Document and Entity Information (USD $) In Millions, except Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2010	Jan. 31, 2011	Jun. 30, 2010
Document and Entity Information
Document Type	10-K
Amendment Flag	false
Document Period End Date	Dec. 31, 2010
Document Fiscal Year Focus	2010
Document Fiscal Period Focus	FY
Entity Registrant Name	SOHU COM INC
Entity Central Index Key	0001104188
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		38,169,360
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Public Float			$ 1,218

CONSOLIDATED BALANCE SHEETS (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2010	Dec. 31, 2009
ASSETS
Cash and cash equivalents	$ 678,389	$ 563,782
Investment in debt securities	75,529	0
Accounts receivable, net	62,603	46,610
Prepaid and other current assets (including $4,983 and $ nil of shareholder loan to an equity investee, respectively)	20,416	10,781
Total current assets	836,937	621,173
Fixed assets, net	120,627	115,088
Goodwill	67,761	55,555
Intangible assets, net	11,806	7,933
Prepaid non-current assets	142,731	26,207
Other assets, net	7,728	2,317
Total assets	1,187,590	828,273
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable	5,940	4,602
Accrued liabilities to suppliers and agents	65,917	41,103
Receipts in advance and deferred revenue	51,513	36,944
Accrued salary and benefits	35,409	28,860
Tax payables	31,719	21,953
Other accrued liabilities	21,174	17,035
Total current liabilities	211,672	150,497
Contingent consideration	1,359	0
Total liabilities	213,031	150,497
Commitments and contingencies
Shareholders' equity
Common stock: $0.001 par value per share (75,400 shares authorized; 38,025 and 37,749 shares issued and outstanding, respectively)	43	43
Additional paid-in capital	338,033	317,052
Treasury stock (5,389 shares)	(114,690)	(114,690)
Accumulated other comprehensive income	38,228	21,502
Retained earnings	534,503	385,874
Total Sohu.com Inc. shareholders' equity	796,117	609,781
Noncontrolling interest	178,442	67,995
Total shareholders' equity	974,559	677,776
Total liabilities and shareholders' equity	$ 1,187,590	$ 828,273

CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) In Thousands, except Per Share data, unless otherwise specified	Dec. 31, 2010	Dec. 31, 2009
CONSOLIDATED BALANCE SHEETS
Prepaid and other current assets, from third party	$ 4,983
Common stock, par value per share	$ 0.001	$ 0.001
Common stock, shares authorized	75,400	75,400
Common stock, shares issued	38,025	37,749
Common stock, shares outstanding	38,025	37,749
Treasury stock at cost , shares	5,389	5,389

CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) In Thousands, except Per Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2010	Dec. 31, 2009	Dec. 31, 2008
Revenues:
Brand advertising	$ 211,821	$ 177,073	$ 169,268
Online game	327,151	267,585	201,845
Sponsored search	18,649	8,491	6,313
Wireless and Others	55,156	62,090	51,625
Total revenues	612,777	515,239	429,051
Cost of revenues:
Brand advertising	86,684	59,451	59,443
Online game	29,852	17,505	14,567
Sponsored search	14,243	9,669	6,075
Wireless and Others	29,528	36,770	27,229
Total cost of revenues	160,307	123,395	107,314
Gross profit	452,470	391,844	321,737
Operating expenses:
Product development	75,600	56,943	49,713
Sales and marketing	105,406	93,498	84,691
General and administrative	40,375	36,624	22,695
Amortization of intangible assets	558	388	796
Total operating expenses	221,939	187,453	157,895
Operating profit	230,531	204,391	163,842
Other (expense) income	(790)	342	(535)
Interest income and exchange difference	4,474	5,001	4,288
Income before income tax expense	234,215	209,734	167,595
Income tax expense	36,031	33,745	9,009
Income from continuing operations	198,184	175,989	158,586
Gain from discontinued e-commerce operations	0	446	0
Net income	198,184	176,435	158,586
Less: Net income (loss) attributable to the noncontrolling interest	49,555	28,602	(51)
Net income attributable to Sohu.com Inc.	$ 148,629	$ 147,833	$ 158,637
Basic net income per share attributable to Sohu.com Inc.	$ 3.92	$ 3.86	$ 4.16
Shares used in computing basic net income per share attributable to Sohu.com Inc.	37,870	38,294	38,168
Diluted net income per share attributable to Sohu.com Inc.	$ 3.62	$ 3.57	$ 4.06
Shares used in computing diluted net income per share attributable to Sohu.com Inc.	38,445	38,969	39,117

CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2010	Dec. 31, 2009	Dec. 31, 2008
Cash flows from operating activities:
Net income	$ 198,184	$ 176,435	$ 158,586
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	20,699	16,607	13,485
Share-based compensation expense	27,491	17,319	10,620
Amortization and impairment of intangible assets	5,656	1,810	3,159
Losses on disposal of fixed assets	109	290	1,269
Provision for allowance for doubtful accounts	1,493	1,158	579
Excess tax benefits from share-based payment arrangements	(1,170)	(3,249)	0
Loss from equity investment	1,686	0	0
Others	0	0	(241)
Changes in assets and liabilities, net of acquisition:
Accounts receivable	(11,018)	(10,922)	(8,653)
Prepaid and other current assets	(11,216)	15,905	(19,630)
Accounts payable	1,338	263	1,672
Tax payables	8,800	5,255	12,042
Accrued liabilities to suppliers and agents	24,814	8,049	9,313
Receipts in advance and deferred revenue	10,371	5,498	17,307
Other accrued liabilities	7,187	603	18,850
Net cash provided by operating activities	284,424	235,021	218,358
Cash flows from investing activities:
Purchase of fixed assets	(134,638)	(78,915)	(26,373)
Purchase of debt securities	(74,615)	0	0
Purchase of intangible and other assets	(6,370)	(3,401)	(2,301)
Shareholder loan to an equity investee	(4,859)	0	0
Decrease in restricted cash	0	2,671	1,653
Acquisitions, net of cash acquired	(9,332)	0	0
Net cash used in investing activities	(229,814)	(79,645)	(27,021)
Cash flows from financing activities:
Issuance of common stock	2,128	4,140	13,103
Repurchase of common stock	0	(40,007)	(19,997)
Redemption of zero coupon convertible senior notes	0	0	(6)
Cash contribution received from noncontrolling interest shareholder	48,719	0	427
Excess tax benefits from share-based payment arrangements	1,170	3,249	0
Proceeds from Changyou's initial public offering	0	128,340	0
Other payments relating to financing activities, net	(3,000)	(2,048)	(917)
Net cash provided by (used in) financing activities	49,017	93,674	(7,390)
Effect of exchange rate change on cash and cash equivalents	10,980	307	7,772
Net increase in cash and cash equivalents	114,607	249,357	191,719
Cash and cash equivalents at beginning of year	563,782	314,425	122,706
Cash and cash equivalents at end of year	678,389	563,782	314,425
Supplemental cash flow disclosures:
Cash paid for income taxes	34,450	23,353	4,484
Barter transactions	$ 0	$ 691	$ 519

