FAQs and General Information

A glossary of terms you can find on Alphabet financial statements and answers to frequently asked questions regarding our financial statements.

Segments and Allocations
Google Services Segment

• Includes products and services such as: Ads, Android, Chrome, Devices (including the Pixel family), Google Maps, Google Photos, Google Play, Search, and YouTube.
• Google Services generates revenues primarily from advertising; subscription-based products, such as YouTube TV, YouTube Music and Premium, NFL Sunday Ticket, and Google One; sales of apps and in-app purchases; and sales of devices.

Google Cloud Segment

• Google Cloud includes infrastructure and platform services, collaboration tools, and other services for enterprise customers. These services provide access to solutions such as cybersecurity, databases, analytics, and AI offerings including our AI infrastructure and Generative AI Solutions.
  
  • AI Infrastructure includes Cloud TPUs and GPUs;
  • Generative AI Solutions includes products such as Vertex AI, Gemini for Google Cloud, and Gemini for Workspace.
• Google Cloud generates revenues primarily from consumption-based fees and subscriptions received for Google Cloud Platform (“GCP”) services, Google Workspace communication and collaboration tools, and other enterprise services.

Other Bets Segment

• Other Bets is a combination of multiple operating segments that are not individually material.
• Includes businesses such as GFiber, Calico, CapitalG, GV, Verily, Waymo, Wing, and X, among others.
• Revenues from the Other Bets are generated primarily through the sale of healthcare-related services through Verily and internet services through GFiber.

Alphabet-Level Activities (formerly Corporate Costs, Unallocated)

• Alphabet-level activities primarily include AI-focused shared R&D activities, including development costs of our general AI models; corporate initiatives such as our philanthropic activities; and corporate shared costs such as certain finance, human resource, and legal costs, including certain fines and settlements. Alphabet-level activities also include charges associated with employee severance and office space reductions during 2023 and employee severance in 2024. Additionally, hedging gains (losses) related to revenue are included in Alphabet-level activities.

Revenues
Google Services Revenues

• Advertising revenues: Google Search & Other

  • Google search properties (including revenues from traffic generated by search distribution partners who use Google.com as their default search in browsers, toolbars, etc.).
  • Revenues generated from advertising on other Google owned and operated properties like Gmail, Google Maps, and Google Play.

• Advertising revenues: YouTube Ads

  • YouTube properties.
  • YouTube Ads revenues are primarily recognized on a gross basis. Content acquisition costs (“CAC”) for YouTube, which are payments to content providers from whom we license video and other content for distribution, are recognized in Other Cost of Revenues.

• Advertising revenues: Google Network

  • Google Network properties participating in AdMob, AdSense, and Google Ad Manager.

• Subscriptions, Platforms, and Devices revenues (formerly ‘Google Other’)

  • Consumer subscriptions, which primarily include revenues from YouTube services, such as YouTube TV, YouTube Music and Premium, and NFL Sunday Ticket, as well as Google One, including Google One AI Premium that gives access to Gemini Advanced.
  • Platforms, which primarily include revenues from Google Play from the sales of apps and in-app purchases (which we recognize on a net basis).
  • Devices, which primarily include sales of the Pixel family of devices.
  • Other products and services.

Consumer Subscriptions
YouTube Music and Premium and YouTube TV subscribers

• YouTube Music and Premium subscribers includes those in trial and all registered members in our family plan. Family plan memberships include one subscriber and up to an additional 5 family members. It does not include YouTube TV subscribers.
• YouTube TV subscribers does not include those in trial. Subscribers exclude additional household members. It does not include YouTube Music and Premium subscribers or subscribers to standalone NFL Sunday Ticket (i.e., without YouTube TV).

NFL Sunday Ticket

• We account for NFL Sunday Ticket in a manner generally consistent with other subscription offerings:
  
  • Subscription fees are recognized as revenue when content is delivered to our customers, which occurs over the course of the NFL regular season.
  • Similarly, content acquisition costs are recorded in our income statement over the course of the NFL regular season.

Revenue Backlog

• We have performance obligations associated with commitments in customer contracts, primarily related to Google Cloud, for future services that have not yet been recognized as revenues (“revenue backlog”). This includes related deferred revenue currently recorded and amounts that will be invoiced in future periods, and excludes contracts with an original expected term of one year or less and cancellable contracts.

Expenses
Traffic Acquisition Costs (TAC)

• Amounts paid to our distribution partners who make available our search access points and services. Distribution partners include browser providers, mobile carriers, original equipment manufacturers, and software developers.
• Amounts paid to Google Network partners primarily for ads displayed on their properties.

