value on a recurring basis include cash equivalents, marketable securities, derivative contracts, and non-marketable debt securities. Our financial assets measured at fair value on a nonrecurring basis include non-marketable equity securities, which are adjusted to fair value when observable price changes are identified or when the non-marketable equity securities are impaired (referred to as the measurement alternative). Other financial assets and liabilities are carried at cost with fair value disclosed, if required. Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or a liability. Assets and liabilities recorded at fair value are measured and classified in accordance with a three-tier fair value hierarchy based on the observability of the inputs available in the market used to measure fair value Level 1 - Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets Level 2 - Inputs that are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model based valuation techniques for which all significant inputs are observable in the market or can be derived from observable market data. Where applicable, these models project future cash flows and discount the future amounts to a present value using market-based observable inputs including interest rate curves, foreign exchange rates, and credit ratings Level 3 - Unobservable inputs that are supported by little or no market activities. The fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value Cash, Cash Equivalents, and Marketable Securities We invest all excess cash primanly in goverment bonds corporate debt securities, mortgage-backed and asset-backed securities, time deposits and money market funds We classify all marketable investments that have stated maturities of three months or less from the date of purchase as cash equivalents and those with stated maturities of greater than three months as marketable securities We determine the appropriate classification of our investments in marketable securities at the time of purchase and reevaluate such designation at each balance sheet date. We have classified and accounted for our marketable debt secunties as available for-sale After consideration of our risk versus reward objectives as well as our liquidity requirements, we may sell these debt securities prior to their stated maturities As we view these securities as available to support current operations, we classify highly liquid securities with matunties beyond 12 months as current assets under the caption marketable securities on the Consolidated Balance Sheets. We carry these securities at fair value, and report the unrealized gains and losses, net of taxes as a component of stockholders equity, except for unrealized losses determined to be other than temporary which we record within other income (expense) net. We determine any realized gains or O w Style Paragraph losses on the sale of marketable debt securities on a specific identification method, and we record such gains and losses as a component of other income (expense), net. Non-Marketable Investments We account for non-marketable equity investments through which we exercise significant influence but do not have control over the investee under the equity method Our non-marketable equity securties not accounted for under the equity method are primarily accounted for under the measurement alternative in accordance with Accounting Standards Update No. 2016-01, which we adopted on January 1, 2018. Under the measurement alternative, the carrying value of our non-marketable equity investments is adjusted to fair value for observable transactions for identical or similar investments of the same issuer or impairment. Adjustments are determined primanly based on a market approach as of the transaction date. We account for our non-marketable investments that meet the definition of a debt security as available for-sale securities We classify our non-marketable investments that do not have stated contractual maturity dates, as non-current assets on the Consolidated Balance Sheets Impairment of Investments We periodically review our debt and equity investments for impairment. For debt securities we consider the duration, severity and the reason for the decline in security value whether it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis, or if the amortized cost basis cannot be recovered as a result of credit losses. If any impairment is considered other than temporary, we will write down the security to its fair value and record the corresponding charge as other income (expense), net. For equity securities we consider impairment indicators such as negative changes in industry and market conditions, financial performance, business prospects and other relevant events and factors. If indicators exist and the fair value of the security is below the carrying amount, we write down the security to fair value. Variable Interest Entities We determine at the inception of each arrangement whether an entity in which we have made an investment or in which we have other vanable interests in is considered a variable interest entity (VIE) We consolidate VIEs when we are the primary beneficiary. The primary beneficiary of a VIE is the party that meets both of the following criteria (1) has the power to make decisions that most significantly affect the economic performance of the VIE; and (2) has the obligation to absorb losses or the right to receive benefits that in either case could potentially be significant to the VIE. Periodically, we assess whether any changes in our interest or relationship with the entity affect our determination of whether the entity is still a VIE and, if so, whether we are the primary beneficiary. If we are not the primary beneficiary in a VIE we account for the investment or other vanable interests in a VIE in accordance with applicable