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (USD $) In Thousands, unless otherwise specified	Total	Comprehensive Income	Common Stock	Additional Paid-in Capital	Treasury Stock	Accumulated Other Comprehensive Income	Retained Earnings	Noncontrolling Interest
Beginning balance at Dec. 31, 2007	$ 218,904	$ 0	$ 42	$ 182,225	$ (54,686)	$ 11,912	$ 79,404	$ 7
Issuance of common stock	13,104	0	1	13,103	0	0	0	0
Contributions received from a noncontrolling interest shareholder	427	0	0	0	0	0	0	427
Repurchase of common stock	(19,997)	0	0	0	(19,997)	0	0	0
Share-based compensation expense	10,620	0	0	5,868	0	0	0	4,752
Comprehensive income:
Net income	158,586	158,586	0	0	0	0	158,637	(51)
Other comprehensive income:
Foreign currency translation adjustment	9,450	9,450	0	0	0	9,437	0	13
Total other comprehensive income	9,450	9,450
Total comprehensive income	168,036	168,036
Comprehensive income attributable to the noncontrolling interest		38
Comprehensive income attributable to Sohu.com Inc.		168,074
Ending balance at Dec. 31, 2008	391,094	0	43	201,196	(74,683)	21,349	238,041	5,148
Issuance of common stock	4,140	0	0	4,140	0	0	0	0
Repurchase of common stock	(40,007)	0	0	0	(40,007)	0	0	0
Share-based compensation expense	17,319	0	0	8,095	0	0	0	9,224
Excess tax benefits from share-based awards	3,069	0	0	3,069	0	0	0	0
Comprehensive income:
Net income	176,435	176,435	0	0	0	0	147,833	28,602
Other comprehensive income:
Foreign currency translation adjustment	351	351	0	0	0	153	0	198
Total other comprehensive income	351	351
Total comprehensive income	176,786	176,786
Comprehensive income attributable to the noncontrolling interest		(28,800)
Comprehensive income attributable to Sohu.com Inc.		147,986
Recognition of change in Sohu's economic interest in Changyou	125,375		0	100,552	0	0	0	24,823
Ending balance at Dec. 31, 2009	677,776	0	43	317,052	(114,690)	21,502	385,874	67,995
Issuance of common stock	2,128	0	0	2,128	0	0	0	0
Contributions received from a noncontrolling interest shareholder	48,719							48,719
Share-based compensation expense	27,491	0	0	17,683	0	0	0	9,808
Excess tax benefits from share-based awards	1,170	0	0	1,170	0	0	0	0
Comprehensive income:
Net income	198,184	198,184	0	0	0	0	148,629	49,555
Other comprehensive income:
Foreign currency translation adjustment	19,091	19,091	0	0	0	16,726	0	2,365
Total other comprehensive income	19,091	19,091
Total comprehensive income	217,275	217,275
Comprehensive income attributable to the noncontrolling interest		(51,920)
Comprehensive income attributable to Sohu.com Inc.		165,355
Ending balance at Dec. 31, 2010	$ 974,559		$ 43	$ 338,033	$ (114,690)	$ 38,228	$ 534,503	$ 178,442

Organization and Nature of Operations	12 Months Ended
Organization and Nature of Operations	Dec. 31, 2010
Organization and Nature of Operations
Organization and Nature of Operations	1. Organization and Nature of Operations Sohu.com Inc. ("Sohu" or "the Company"), a Delaware corporation organized in 1996, is a leading online media, search, gaming, community and mobile service group providing comprehensive online products and services in the People's Republic of China (the "PRC" or "China"). The Company, together with its wholly-owned and majority-owned subsidiaries and variable interest entities (collectively the "Sohu Group") mainly offers brand advertising services, online game services (through Changyou.com Limited), sponsored search services (through Sogou Inc.), and wireless services through its Internet sites: sohu.com, 17173.com, focus.cn, chinaren.com, changyou.com and sogou.com. Brand advertising and online game are the two core businesses of the Sohu Group. The brand advertising business provides advertisements on the Sohu Group's portal matrix to advertisers who wish to build up their brand awareness online. The online game business is conducted by a majority-owned subsidiary of Sohu, Changyou.com Limited ("Changyou"), which currently operates seven massively multi-player online role-playing games ("MMORPGs"), (i) Tian Long Ba Bu ("TLBB"), (ii) Blade Online ("BO"), (iii) Blade Hero 2 ("BH 2") which is the sequel to BO, (iv) Da Hua Shui Hu ("DHSH"), (v) Zhong Hua Ying Xiong ("ZHYX"), (vi) Immortal Faith ("IF"); and (vii) San Jie Qi Yuan ("SJQY"). TLBB is Changyou's first in-house developed MMORPG and is one of the most popular online games in China. On April 7, 2009, Changyou completed its initial public offering on the NASDAQ Global Select Market, trading under the symbol "CYOU." After Changyou's offering, Sohu continues to consolidate Changyou in Sohu's consolidated financial statements, as Sohu is Changyou's controlling shareholder, but recognizes noncontrolling interest reflecting shares held by shareholders other than Sohu. As of December 31, 2010, 29% of the economic interest in Changyou was recognized as noncontrolling interest in Sohu's consolidated financial statements. See Note 2 - Changyou Transactions - Sohu's Shareholding in Changyou, and Note 4 - Summary of Significant Accounting Policies - Basis of Consolidation and Recognition of Noncontrolling Interest.

