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Basis of Presentation and Summary of Significant Accounting Policies (Policies)
6 Months Ended
Jun. 30, 2023
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Basis of Consolidation
Basis of Consolidation
The condensed consolidated financial statements include the accounts of Etsy and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
Basis of Presentation
Basis of Presentation
The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and pursuant to the applicable rules and regulations of the Securities and Exchange Commission (“SEC”). The Company has condensed or omitted certain information and notes normally included in complete annual financial statements prepared in accordance with GAAP. These unaudited interim condensed consolidated financial statements should therefore be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K filed with the SEC on February 23, 2023 (the “Annual Report”). In the opinion of management, all material adjustments, which are of a normal and recurring nature, necessary for a fair statement of the results for the periods presented have been reflected in the condensed consolidated financial statements. The results of operations of any interim period are not necessarily indicative of the results of operations for the full annual period or any future period due to seasonal and other factors.
Use of Estimates
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with GAAP requires the Company to make estimates and judgments that affect the amounts reported and disclosed in the condensed consolidated financial statements and accompanying notes. Actual results could differ from these estimates and judgments. The accounting estimates that require management’s most subjective judgments include: stock-based compensation; income taxes, including the estimate of the annual effective tax rate at interim periods and evaluation of uncertain tax positions; the valuation of acquired intangible assets, developed technology, and goodwill as part of purchase price allocations for business combinations; valuation of goodwill; and leases. As of June 30, 2023, there continues to be significant global macroeconomic and geopolitical uncertainty which may impact the Company’s business, results of operations, and financial condition. As a result, many of the Company’s estimates and judgments require increased judgment and carry a higher degree of variability and volatility. As additional information becomes available, the Company’s estimates may change materially in future periods.
Interim Impairment Evaluation
Interim Impairment Evaluation
During the quarter ended June 30, 2023, the Company evaluated whether events or circumstances had changed such that it would indicate it is more likely than not that its goodwill, finite-lived intangible assets, and other long-lived assets were impaired (a “triggering event”). Given the current macroeconomic conditions, challenges applying the Company’s technological, marketing, and operational expertise to help scale Elo7’s business, and the resultant headwinds to the business, the Company revised its business forecasts for Elo7 downwards. The Company concluded a triggering event had occurred for the Elo7 reporting unit, and conducted an impairment test of its finite-lived intangible assets and other long-lived assets as of June 30, 2023. The Company prepared an updated fair value for the Elo7 reporting unit based on a quantitative assessment, which included estimates of future revenue, and the net available cash flows; as well as a determination that the Company would more likely than not use the Elo7 asset group, including its intangible assets, for a period of less than twelve months. Based on this assessment, the Company concluded that the book value of the finite-lived intangible assets and other long-lived assets for the Elo7 reporting units were fully impaired. The Company recognized impairment charges of $68.1 million for the Elo7 reporting unit as a result of this quantitative assessment during the three months ended June 30, 2023. See “Note 5—Asset Impairment Charges” for further details.
The Company concluded for its Etsy standalone and Reverb and Depop reporting units, that events and circumstances had not changed such that it was more likely than not that their fair values were less than their carrying amounts at June 30, 2023.