GAAP Accounts Receivable We record accounts receivable at the invoiced amount. We maintain an allowance for doubtful accounts to reserve for potentially uncollectible receivables. We review the accounts receivable by amounts due from customers that are past due to identify specific customers with known disputes or collectability issues in determining the amount of the reserve, we make judgments about the creditworthiness of significant customers based on ongoing credit evaluations Styles Our payment terms vary by the type and location of our customer and the products or services offered. The term between invoicing and when payment is due is not significant For certain products or services and customer types, we require payment before the products or services are delivered to the customer Leases We determine if an arrangement is a lease at inception. Our lease agreements generally contain lease and non-lease components. Payments under our lease arrangements are primarily fixed. Non-lease components primarily include payments for maintenance and utilities We combine fixed payments for non-lease components with lease payments and account for them together as a single lease component which increases the amount of our lease assets and liabilities Certain lease agreements contain variable payments, which are expensed as incurred and not included in the lease assets and liabilities. These amounts include payments affected by the Consumer Price Index, payments contingent on wind or solar production for power purchase arrangements, and payments for maintenance and utilities Lease assets and liabilities are recognized at the present value of the future lease payments at the lease commencement date. The interest rate used to determine the present value of the future lease payments is our incremental borrowing rate, because the interest rate implicit in our leases is not readily determinable. Our incremental borrowing rate is estimated to approximate the interest rate on a collateralized basis with similar terms and payments, and in economic environments where the leased asset is located Our lease terms include periods under options to extend or terminate the lease when it is reasonably certain that we will exercise that option. We generally use the base, non-cancelable, lease term when determining the lease assets and liabilities Lease assets also include any prepaid lease payments and lease incentives. Operating lease assets and liabilities are included on our Consolidated Balance Sheet beginning January 1, 2019. The current portion of our operating lease liabilities is included in accrued expenses and other current liabilities and the long-term portion is included in operating lease liabilities. Finance lease assets are included in property and equipment, net. Finance lease liabilities are included in accrued expenses and other current liabilities or long-term debt. Operating lease expense is recognized on a straight-line basis over the lease term. Property and Equipment Property and equipment include the following categoriesland and buildings, information technology assets, construction in progress, leasehold improvements, and furniture and fixtures. Land and buildings include land, offices, data centers and related building improvements. Information technology assets include servers and network equipment. We account for property and equipment at cost less accumulated depreciation We compute depreciation using the straight-line method over the estimated useful lives of the assets. We depreciate buildings over periods of seven to 25 years. We depreciate information technology assets generally over periods of three to five years (specifically, three years for servers and three to five years for network equipment) We depreciate leasehold improvements over the shorter of the remaining lease term or the estimated useful lives of the assets. Construction in progress is the construction or development of property and equipment that have not yet been placed in service for our intended use. Depreciation for equipment, buildings, and leasehold improvements commences once they are ready for our intended use. Land is not depreciated. Inventory Inventory consists primarily of finished goods and is stated at the lower of cost and net realizable value Cost is computed using the first-in, first-out method. Software Development Costs We expense software development costs, including costs to develop software products or the software component of products to be sold, leased or marketed to external users, before technological feasibility is reached. Technological feasibility is typically reached shortly before the release of such products and as a result, development costs that meet the critena for capitalization were not material for the periods presented Software development costs also include costs to develop software to be used solely to meet internal needs and cloud-based applications used to deliver our services. We capitalize development costs related to these software applications once the preliminary project stage is complete and it is probable that the project will be completed, and the software will be used to perform the function intended. Costs capitalized for developing such software applications were not material for the periods presented. Business Combinations We include the results of operations of the businesses that we acquire as of the acquisition date. We allocate the purchase price of the acquisitions to the assets acquired and liabilities assumed based on their estimated fair values The excess of the purchase price over the fair values of identifiable assets and liabilities is recorded as goodwill. Acquisition-related expenses are recognized separately from the business combination and are expensed as incurred Long-Lived Assets, Goodwill and Other