Changyou Transactions	12 Months Ended
Changyou Transactions	Dec. 31, 2010
Changyou Transactions
Changyou Transactions	2. Changyou Transactions *Share-based Award to Tao Wang, Chief Executive Officer of Changyou* In January 2008, Sohu communicated to and agreed with Tao Wang, who is now the Chief Executive Officer of Changyou, to grant him 700,000 ordinary shares and 800,000 restricted ordinary shares, in lieu of his contingent right in Beijing Fire Fox Digital Technology Co., Ltd. ("Beijing Fire Fox"), which was one of Sohu's subsidiaries devoted to the development of TLBB. The 800,000 restricted ordinary shares were subject to a four-year vesting period commencing February 1, 2008. In addition, Tao Wang would not be entitled to participate in any distributions on Changyou shares, whether or not vested, until the earlier of Changyou's completion of an initial public offering or February 2012, and in any event entitlement to distributions would be subject to vesting of the shares. In January 2009, under Changyou's 2008 Share Incentive Plan described below, Changyou issued 700,000 of its Class B ordinary shares and 800,000 of its Class B restricted ordinary shares to Tao Wang through Prominence Investments Ltd. ("Prominence"), which is an entity deemed under applicable Securities and Exchange Commission ("SEC") rules to be beneficially owned by Tao Wang. In February 2009, 200,000 Class B restricted ordinary shares held by Prominence became vested. Upon this vesting, the number of Class B ordinary shares held beneficially by Tao Wang increased to 900,000 shares and the number of Class B restricted ordinary shares held beneficially by Tao Wang decreased to 600,000 shares. In March 2009, in preparation for its initial public offering, Changyou effected a ten-for-one share split that resulted in the aforementioned 900,000 Class B ordinary shares and 600,000 Class B restricted ordinary shares becoming 9,000,000 Class B ordinary shares and 6,000,000 Class B restricted ordinary shares, respectively. Upon the completion of Changyou's initial public offering in April 2009, vested Class B ordinary shares held by Prominence became entitled to participate in distributions on Changyou shares. Since the completion of the initial public offering, Class B restricted ordinary shares held by Prominence have continued, and will continue, to become vested from time to time in accordance with their terms. *Changyou's 2008 Share Incentive Plan* On December 31, 2008, Changyou reserved 2,000,000 of its ordinary shares, which included 1,774,000 Class B ordinary shares and 226,000 Class A ordinary shares, for issuance to certain of its executive officers and to certain of its employees as incentive compensation under Changyou's 2008 Share Incentive Plan. As described above, 700,000 ordinary shares and 800,000 restricted ordinary shares were granted to Tao Wang through Prominence under this incentive plan. In March 2009, the 2,000,000 reserved ordinary shares were subject to a ten-for-one share split effected by Changyou and became 20,000,000 ordinary shares. *Initial Public Offering of Changyou* On April 7, 2009, Changyou completed its initial public offering on the NASDAQ Global Select Market, trading under the symbol "CYOU." The initial public offering consisted of American depositary shares ("ADSs"), with each ADS representing two Class A ordinary shares. Changyou's ordinary shares are divided into Class A ordinary shares and Class B ordinary shares. Holders of Class A ordinary shares and holders of Class B ordinary shares have the same rights in Changyou, with the exception of voting and conversion rights. Each Class A ordinary share is entitled to one vote on all matters subject to a shareholder vote, and each Class B ordinary share is entitled to ten votes on all matters subject to a shareholder vote. Each Class B ordinary share is convertible into one Class A ordinary share at any time at the election of the holder. Class A ordinary shares are not convertible into Class B ordinary shares under any circumstances. At the closing of the initial public offering, Changyou issued and sold 7,500,000 Class A ordinary shares represented by 3,750,000 ADSs, and Sohu, through its indirectly wholly-owned subsidiary Sohu.com (Game) Limited ("Sohu Game"), sold 9,750,000 Class A ordinary shares represented by 4,875,000 ADSs, including 2,250,000 Class A ordinary shares represented by 1,125,000 ADSs sold pursuant to the exercise of the underwriters' over-allotment option. Subsequent to the offering, Changyou had 102,500,000 Class A and Class B ordinary shares issued and outstanding. Those outstanding shares consisted of (i) 70,250,000 Class B ordinary shares held by Sohu through Sohu Game; (ii) 15,000,000 Class B ordinary shares held by Tao Wang through Prominence, including 6,000,000 Class B restricted ordinary shares that were not vested as of the completion of the offering; and (iii) 17,250,000 Class A ordinary shares held by public shareholders. Net proceeds to Changyou and Sohu Game from this initial public offering were approximately $54.7 million and $70.7 million, respectively, for total net proceeds of approximately $125.4 million, after deducting underwriting discounts and commissions and offering expenses. As a result of the completion of Changyou's initial public offering, in the second quarter of 2009, Sohu recognized a one-time gain of $100.6 million in the shareholders' equity section of Sohu's consolidated balance sheets, to reflect the net proceeds Sohu received from the initial public offering and the incremental change in Sohu's economic interest in Changyou immediately before and after the offering. *Sohu's Shareholding in Changyou* Shareholding and Control Through December 31, 2010, 1,220,000 Class B restricted share units granted to certain of Changyou's executive officers other than Tao Wang and to certain of its employees had become vested, and were settled in Class B ordinary shares and then converted into Class A ordinary shares; and 358,000 Class A restricted share units granted to certain of Changyou's executive officers other than Tao Wang and to certain of its employees had become vested, and were settled in Class A ordinary shares. As of December 31, 2010, Changyou had outstanding a combined total of 104,078,000 Class A and Class B ordinary shares, consisting of (i) 70,250,000 Class B ordinary shares held by Sohu through Sohu Game; (ii) 14,400,000 Class B ordinary shares held by Tao Wang through Prominence, including 4,000,000 Class B restricted ordinary shares that were not vested; (iii) 17,850,000 Class A ordinary shares issued in Changyou's initial public offering; (iv) 1,220,000 Class A ordinary shares issued to certain of Changyou's executive officers other than Tao Wang and to certain of its employees upon conversion of Class B ordinary shares that had been issued upon the vesting and settlement of Class B restricted share units granted to them; and (v) 358,000 Class A ordinary shares issued to certain of Changyou's executive officers other than Tao Wang and to certain of its employees upon the vesting and settlement of Class A restricted share units granted to them. As of December 31, 2010, treating Tao Wang's 4,000,000 Class B restricted ordinary shares as owned by Tao Wang, Sohu held approximately 68% of the combined total of Changyou's outstanding Class A and Class B ordinary shares and controlled approximately 81% of the total voting power in Changyou. As a result, Sohu had the power to elect the entire Board of Directors of Changyou and determine the outcome of all matters submitted to a shareholder vote. As Changyou's controlling shareholder, Sohu will continue to consolidate Changyou in Sohu's consolidated financial statements but recognize noncontrolling interest reflecting shares held by shareholders other than Sohu, see Note 4 - Summary of Significant Accounting Policies - Basis of Consolidation and Recognition of Noncontrolling Interest. Economic Interest Because Tao Wang's 4,000,000 Class B restricted ordinary shares are subject to forfeiture to Sohu until they become vested, for accounting purposes those shares are treated as owned by Sohu, rather than as owned by Tao Wang, and therefore those shares are not included in the noncontrolling interest line items in Sohu's consolidated financial statements. As a result, as of December 31, 2010, Sohu was treated as holding approximately 71% of the economic interest in Changyou. Accordingly, shareholders other than Sohu were treated as holding the remaining 29% of the economic interest, which was recognized as noncontrolling interest in Sohu's consolidated financial statements. See Note 4 - Summary of Significant Accounting Policies - Basis of Consolidation and Recognition of Noncontrolling Interest. Sohu's economic interest in Changyou, as well as the noncontrolling interest recognized for Changyou in Sohu's consolidated financial statements, will continue to change as the Class B restricted ordinary shares granted to Tao Wang become vested, and the restricted share units granted to certain of Changyou's executive officers other than Tao Wang and to certain of its employees become vested and settled. Dilutive Impact Through December 31, 2010, under Changyou's 2008 Share Incentive Plan, Changyou has granted 11,000,000 Class B ordinary shares and 4,000,000 Class B restricted ordinary shares to Tao Wang through Prominence and 4,463,000 Class A and Class B restricted share units (settleable by Changyou's issuance of Class A ordinary shares and Class B ordinary shares, respectively) to certain of its executive officers other than Tao Wang and to certain of its employees. As of December 31, 2010, the number of Changyou's outstanding restricted share units decreased from 4,463,000 to 2,767,000, as a result of vesting and settlement or forfeitures of restricted share units. Because no Class A ordinary shares or Class B ordinary shares will be issued with respect to these restricted share units until the restricted share units are vested and settled, the unvested restricted share units and vested restricted share units that have not yet been settled are not included as outstanding shares of Changyou and have no impact on Sohu's basic net income per share. Unvested restricted share units and vested restricted share units that have not yet been settled do, however, have a dilutive impact on Sohu's diluted net income per share. In the calculation of Sohu's diluted net income per share, Sohu's economic interest in Changyou is calculated treating all of Changyou's existing unvested restricted shares, unvested restricted share units, and vested restricted share units that have not yet been settled as vested, in the case of restricted shares, and vested and settled, in the case of restricted shares units. See Note 22- Net Income per Share.