Other Cost of Revenues

• Compensation expense related to our technical infrastructure and other operations such as content review and customer and product support.
• Content acquisition costs, which are payments to content providers from whom we license video and other content for distribution on YouTube advertising and subscription services and Google Play (we pay fees to these content providers based on revenues generated or a flat fee). Content acquisition costs also include licensing costs for news from our Google News Showcase product.
• Depreciation expense related to our technical infrastructure;
• Inventory and other costs related to the devices we sell.
• Other technical infrastructure operations costs, including bandwidth, energy, and equipment costs;

Workforce Reduction and Office Space Optimization

• In January 2023, we announced a reduction of our workforce.
• The majority of the future compensation and severance expense were accrued in Q1 2023 for the affected employees and reflected in severance and related charges.
• In 2023 we also took action to optimize our global office space, which resulted in additional charges within our consolidated statements of income.
• The substantial majority of these charges were recognized within Alphabet-level activities in our segment results.
• Please refer to our consolidated financial statements as filed with the SEC for further details on the timing, classification and amount of charges associated with reductions in our workforce.

Legal Accruals (Loss Contingencies)

• Under accounting rules, if we determine that an unfavorable outcome to a legal matter is both 1) probable and 2) in an amount that we can reasonably estimate, we record an accrual.
• Accruals are recorded in the period in which legal matters meet these criteria. Depending on the facts and circumstances, this could be before - or at the same time as - a regulatory fine, settlement or trial outcome.
• Accruals for legal matters are generally recorded in G&A expense within our income statement, but the classification depends on the nature of the specific matter.
• The segment classification for legal accruals depends on several factors, such as the area of our business to which it relates and the amount of the accrual.
• If an unfavorable outcome is not probable and estimable, we will not record an accrual. However, we will disclose it within our financial statement footnotes if material.

Capital Expenditures (“CapEx”)

• Our capital investments in property and equipment consist primarily of the following categories:

  • Technical infrastructure

    • Servers and network equipment for computing, storage, and networking requirements.
    • Data center land and building construction.

  • Office facilities

    • Land for office facilities, ground-up office development projects, office building purchases, and building improvements (also referred to as “fit-outs”).
• The timing of cash payments to suppliers can cause variability in quarterly reported CapEx.

Depreciation

• Once an asset is ready for use and placed in service, we begin depreciating it.
• Depreciation is reflected on the Income statement as a component of Other costs of revenues and Research and development expenses.

• Useful lives for property and equipment as of January 1, 2023 is as follows:
  
  • Buildings depreciated over periods of seven to 25 years.
  • Server equipment depreciated generally over six years.
  • Network equipment depreciated generally over six years.
  • Leasehold improvements depreciated over the shorter of the remaining lease term or the estimated useful lives of the assets.
• In January 2023, we completed an assessment of the useful lives of our servers and network equipment, resulting in a change in the estimated useful life of our servers and certain network equipment to six years.

• Depreciation is recorded using the straight-line accounting method over the estimated useful lives of the assets.

Purchase Commitments and Other Contractual Obligations

• These amounts primarily consist of purchase orders for certain technical infrastructure as well as amounts related to commitments to purchase licenses, including content licenses, inventory, and network capacity. The total amount of purchase commitments or other contractual obligations declines when a cash payment is made for an item reflected in this category. The timing of payments is based on the terms of the commitments.

Statements of Cash Flows
Net Payments Related to Stock-based Award Activities

• The “Net payments related to stock-based award activities” line in the statement of cash flows primarily reflects employee tax withholding payments related to stock-based compensation.

Financial Statement Reclassifications (2023 10-K)
Depreciation Expense - Cash Flow Statement

• On the statement of cash flows, we moved impairment out of the “Depreciation and impairment of property and equipment” line into the “Other” non-cash adjustments line.
• Depreciation represented the majority of the prior reported line, while impairment of property and equipment was not material.
• The new line is now titled “Depreciation of property and equipment”.

Inventory and Intangible Assets - Balance Sheet

Amortization of Intangible Assets - Cash Flow Statement

• On the balance sheet, we now map Inventory to Other Current Assets and Intangible Assets to Other Non Current Assets.
• In the statement of cash flows, Amortization and Impairment of Intangible Assets is now included in the “Other” non-cash adjustments line.
• The above changes were made on the basis of materiality.

Investments
How Do You Measure the Change in Valuation of a Private Equity Investment (Non-marketable Equity Security)?

• Under the measurement alternative of US GAAP, we may increase the valuation of a private equity investment when an observable market transaction occurs.
  
  • For illustrative purposes, if Company A in our portfolio raises capital through the sale of securities at a valuation that is 20% higher than its previous financing round, we may increase the valuation of the holding by 20%.
• We may decrease the valuation of a private equity investment when an observable market transaction occurs. In addition, we also decrease the valuation of a private investment when we determine an impairment exists (the fair value is below the carrying value of the investment).
  
  • For illustrative purposes, if Company B in our portfolio raises capital through the sale of securities at a valuation that is 20% lower than its previous financing round, we may decrease the valuation of the holding by 20%.

Where Does a Change in Valuation of a Private Equity Investment Appear (Non-marketable Equity Security)?

• Gains and losses, including impairments, in private equity investments are reflected in the OI&E line in the income statement.

Foreign Exchange

• Foreign Exchange Rates: We translate the financial statements of our international subsidiaries to U.S. 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. An illustrative example:

• Hedging Framework: Principal currencies hedged included the Australian dollar, British pound, Canadian dollar, Euro, and Japanese yen.

Note: All information is as of October 31, 2024, and we undertake no duty to update this information unless required by law.
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