Acquired Intangible Assets We review property and equipment, long term prepayments, and intangible assets, excluding goodwill, for impairment when events or changes in circumstances indicate the carrying amount may not be recoverable. We measure recoverability of these assets by comparing the carrying amounts to the future undiscounted cash flows that the assets or the asset group are expected to generate. If the carrying value of the assets are not recoverable, the impairment recognized is measured as the amount by which the carrying value of the asset exceeds its fair value. Impairments were not material for the periods presented We allocate goodwill to reporting units based on the expected benefit from the business combination. We evaluate our reporting units when changes in our operating structure occur, and if necessary, reassign goodwill using a relative fair value allocation approach. We test our goodwill for impairment at least annually, or more frequently if events or changes in circumstances indicate that the asset may be impaired. Goodwill impairments were not material for the periods presented Intangible assets with definite lives are amortized over their estimated useful lives We amortize intangible assets on a straight-line basis with definite lives generally over perioes ranging from one to twelve years. Income Taxes We account for income taxes using the asset and liability method, under which we recognize the amount of taxes payable or refundable for the current year and deferred tax assets and liabilities for the future tax consequences of events that have been recognized in our financial statements or tax returns. We measure current and deferred tax assets and liabilities based on provisions of enacted tax law. We evaluate the realization of our deferred tax assets based on all available evidence and establish a valuation allowance to reduce deferred tax assets when it is more likely than not that they will not be realized. We recognize the financial statement effects of a tax position when it is more likely than not that based on technical merits, the position will be sustained upon examination The tax benefits of the position recognized in the financial statements are then measured based on the largest amount of benefit that is greater than 50% likely to be realized upon settlement with a taxing authority. In addition, we recognize interest and penalties related to unrecognized tax benefits as a component of the income tax provision Foreign Currency Generally, the functional currency of our international subsidiaries is the local currency We translate the financial statements of these subsidiaries to US dollars using month-end exchange rates for assets and liabilities, and average rates for the annual period derived from month-end exchange rates for revenues, costs, and expenses. We record translation gains and losses in accumulated other comprehensive income (AOCI) as a component of stockholders' equity. We reflect net foreign exchange transaction gains and losses resulting from the conversion of the transaction currency to functional currency as a component of foreign currency exchange gain (loss) in other income (expense), net Advertising and Promotional Expenses We expense advertising and promotional costs in the period in which they are incurred. For the years ended December 31, 2017, 2018 and 2019, advertising and promotional expenses totaled approximately $5.1 billion, $6.4 billion, and $6.8 billion, respectively Recent Accounting Pronouncements Recently issued accounting pronouncements not yet adopted In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No 2016-13 (ASU 2016-13) "Financial Instruments-Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments", which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss model which requires the use of forward-looking information to calculate credit loss estimates. It also eliminates the concept of other-than-temporary impairment and requires credit losses related to available for sale debt securities to be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. These changes will result in earlier recognition of credit losses. We will adopt ASU 2016-13 effective January 1, 2020 with the cumulative effect of adoption recorded as an adjustment to retained earnings. The effect on our consolidated financial statements and related disclosures is not expected to be material Recently adopted accounting pronouncements la February 2016, the FASB issued Accounting Standards Update No. 2016 02 (Topic 842) "Leases." Topic 842 supersedes the lease requirements in Accounting Standards Codification Topic 840, "Leases Under Topic 842 lessees are required to recognize assets and liabilities on the balance sheet for most leases and provide enhanced disclosures Leases continue to be classified as either finance or operating O We adopted Topic 842 effective January 1, 2019. The most significant effects of Topic 842 were the recognition of $8.0 billion of operating lease assets and $8.4 billion of operating lease liabilities and the de-recognition of $1.5 billion of build-to-suit assets and liabilities upon adoption. We applied Topic 842 to all leases as of January 1, 2019 with comparative periods continuing to be reported under Topic 840. In the adoption of Topic 842, we carried forward the assessment from Topic 840 of whether our contracts contain or are leases, the classification of our leases, and remaining lease terms. Our accounting for finance leases remains substantially unchanged. The standard did not have a significant effect on our consolidated results of operations or cash flows. See Note 4 for further details Prior Period Reclassifications Certain amounts in prior periods have been reclassified to conform with current period presentation. Hedging gains (losses), which were previously