Sogou Transactions	12 Months Ended
Sogou Transactions	Dec. 31, 2010
Sogou Transactions
Sogou Transactions	3. Sogou Transactions *Restructuring Transactions* During 2010, the Company restructured its sponsored search business in preparation for the sale by its online search subsidiary Sogou Inc. ("Sogou") of newly-issued Series A Preferred Shares to Alibaba Investment Limited ("Alibaba"), a private investment subsidiary of Alibaba Group Holding Limited, China Web Search (HK) Limited ("China Web"), an investment vehicle of Yunfeng Fund, LP, and Photon Group Limited ("Photon"), the investment fund of Sohu's Chairman and Chief Executive Officer Dr. Charles Zhang. In the restructuring, the Company transferred to Sogou certain assets and liabilities associated with the mobile version of Sogou Pinyin, and transferred to Sohu certain non-search assets and liabilities that had been held by Sogou. Sogou will remain liable for a loan payable to Sohu in the amount of $45 million, which will be payable solely from the proceeds of an initial public offering by Sogou. The loan amount consists primarily of losses historically incurred in search business and previously funded by Sohu. On October 22, 2010, Sogou completed the sale of newly-issued Series A Preferred Shares to Alibaba, China Web and Photon for $15 million, $9 million, and $24 million, respectively. *Sogou Series A Terms* The following is a summary of some of the key terms of the Sogou Series A Preferred Shares. Dividend Rights Sogou may not declare or pay dividends on its ordinary shares unless the holders of the Series A Preferred Shares then outstanding first receive a dividend on each outstanding Series A Preferred Share in an amount at least equal to the sum of (i) the dividends that would have been payable to the holder of such Series A Preferred Share if such share had been converted into ordinary shares, at the then-applicable conversion rate, immediately prior to the record date for such dividend, and (ii) all accrued and unpaid Accruing Dividends. "Accruing Dividends" are calculated from the date of issuance of the Series A Preferred Shares at the rate per annum of US $0.0375 per Series A Preferred Share. Liquidation Rights In the event of any "Liquidation Event," such as the liquidation, dissolution or winding up of Sogou, a merger or consolidation of Sogou resulting in a change of control, the sale of substantially all of Sogou's assets or similar events, the holders of Series A Preferred Shares are entitled to receive, before any payment to holders of ordinary shares, an amount equal to the greater of (i) 1.3 times the original $48 million of the Series A Preferred Shares plus all accrued but unpaid Accruing Dividends and any other accrued and unpaid dividends on the Series Preferred Shares or (ii) such amount per share as would be payable if the Series A Preferred Shares had been converted into ordinary shares, at the then-applicable conversion rate, immediately prior to the Liquidation Event. Redemption Rights The Series A Preferred Shares are not redeemable. Conversion Rights Each Series A Preferred Share is convertible, at the option of the holder, at any time, and without the payment of additional consideration by the holder. Each Series A Preferred Share is convertible into such number of ordinary shares as is determined by dividing the original issue price of Series A Preferred Share by the then-effective conversion price. The conversion price is initially the same as the original issue price of $0.625, and is subject to adjustment on a weighted average basis upon the issuance of additional equity shares, or securities convertible into equity shares, at a price per share less than the original price per share of the Series A Preferred Shares, subject to certain customary exceptions, such as shares issued pursuant to the Sogou 2010 Share Incentive Plan. Each Series A Preferred Share will be automatically converted into ordinary shares of Sogou upon the closing of a qualified initial public offering of Sogou based on the then-effective conversion price. Voting Rights Each holder of Series A Preferred Shares is entitled to cast the number of votes equal to the number of ordinary shares into which the Series A Preferred Shares held by such holder are then convertible. Other Rights The Series A Terms include various other provisions typical of preferred share investments, such as rights of first refusal and co-sale, and registration rights. *Sohu's Shareholding in Sogou* As of December 31, 2010, Series A Preferred Shares of Sogou held by Alibaba, China Web and Photon represent approximately 10%, 6% and 16%, respectively, of the outstanding share capital of Sogou on a fully-diluted basis. Sohu will retain approximately 53% of Sogou on a fully-diluted basis, and intends in any event to retain a majority of the outstanding share capital of Sogou on a fully-diluted basis. As Sogou's controlling shareholder, Sohu will continue to consolidate Sogou but will recognize noncontrolling interest reflecting shares held by shareholders other than Sohu. See Note 4 - Summary of Significant Accounting Policies - Basis of Consolidation and Recognition of Noncontrolling Interest. *Sogou's 2010 Share Incentive Plan* On October 20, 2010, Sogou adopted the Sogou 2010 Share Incentive Plan (the "Sogou 2010 Share Incentive Plan"), which provides for the issuance of up to 24,000,000 ordinary shares of Sogou to Sogou management and key employees as well as certain members of Sohu's executive management. The maximum term of any issued share right under the Sogou 2010 Share Incentive Plan is ten years from the grant date. The Sogou 2010 Share Incentive Plan will expire on October 19, 2020. As of December 31, 2010, no share rights had been issued under this Plan.

Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2010

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

4. Summary of Significant Accounting Policies

Accounting Standards

The consolidated financial statements have been prepared on a historical cost basis to reflect the financial position and results of operations of the Company in accordance with Generally Accepted Accounting Principles in the United States ("U.S. GAAP").

Use of Estimation

The preparation of the consolidated financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, the Company evaluates the estimates based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The Company believes that the basis of consolidation and recognition of noncontrolling interest, revenue recognition, share-based compensation expense recognition, income taxes and uncertain tax positions, computation of net income per share, determination of fair value of financial instruments, determination of net accounts receivable, determination of fair value of identifiable assets and liabilities acquired through business combination, accounting for investment in debt securities, accounting for equity investments, assessment of impairment for long-lived assets and goodwill, and determination of functional currencies represent critical accounting policies that reflect the more significant judgments and estimates used in the preparation of the consolidated financial statements.

Basis of Consolidation and Recognition of Noncontrolling Interest

The consolidated financial statements include the accounts of Sohu and its wholly-owned and majority-owned subsidiaries and variable interest entities ("VIEs"). VIEs are consolidated if the Company determines that it is the primary beneficiary. All intercompany transactions are eliminated. Certain comparative figures have been reclassified to conform to the current presentation.

For majority-owned subsidiaries and VIEs, noncontrolling interest is recognized to reflect the portion of their equity which is not attributable, directly or indirectly, to the controlling shareholder.

Noncontrolling Interest for Changyou

As Sohu is Changyou's controlling shareholder, Changyou's financial results have been consolidated with those of Sohu for all periods presented. To reflect the economic interest in Changyou held by shareholders other than Sohu ("noncontrolling shareholders"), Changyou's net income attributable to these noncontrolling shareholders is recorded as noncontrolling interest in Sohu's consolidated statements of operations, based on their share of the economic interests in Changyou. Changyou's cumulative results of operations attributable to these noncontrolling shareholders, along with its changes in shareholders' equity and adjustment for share-based compensation expense in relation to those share-based awards which are unvested and vested but not yet settled, are recorded as noncontrolling interest in Sohu's consolidated balance sheets. See Note 2 - Changyou Transactions - Sohu's Shareholding in Changyou and Note 21 - Noncontrolling Interest.

Noncontrolling Interest for Sogou

As Sohu is Sogou's controlling shareholder, Sogou's financial results have been consolidated with those of Sohu for all periods presented. To reflect the economic interest in Sogou held by shareholders other than Sohu ("noncontrolling shareholders"), Sogou's net income/loss attributable to these noncontrolling shareholders is recorded as noncontrolling interest in Sohu's consolidated statements of operations. Sogou's cumulative results of operations attributable to these noncontrolling shareholders, along with these shareholders' original investments in Series A Preferred Shares, is accounted for as a noncontrolling interest classified as permanent equity in Sohu's consolidated balance sheets, as its redemption is solely within the control of Sohu. These treatments are based on the terms governing investment by the noncontrolling shareholders in the Series A Preferred Shares of Sogou (the "Sogou Series A Terms") and the terms of Sogou's restructuring. See Note 3 - Sogou Transaction and Note 21 - Noncontrolling Interest.

By virtue of the Sogou Series A Terms and the terms of the restructuring, as Sogou loses money after its restructuring, the net losses will be allocated in the following order: (i) net losses will be allocated to Sohu until its basis in Sogou decreases to zero; (ii) additional net losses will be allocated to noncontrolling shareholders until their investment in Sogou decreases to zero; and (iii) further net losses will be allocated between Sohu and noncontrolling shareholders based on their shareholding percentage in Sogou. Any subsequent net income from Sogou will be allocated in the following order: (i) net income will be allocated between Sohu and noncontrolling shareholders based on their shareholding percentage in Sogou until their basis in Sogou increases to zero; (ii) additional net income will be allocated to noncontrolling shareholders to bring their basis back; (iii) further net income will be allocated to Sohu to bring its basis back; and (iv) further net income will be allocated between Sohu and noncontrolling shareholders based on their shareholding percentage in Sogou.

Segment Reporting

The Sohu Group has determined that the business segments that constitute its primary reporting segments are brand advertising, online game, sponsored search and wireless and others, which is consistent with the Sohu Group's internal financial reporting structure.

Prior to 2009, the Company disclosed segment operating performance only through the gross profits line item, and did not allocate any operating expenses or assets to those segments, as management did not use this information to measure the performance of the operating segments.

In 2009, the chief operating decision maker ("CODM") began reviewing certain additional information for the online game segment. Accordingly, the Company has adjusted the online game segment operating performance measurement disclosures to include income from operations and the main segment assets for the online game segment. For the remaining segments, the operating performance measurements are unchanged.

In 2010, the CODM began reviewing certain additional information for the sponsored search segment. Accordingly, the Company has adjusted the sponsored search segment operating performance measurement disclosures to include income from operations and the main segment assets for the sponsored search segment. For the remaining segments, the operating performance measurements are unchanged.

Consistent with prior periods, some items, such as share-based compensation expense, operating expenses, other income and expense, and income tax expense, are not reviewed by the CODM. These items are disclosed in the segment information for reconciliation purposes only.

The Company has restated the presentation of its segments for prior periods to conform to the current presentation, and it will restate all comparable periods hereafter.

Revenue Recognition

The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed or determinable, and collectability is reasonably assured. The recognition of revenue involves certain management judgments. The amount and timing of revenues could be materially different for any period if management made different judgments or utilized different estimates.

For a barter transaction involving advertising services, the Company recognizes revenue and expense at fair value only if the fair value of the advertising services surrendered/received in the transaction is determinable. No revenue from advertising-for-advertising barter transaction is recognized since the fair value cannot be reliably determined.

Brand Advertising Revenues

Brand advertising revenue is recognized after deducting agent rebates and applicable business tax.

For brand advertising revenues, a contract is signed to establish the fixed price and advertising services to be provided. Based on the contracts, the Company provides advertisement placements on its different website channels and/or in different formats, including but not limited to banners, links, logos, buttons, rich media and content integration.

For brand advertising revenue recognition, prior to entering into contracts, the Company makes a credit assessment of the customer to assess the collectability of the contract. For those contracts for which collectability was assessed as reasonably assured, the Company recognizes revenue ratably over the period during which the advertising services were provided and when all other revenue recognition criteria were met. For those contracts for which collectability was assessed as not reasonably assured, the Company recognizes revenue only when the cash was received and all other revenue recognition criteria were met. The Company treats all elements of advertising contracts as a single unit of accounting for revenue recognition purposes and recognizes such revenue in one time when the last deliverable service in the arrangement was provided.

Sponsorship services, which is a type of brand advertising service, is similar to other brand advertising services, but generally involves larger amounts and longer contract periods. Sponsorship service may allow advertisers to sponsor a particular area on websites of the Company, and may include brand affiliation services and/or a larger volume of services, and may require some exclusivity or premier placements. Sponsorship services advertising revenues are normally recognized on a straight-line basis over the contract period, provided obligations under the contract have been met and all revenue recognition criteria have been met.

Online Game Revenues

Game Operation Revenues

Online game revenues from Changyou's current MMORPG operations are earned by providing online services to game players pursuant to the item-based revenue model. Under the item-based revenue model, game players play games free of charge and players are charged for purchases of in-game virtual items.