included in Google revenues, are now reported separately as a component of total revenues for all periods presented. See Note 2 for further details Additionally, performance fees have been reclassified for all periods from general and administrative expenses to other income (expense), net to align with the presentation of the investment gains and losses on which the performance fees are based. See Note 7 for further details. CONSOLIDATED STATEMENTS OF INCOME (In millions, except per share amounts) Year Ender 151 857 5 136,819 1917 110 855 5 $ Revenues Costs and expenses: Cost of revenues Research and development Sales and marketing General and administrative European Commission fines Total costs and expenses Income from operations Other income (expense), net 45.583 15.525 12,893 5.840 2,736 84,677 26,178 1,015 27,193 14,531 12,662 59.549 21.419 16.333 5.923 5.071 109. 295 27 524 7 389 34 913 4.177 30.736 71.896 25.018 18.454 9.551 1.697 127.526 34,231 5.394 39,625 5.282 34 343 s 5 $ 49.59 49.16 $ $ 44.22 43.70 5 $ Income before income taxes Provision for income taxes Net income 18.27 18.00 $ s Basic net income per share of Class A and B common stock and Class C capital stock Diluted net income per share of Class A and B common stock and Class C capital stock See accompanying notes. 51 ch che gov 84753F92655042AAF482AB21F2C378 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME in millions) 31 12.662 5 30.735 1.543 (751) 1.511 Net income Other comprehensive income (loss): Change in foreign currency translation adjustment Available-for-sale investments: Change in net unrealized gains (losses) Less: reclassification adjustment for net (gains) losses included in net income Net change (net of tax effect of $0, $156, and $221) Cash flow hedges: Change in net unrealized gains (losses) Less: reclassification adjustment for net (gains) losses included in net income Net change (net of tax effect of $247. $103, and $42) comprehensive income (loss) rehensive income See accompanying notes. 307 TOS 412 88 1911) 1823 1,500 290 (638) 93 (545) (299) (277) 1,104 35,447 1.410 398 (1.215) 29.520 $ 14,072 52 Other Income (Expense), Net 2013 Interest income Interest expense Foreign currency exchange gain (loss), net Gain (loss) on debt securities, net Gain (loss) on equity securities.net Performance fees Other 411 fa 14) Year End 11 11 1312 5 1878 2.4ZT (109) 100) 1125) (80) 103 (110) 1.190 149 5.450 2.549 (32) (1.203 1325) Gain (loss) and impairment from equity method investments, net (155) (120) 390 158 375 102 Other income (expense), not 1,015 5 7399 5 5,354 Interest expense is net of interest capitalured of 548 million, 592 millon, and $167 million for the years anded December 31, 2017, 2018 and 2010. godine Our foreign currency exchange gain (los), net are related to the option premium costs and forwards points for our foreign currency hedging mach out for a chance transaction gains and losses from the conversion of the transaction currency to the functional currency, affuet by the foreign currency hedging contractors and gain. The not foreign currency transaction losses were 5226 million, 5195 milion, and 5166 million for the years ended December 31, 2017, 2018, and 2015, recively During the year anded December 31, 2018, the terms of a non-marketable debt security were modified resulting in an unrealized $13 bilion gain Performance fees were reclassified for prior periods from general and administrative expenses to other income (expense net to conform with current and presentation Note 8. Acquisitions 2019 Acquisitions Looker In December 2019, we obtained all regulatory clearances necessary to close the acquisition of Looker, a unified platform for business intelligence, data applications and embedded analytics for $2.4 billion, with integration pending approval from a UK regulatory review. The addition of Locker to Google Cloud expected to help customers accelerate how they analyze data, deliver business intelligence, and build data-driven applications The fair value of assets acquired and liabilities assumed was recorded based on a preliminary valuation and our estimates and assumptions are subject to change within the measurement period. The $2.4 billion purchase price includes our previously held equity interest and excludes post acquisition compensation arrangements. In aggregate, 891 million was cash acquired, $290 million was attributed to intangible assets. $1.9 billion to goodwill and 348 million tonettes acquired. Goodwill was recorded in the Google segment and primarily attributable to synergies expected to arise after the acquisition Goodwil is not expected to be deductible for tax purposes. Other Acquisitions During the year ended December 31, 2019, we completed other acquisitions and purchases of intangible assets for total consideration of approximately 51.0 billion. In aggregate, $28 million was cash acquired, $282 million was attributed to intangible assets. $904 million to goodwill and 5185 million tonetas assumed. These acquisitions generally enhance the breadth and depth of our offerings and expand our expertise in engineering and cthar functional armas 700000 og 10.4.2019.68473F32655042AAF452A52F207s The components of other Income (openso), net, were as follows (in millions I JIM LOUICIJU I RI YURG von WTWO CAPULCO. Fair Value of Financial Instruments Our financial assets and liabilities that are measured at fair value on a recurring basis include cash equivalents, marketable securities, derivative contracts, and non-marketable debt securities. Our financial assets measured at fair value on a nonrecurring basis include non-marketable equity securities, which are adjusted to fair value when observable price changes are identified or when the non-marketable equity securities are impaired (referred to as the measurement alternative). Other financial assets and liabilities are carried at cost with fair value disclosed, if required. Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or a liability. Assets and liabilities recorded at fair value are measured and classified in accordance with a three-tier fair value hierarchy based on the observability of the inputs available in the market used to measure fair value Level 1 - Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets Level 2 - Inputs that are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model based valuation techniques for which all significant inputs are observable in the market or can be derived from observable market data. Where applicable, these models project future cash flows and discount the future amounts to a present value using market-based observable inputs including interest rate curves, foreign exchange rates, and credit ratings Level 3 - Unobservable inputs that are supported by little or no market activities. The fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value Cash, Cash Equivalents, and Marketable Securities We invest all excess cash primanly in goverment bonds corporate debt securities, mortgage-backed and asset-backed securities, time deposits and money market funds We classify all marketable investments that have stated maturities of three months or less from the date of purchase as cash equivalents and those with stated maturities of greater than three months as marketable securities We determine the appropriate classification of our investments in marketable securities at the time of purchase and reevaluate such designation at each balance sheet date. We have classified and accounted for our marketable debt secunties as available for-sale After consideration of our risk versus reward objectives as well as our liquidity requirements, we may sell these debt securities prior to their stated maturities As we view these securities as available to support current operations, we classify highly liquid securities with matunties beyond 12 months as current assets under the caption marketable securities on the Consolidated Balance Sheets. We carry these securities at fair value, and report the unrealized gains and losses, net of taxes as a component of stockholders equity, except for unrealized losses determined to be other than temporary which we record within other income (expense) net. We determine any realized gains or O w Style Paragraph losses on the sale of marketable debt securities on a specific identification method, and we record such gains and losses as a component of other income (expense), net. Non-Marketable Investments We account for non-marketable equity investments through which we exercise significant influence but do not have control over the investee under the equity method Our non-marketable equity securties not accounted for under the equity method are primarily accounted for under the measurement alternative in accordance with Accounting Standards Update No. 2016-01, which we adopted on January 1, 2018. Under the measurement alternative, the carrying value of our non-marketable equity investments is adjusted to fair value for observable transactions for identical or similar investments of the same issuer or impairment. Adjustments are determined primanly based on a market approach as of the transaction date. We account for our non-marketable investments that meet the definition of a debt security as available for-sale securities We classify our non-marketable investments that do not have stated contractual maturity dates, as non-current assets on the Consolidated Balance Sheets Impairment of Investments We periodically review our debt and equity investments for impairment. For debt securities we consider the duration, severity and the reason for the decline in security value whether it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis, or if the amortized cost basis cannot be recovered as a result of credit losses. If any impairment is considered other than temporary, we will write down the security to its fair value and record the corresponding charge as other income (expense), net. For equity securities we consider impairment indicators such as negative changes in industry and market conditions, financial performance, business prospects and other relevant events and factors. If indicators exist and the fair value of the security is below the carrying amount, we write down the security to fair value. Variable Interest Entities We determine at the inception of each arrangement whether an entity in which we have made an investment or in which we have other vanable interests in is considered a variable interest entity (VIE) We consolidate VIEs when we are the primary beneficiary. The primary beneficiary of a VIE is the party that meets both of the following criteria (1) has the power to make decisions that most significantly affect the economic performance of the VIE; and (2) has the obligation to absorb losses or the right to receive benefits that in either case could potentially be significant to the VIE. Periodically, we assess whether any changes in our interest or relationship with the entity affect our determination of whether the entity is still a VIE and, if so, whether we are the primary beneficiary. If we are not the primary beneficiary in a VIE we account for the investment or other vanable interests in a VIE in accordance with applicable GAAP Accounts Receivable We record accounts receivable at the invoiced amount. We maintain an allowance for doubtful accounts to reserve for potentially uncollectible receivables. We review the accounts receivable by amounts due from customers that are past due to identify specific customers with known disputes or collectability issues in determining the amount of the reserve, we make judgments about the creditworthiness