Game operations revenues are collected by Changyou's VIEs through the sale of Changyou's prepaid cards, which it sells in both virtual and physical forms to third-party distributors and players. Proceeds received from sales of prepaid cards are initially recorded as receipts in advance from customers and, upon activation or charge of the prepaid cards, are transferred from receipts in advance from customers to deferred revenues. As Changyou does not have control of, and generally does not know, the ultimate selling price of the prepaid cards sold by distributors, net proceeds from distributors form the basis of revenue recognition.

Under the item-based revenue model, revenue is recognized over the estimated lives of the virtual items purchased or as the virtual items are consumed. If different assumptions were used in deriving the estimated lives of the virtual items, the timing in which Changyou records its revenues would be impacted.

Revenues are recorded net of business tax, discounts and rebates to distributors.

Prepaid cards will expire two years after the date of card production if they have never been activated. The proceeds from the expired game cards are recognized as revenue upon expiration of cards.

Once the prepaid cards are activated and credited to a player's personal game account, they will not expire as long as the personal game account remains active. Changyou is entitled to suspend and close a player's personal game account if it has been inactive for a period of 180 consecutive days. The unused balances in an inactive player's personal game account are recognized as revenues when the account is suspended and closed.

Overseas Licensing Revenues

Changyou enters into licensing arrangements with overseas licensees to operate its MMORPGs in other countries or territories. These licensing agreements provide two revenue streams, consisting of an initial license fee and a monthly revenue-based royalty fee based on monthly revenue and sales from ancillary products of the games. The initial license fee is based on both a fixed amount and additional amounts receivable upon achieving certain sales targets. Since Changyou is obligated to provide post-sales services such as technical support and provision of updates and when-and-if-available upgrades to the licensees during the license period, the initial license fee from the licensing arrangement is recognized as revenue ratably over the license period. The fixed amount of the initial license fee is recognized ratably over the remaining license period from the launch of the game and the additional amount is recognized ratably over the remaining license period from the date such additional amount is certain. The monthly revenue-based royalty fee is recognized when earned, provided that collectability is reasonably assured.

Sponsored Search Revenues

Sponsored search services mainly include priority placement services and pay-for-click services. The priority placement services are placed in the Company's search directory and are normally provided for a fixed fee over the service period of the contract. Pay-for-click services mainly consist of displaying the text-based links of the Company's advertisers on the Company's websites and its website Alliance network. Sponsored search contracts are normally for relatively small amounts and are signed with small and medium-sized enterprises.

Revenue for priority placement services is normally recognized on a straight-line basis over the contract period, provided the Company's obligations under the contract have been met and all revenue recognition criteria have been met. Revenue for pay-for-click services is recognized on a per click basis when the users click on the displayed links. The priority of the display of text-based links is based on the bidding price of different advertisers.

Wireless and Others Revenues

The Company's wireless and others revenues are mainly from its wireless business.

Wireless revenues are derived from a wide range of wireless products focused on entertainment, information and communications, such as short messaging services ("SMS"), Ring Back Tone ("RBT"), Wireless Application Protocol ("WAP"), multi-media messaging services ("MMS") and interactive voice response ("IVR"). The Company mainly offers news, weather forecasts, chatting, entertainment information, mobile phone ring tones, and logo downloads and various other mobile related services to mobile phone users through contracts signed with third party mobile network operators.

The Company contracts with China Mobile and its subsidiaries and China Unicom and its subsidiaries ("China mobile network operators") for billing, collection and transmission services offered to their users. The Company also contracts with other service providers to obtain content and to distribute the Company's wireless products. In addition, the Company purchases certain content from third-party content providers. In most of these arrangements, the fees payable to the third-party service and content providers are calculated based on certain percentages of the revenue earned after deducting the fees paid to China mobile network operators.

Wireless service fees are charged on a monthly or per message/download basis. Due to technical issues with the operator's network, the Company might be unable to collect certain wireless service fees from an operator in certain circumstances. This un-collectability is referred to as the "failure rate", which can vary from operator to operator. Wireless revenues are recognized in the month in which the service is performed, provided that no significant obligations remain. To recognize wireless revenue, the Company relies on China mobile network operators to provide it billing confirmations for the actual amount of services they have billed to their mobile customers. At the end of each reporting period, when an operator has not provided the Company monthly billing confirmations for the period, the Company uses information generated from its internal system as well as historical data to estimate the failure rate, to estimate the amount of collectable wireless service fees and to recognize revenue. When the Company later receives the actual billing confirmation, it then records a true-up accounting adjustment. Although the Company believes it has the ability to make reasonable estimates, differences between the actual facts and its estimates may result in significant fluctuations in the amount and timing of the revenue recognized. Since 2002 when wireless revenues began representing a significant portion of total revenues, the quarterly historical differences in the Company's estimated revenue which was recorded in the financial statements compared to the actual revenue have ranged from an underestimation of $1,419,000 (gross margin underestimate of $654,000) to an overestimation of $340,000 (gross margin overestimate of $171,000). For the three months ended December 31, 2010, 79% of the estimated wireless revenues were confirmed by the monthly billing confirmations received from the mobile network operators. Generally, (i) within 15 to 120 days after the end of each month, the Company receives billing confirmations from each of the operators confirming the amount of wireless service charges billed to that operator's mobile phone users and (ii) within 30 to 180 days after delivering billing confirmations, each operator remits the wireless service fees, net of its service fees, for the month to the Company.

The Company must determine whether to record wireless revenues using the gross or net method of reporting. Determining whether revenue should be reported gross or net is based on an assessment of various factors, the primary factors being whether the Company is acting as the principal in offering services to the customer or whether the Company is acting as an agent in the transaction and the specific requirements of each contract. Currently, a majority of the wireless revenues are recorded on a gross basis, as the Company has the primary responsibility for fulfillment and acceptability of the wireless services. To the extent the Company is acting as a principal in a transaction, the payments received are recognized as revenue on a gross basis, and the amounts attributable to services provided by mobile network operators and other vendors as costs of revenue. To the extent the Company is acting as an agent in a transaction, the payments received are recognized as revenue on a net basis. Whether the Company is serving as principal or agent in a transaction is judgmental in nature and is determined by evaluating the terms of the arrangement.

Cost of Revenues

Cost of Brand Advertising Revenues

Cost of brand advertising revenues mainly consists of salary and benefits expenses, depreciation expenses, content and license costs, bandwidth leasing costs, and revenue sharing payments to third parties. Royalties paid to content providers are expensed as incurred and included as cost of revenues.

Content and license costs mainly consists of prepaid content and license costs to obtain the right to show third-party content such as TV series, movies and news on the Company's websites for a certain period. The prepayments are amortized over the shorter of the terms of license period or the estimated period over which the benefits of the license contract will be enjoyed.

Cost of Online Game Revenues

Cost of online game revenues mainly consists of salary and benefits expenses, revenue-based royalty payments to the game developers, bandwidth leasing costs, amortization of licensing fees, depreciation expenses, business tax and value-added tax ("VAT") arising from transactions between Changyou's subsidiaries and it VIEs.

Cost of Sponsored Search Revenues

Cost of sponsored search revenues mainly consists of depreciation expenses, bandwidth leasing costs, payments to website Alliance and salary and benefits expenses.

Cost of Wireless and Others Revenues

Cost of Wireless Revenues

Cost of wireless revenues mainly consists of collection charges and transmission fees paid to mobile network operators, payments to third party wireless service alliances and content suppliers, penalties, depreciation expenses, and bandwidth leasing costs.

Cost of Other Revenues

Cost of other revenues mainly consists of salary and benefits expenses and other expenses in connection with sales of software, provision of ASP services and construction and maintenance of websites.

Product Development Expenses

Product development expenses mainly consist of personnel-related expenses incurred for the enhancement to and maintenance of the Company's websites as well as costs associated with new product development and enhancement for existing products and services. Operating, classification and organization of listings and enhancement expenses of the website are expensed as incurred. Significant direct costs of materials, labor and services, if any, incurred during the application development stage of a project are capitalized.

Share-based Compensation Expense

Share-based compensation expense is for share-based awards, including common stock/ordinary shares, share options, restricted shares and restricted share units, granted by Sohu and Changyou to their employees and directors. Share-based compensation expense is recognized as costs and/or expenses in the consolidated financial statements based on the fair values of the related share-based awards on their grant dates.

For share-based awards granted by Sohu, in determining the fair value of share options granted, the Black-Scholes valuation model is applied; in determining the fair value of restricted share units granted, the public market price of the underlying shares on the grant dates is applied.

For share-based awards granted by Changyou, in determining the fair value of ordinary shares, restricted shares and restricted share units granted in 2008, the income approach/discounted cash flow method with a discount for lack of marketability was applied, given that the shares underlying the awards were not publicly traded at the time of grant. In determining the fair value of restricted share units granted in 2009 before Changyou's initial public offering, the fair value of the underlying shares was determined based on Changyou's offering price for its initial public offering. In determining the fair value of restricted share units granted after Changyou's initial public offering, the public market price of the underlying shares on the grant dates is applied.

Share-based compensation expense for ordinary shares granted is fully recognized in the quarter during which these ordinary shares are granted. Share-based compensation expense for share options, restricted shares and restricted share units granted is recognized on an accelerated basis over the requisite service period. The number of share-based awards for which the service is not expected to be rendered over the requisite period is estimated, and the related compensation expense is not recorded for that number of awards.

The assumptions used in share-based compensation expense recognition represent management's best estimates, but these estimates involve inherent uncertainties and the application of management judgment. If factors change or different assumptions are used, the share-based compensation expense could be materially different for any period. Moreover, the estimates of fair value are not intended to predict actual future events or the value that ultimately will be realized by employees who receive equity awards, and subsequent events are not indicative of the reasonableness of the original estimates of fair value made by the Company for accounting purposes.

Income Taxes and Uncertain Tax Positions

Income Taxes

Income taxes are accounted for using an asset and liability approach which requires the recognition of income taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in the Company's financial statements or tax returns. Deferred income taxes are determined based on the differences between the financial reporting and tax basis of assets and liabilities and are measured using the currently enacted tax rates and laws. Deferred tax assets are reduced by a valuation allowance, if based on available evidence, it is considered that it is more likely than not that some portion of or all of the deferred tax assets will not be realized. In making such determination, the Company considers factors including (i) future reversals of existing taxable temporary differences, (ii) future profitability, and (iii) tax planning strategies.

Uncertain Tax Positions

In order to assess uncertain tax positions, the Company applies a more likely than not threshold and a two-step approach for the tax position measurement and financial statement recognition. For the two-step approach, the first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is greater than 50% likely to be realized upon settlement.

Net Income per Share

Basic net income per share is computed using the weighted average number of common shares outstanding during the period. Diluted net income per share is computed using the weighted average number of common shares and, if dilutive, potential common shares outstanding during the period. Potential common shares comprise shares issuable upon the exercise or settlement of share-based awards using the treasury stock method. The computation of diluted net income per share does not assume conversion, exercise, or contingent issuance of securities that would have an anti-dilutive effect (i.e., an increase in earnings per share amounts or a decrease in loss per share amounts) on net income per share. Additionally, for purposes of calculating the numerator of diluted net income per share, the net income attributable to Sohu is adjusted for two factors as following:

(1) Difference between Changyou's net income attributable to Sohu determined by:

the percentage of the total economic interest in Changyou held by Sohu, and

ii)

the percentage of the weighted average number of Changyou shares held by Sohu to the weighted average number of Changyou ordinary shares and shares issuable upon the exercise or settlement of share-based awards under the treasury stock method.

(2) Difference between Sogou's net income/loss attributable to Sohu determined by:

the Sogou Series A Terms and the terms of Sogou's restructuring, and

ii)

the percentage of the weighted average number of Sogou shares held by Sohu to the weighted average number of Sogou ordinary shares and shares issuable upon the conversion of convertible preferred shares under the if-converted method.

Fair Value of Financial Instruments

The Company's financial instruments include cash and cash equivalents, accounts receivable, investment in debt securities, accounts payable and accrued liabilities. The carrying amount of accounts receivable, accounts payable and accrued liabilities approximates their fair value. Other financial instruments are measured at their respective fair values. For fair value measurement, U.S. GAAP establishes a three-tier hierarchy which prioritizes the inputs used in the valuation methodologies in measuring fair value:

Level 1 - observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 - include other inputs that are directly or indirectly observable in the marketplace.

Level 3 - unobservable inputs which are supported by little or no market activity.

The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. Cash equivalents are composed primarily of time deposits.

Accounts Receivable, Net

The carrying value of accounts receivable is reduced by an allowance that reflects the Company's best estimate of the amounts that will not be collected. The Company makes estimations of the collectability of accounts receivable. In estimating the general allowance, many factors are considered, including but not limited to reviewing delinquent accounts receivable, performing aging analyses and customer credit analyses, and analyzing historical bad debt records and current economic trends. Additional allowance for specific doubtful accounts might be made if the financial conditions of the Company's customers or mobile network operators deteriorate or the mobile network operators are unable to collect fees from their end customers, resulting in their inability to make payments due to the Company.

Investment in Debt Securities

The Company invests its excess cash in certain debt securities of high-quality corporate issuers. The Company elected the fair value option to account for its investments in debt securities at their initial recognition, and recorded changes in fair value in other income/expenses. The fair value election was made to mitigate accounting mismatches and to achieve operational simplifications.