of significant customers based on ongoing credit evaluations Styles Our payment terms vary by the type and location of our customer and the products or services offered. The term between invoicing and when payment is due is not significant For certain products or services and customer types, we require payment before the products or services are delivered to the customer Leases We determine if an arrangement is a lease at inception. Our lease agreements generally contain lease and non-lease components. Payments under our lease arrangements are primarily fixed. Non-lease components primarily include payments for maintenance and utilities We combine fixed payments for non-lease components with lease payments and account for them together as a single lease component which increases the amount of our lease assets and liabilities Certain lease agreements contain variable payments, which are expensed as incurred and not included in the lease assets and liabilities. These amounts include payments affected by the Consumer Price Index, payments contingent on wind or solar production for power purchase arrangements, and payments for maintenance and utilities Lease assets and liabilities are recognized at the present value of the future lease payments at the lease commencement date. The interest rate used to determine the present value of the future lease payments is our incremental borrowing rate, because the interest rate implicit in our leases is not readily determinable. Our incremental borrowing rate is estimated to approximate the interest rate on a collateralized basis with similar terms and payments, and in economic environments where the leased asset is located Our lease terms include periods under options to extend or terminate the lease when it is reasonably certain that we will exercise that option. We generally use the base, non-cancelable, lease term when determining the lease assets and liabilities Lease assets also include any prepaid lease payments and lease incentives. Operating lease assets and liabilities are included on our Consolidated Balance Sheet beginning January 1, 2019. The current portion of our operating lease liabilities is included in accrued expenses and other current liabilities and the long-term portion is included in operating lease liabilities. Finance lease assets are included in property and equipment, net. Finance lease liabilities are included in accrued expenses and other current liabilities or long-term debt. Operating lease expense is recognized on a straight-line basis over the lease term. Property and Equipment Property and equipment include the following categoriesland and buildings, information technology assets, construction in progress, leasehold improvements, and furniture and fixtures. Land and buildings include land, offices, data centers and related building improvements. Information technology assets include servers and network equipment. We account for property and equipment at cost less accumulated depreciation We compute depreciation using the straight-line method over the estimated useful lives of the assets. We depreciate buildings over periods of seven to 25 years. We depreciate information technology assets generally over periods of three to five years (specifically, three years for servers and three to five years for network equipment) We depreciate leasehold improvements over the shorter of the remaining lease term or the estimated useful lives of the assets. Construction in progress is the construction or development of property and equipment that have not yet been placed in service for our intended use. Depreciation for equipment, buildings, and leasehold improvements commences once they are ready for our intended use. Land is not depreciated. Inventory Inventory consists primarily of finished goods and is stated at the lower of cost and net realizable value Cost is computed using the first-in, first-out method. Software Development Costs We expense software development costs, including costs to develop software products or the software component of products to be sold, leased or marketed to external users, before technological feasibility is reached. Technological feasibility is typically reached shortly before the release of such products and as a result, development costs that meet the critena for capitalization were not material for the periods presented Software development costs also include costs to develop software to be used solely to meet internal needs and cloud-based applications used to deliver our services. We capitalize development costs related to these software applications once the preliminary project stage is complete and it is probable that the project will be completed, and the software will be used to perform the function intended. Costs capitalized for developing such software applications were not material for the periods presented. Business Combinations We include the results of operations of the businesses that we acquire as of the acquisition date. We allocate the purchase price of the acquisitions to the assets acquired and liabilities assumed based on their estimated fair values The excess of the purchase price over the fair values of identifiable assets and liabilities is recorded as goodwill. Acquisition-related expenses are recognized separately from the business combination and are expensed as incurred Long-Lived Assets, Goodwill and Other Acquired Intangible Assets We review property and equipment, long term prepayments, and intangible assets, excluding goodwill, for impairment when events or changes in circumstances indicate the carrying amount may not be recoverable. We measure recoverability of these assets by comparing the carrying amounts to the future undiscounted cash flows that the assets or the asset group are expected to generate. If the carrying value of the assets are not recoverable, the impairment recognized is measured as the amount by which the carrying value of the asset exceeds its fair value. Impairments were not material for the periods presented We allocate goodwill to reporting units based on the expected benefit from the business combination. We evaluate our reporting units when changes in our operating structure occur, and if necessary, reassign goodwill using a relative fair value allocation approach. We test our goodwill for impairment at least annually, or more frequently if events or changes in circumstances indicate that the asset may be impaired. Goodwill impairments were not material for the periods presented Intangible assets with definite lives are amortized over their estimated useful lives We amortize intangible assets on a straight-line basis with definite lives generally over perioes ranging from one to twelve years. Income Taxes We account for income taxes using the asset and liability method, under which we recognize the amount of taxes payable or refundable for the current year and deferred tax assets and liabilities for the future tax consequences of events that have been recognized in our financial statements or tax returns. We measure current and deferred tax assets and liabilities based on provisions of enacted tax law. We evaluate the realization of our deferred tax assets based on all available evidence and establish a valuation allowance to reduce deferred tax assets when it is more likely than not that they will not be realized. We recognize the financial statement effects of a tax position when it is more likely than not that based on technical merits, the position will be sustained upon examination The tax benefits of the position recognized in the financial statements are then measured based on the largest amount of benefit that is greater than 50% likely to be realized upon settlement with a taxing authority. In addition, we recognize interest and penalties related to unrecognized tax benefits as a component of the income tax provision Foreign Currency Generally, the functional currency of our international subsidiaries is the local currency We translate the financial statements of these subsidiaries to US dollars using month-end exchange rates for assets and liabilities, and average rates for the annual period derived from month-end exchange rates for revenues, costs, and expenses. We record translation gains and losses in accumulated other comprehensive income (AOCI) as a component of stockholders' equity. We reflect net foreign exchange transaction gains and losses resulting from the conversion of the transaction currency to functional currency as a component of foreign currency exchange gain (loss) in other income (expense), net Advertising and Promotional Expenses We expense advertising and promotional costs in the period in which they are incurred. For the years ended December 31, 2017, 2018 and 2019, advertising and promotional expenses totaled approximately $5.1 billion, $6.4 billion, and $6.8 billion, respectively Recent Accounting Pronouncements Recently issued accounting pronouncements not yet adopted In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No 2016-13 (ASU 2016-13) "Financial Instruments-Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments", which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss model which requires the use of forward-looking information to calculate credit loss estimates. It also eliminates the concept of other-than-temporary impairment and requires credit losses related to available for sale debt securities to be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. These changes will result in earlier recognition of credit losses. We will adopt ASU 2016-13 effective January 1, 2020 with the cumulative effect of adoption recorded as an adjustment to retained earnings. The effect on our consolidated financial statements and related disclosures is not expected to be material Recently adopted accounting pronouncements la February 2016, the FASB issued Accounting Standards Update No. 2016 02 (Topic 842) "Leases." Topic 842 supersedes the lease requirements in Accounting Standards Codification Topic 840, "Leases Under Topic 842 lessees are required to recognize assets and liabilities on the balance sheet for most leases and provide enhanced disclosures Leases continue to be classified as either finance or operating O We adopted Topic 842 effective January 1, 2019. The most significant effects of Topic 842 were the recognition of $8.0 billion of operating lease assets and $8.4 billion of operating lease liabilities and the de-recognition of $1.5 billion of build-to-suit assets and liabilities upon adoption. We applied Topic 842 to all leases as of January 1, 2019 with comparative periods continuing to be reported under Topic 840. In the adoption of Topic 842, we carried forward the assessment from Topic 840 of whether our contracts contain or are leases, the classification of our leases, and remaining lease terms. Our accounting for finance leases remains substantially unchanged. The standard did not have a significant effect on our consolidated results of operations or cash flows. See Note 4 for further details Prior Period Reclassifications Certain amounts in prior periods have been reclassified to conform with current period presentation. Hedging gains (losses), which were previously included in Google revenues, are now reported separately as a component of total revenues for all periods presented. See Note 2 for further details Additionally, performance fees have been reclassified for all periods from general and administrative expenses to other income (expense), net to align with the presentation of the investment gains and losses on which the performance fees are based. See Note 7 for further details