Equity Investments

Investments in entities over which the Company has significant influence but does not control are recorded as equity investments and are accounted for by the equity method. Under this method, the Company's share of the post-acquisition profits or losses of the equity investment is recognized in the Company's consolidated statements of operations; and the Company's share of post-acquisition movements in equity investments is recognized in equity in the Company's consolidated balance sheets. Unrealized gains on transactions between the Company and its equity investments are eliminated to the extent of the Company's interest in the equity investments. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. When the Company's share of losses in an equity investment equals or exceeds its interest in the equity investment, the Company does not recognize further losses, unless the Company has incurred obligations or made payments on behalf of the equity investee.

Long-Lived Assets

Long-lived assets include fixed assets, intangible assets and prepaid non-current assets.

Fixed Assets

Fixed assets comprise computer equipment and hardware, office building, leasehold improvements, vehicles and office furniture. Fixed assets are recorded at cost less accumulated depreciation with no residual value. Depreciation is computed using the straight-line method over their estimated useful lives listed below.


Fixed assets		Estimated useful lives (years)
Computer equipment and hardware		4
Office building		47
Leasehold improvements		Lesser of term of the lease or the estimated useful lives of the assets
Vehicles		10
Office furniture		5

Expenditure for maintenance and repairs is expensed as incurred.

The gain or loss on the disposal of fixed assets is the difference between the net sales proceeds and the lower of the carrying value or fair value less cost to sell of the relevant assets and is recognized in operating expenses in the consolidated statement of operations.

Intangible Assets

Intangible assets primarily comprise computer software, domain names, trademarks, marketing rights, source codes, operating rights for licensed games and computer software purchased from unrelated third parties. Intangible assets are recorded at cost less accumulated amortization with no residual value. Amortization of intangible assets is computed using the straight-line method over their estimated useful lives.

Prepaid non-current Assets

Prepaid non-current assets primarily include prepayments for the office buildings to be built as Sohu's and Changyou's headquarters before they were recognized as fixed assets, also included are prepaid content and license fees. The Company amortizes the content and license fees over the shorter of the terms of the applicable license period or the estimated period over which the benefits of the license contract will be enjoyed.

Impairment of Long-lived Assets

The carrying values of long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Based on the existence of one or more indicators of impairment, the Company measures any impairment of long-lived assets using the projected discounted cash flow method. The estimation of future cash flows requires significant management judgment based on the Company's historical results and anticipated results and is subject to many factors. The discount rate that is commensurate with the risk inherent in the Company's business model is determined by the Company's management. An impairment charge would be recorded if the Company determined that the carrying value of long-lived assets may not be recoverable. The impairment to be recognized is measured by the amount by which the carrying values of the assets exceed the fair values of the assets.

Goodwill

Goodwill represents the excess of the purchase price over the fair value of the identifiable assets and liabilities acquired as a result of the Company's acquisitions of interests in its subsidiaries and consolidated VIEs. Goodwill is not depreciated or amortized but is tested for impairment at the reporting unit level (business segment) on an annual basis, and between annual tests when an event occurs or circumstances change that could indicate that the asset might be impaired. The impairment test consists of a comparison of the fair value of goodwill with its carrying value. Application of a goodwill impairment test requires significant management judgment, including the identification of reporting units, assigning assets and liabilities to reporting units, assigning goodwill to reporting units, and determining the fair value of each reporting unit. The judgment in estimating the fair value of reporting units includes estimating future cash flows, determining appropriate discount rates and making other assumptions. Changes in these estimates and assumptions could materially affect the determination of fair value for each reporting unit.

Comprehensive Income

Comprehensive income is defined as the change in equity of a company during a period from transactions and other events and circumstances excluding transactions resulting from investments from owners and distributions to owners. Accumulated other comprehensive income, as presented on the Company's consolidated balance sheets, includes the cumulative foreign currency translation adjustment.

Functional Currency and Foreign Currency Translation

Functional Currency

An entity's functional currency is the currency of the primary economic environment in which it operates; normally that is the currency of the environment in which it primarily generates and expends cash. Management's judgment is essential to determine the functional currency by assessing various indicators, such as cash flows, sales price and market, expenses, financing and inter-company transactions and arrangements. The functional currency of Sohu.com Inc. is the U.S. dollar. The functional currency of the Company's subsidiaries and VIEs in the PRC (except for Wuxi Sohu New Momentum, a PRC subsidiary set up in May 2010), the United Kingdom, Malaysia and Korea, respectively, are the RMB, British Pound, Malaysian Ringgit and Korean Won, respectively. Wuxi Sohu New Momentum's functional currency is the U.S. dollar. The functional currency of the Company's subsidiaries in the U.S. and Hong Kong is the U.S. dollar.

Foreign Currency Translation

Assets and liabilities of the Company's subsidiaries and VIEs in the PRC (not including Wuxi Sohu New Momentum), the United Kingdom, Malaysia and Korea are translated into U.S. dollars, the Company's reporting currency, at the exchange rate in effect at the balance sheet date and revenues and expenses are translated at the average exchange rates in effect during the reporting period. Foreign currency translation adjustments are not included in determining net income for the period but are accumulated in a separate component of equity in the Company's consolidated balance sheets.

Foreign currency transactions denominated in currencies other than the functional currency are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are remeasured at the applicable rates of exchange in effect at that date. Gains and losses resulting from foreign currency re-measurement are included in the consolidated statements of operations.

Effect of Recent Accounting Pronouncements

In October 2009, the Financial Accounting Standards Board ("FASB") issued new guidance on "revenue recognition for arrangements with multiple deliverables and certain revenue arrangements that include software elements." By providing another alternative for determining the selling price of deliverables, the guidance for arrangements with multiple deliverables will allow companies to allocate consideration in multiple deliverable arrangements in a manner that better reflects the transaction's economics and will often result in earlier revenue recognition. The new guidance modifies the fair value requirements of previous guidance by allowing "best estimate of selling price" in addition to vendor-specific objective evidence ("VSOE") and other vendor objective evidence ("VOE," now referred to as "TPE," standing for third-party evidence) for determining the selling price of a deliverable. A vendor is now required to use its best estimate of the selling price when VSOE or TPE of the selling price cannot be determined. In addition, the residual method of allocating arrangement consideration is no longer permitted under the new guidance. The new guidance for certain revenue arrangements that include software elements removes non-software components of tangible products and certain software components of tangible products from the scope of existing software revenue guidance, resulting in the recognition of revenue similar to that for other tangible products. The new guidance is effective for fiscal years beginning on or after June 15, 2010. However, companies may adopt the guidance as early as interim periods ended September 30, 2009. The guidance may be applied either prospectively from the beginning of the fiscal year for new or materially modified arrangements or retrospectively. The Company has not early adopted the new guidance and is currently evaluating the impact on its consolidated financial statements of adopting this guidance.

In December 2010, FASB issued revised guidance on "When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts." The revised guidance specifies that an entity with reporting units that have carrying amounts that are zero or negative is required to assess whether it is more likely than not that the reporting units' goodwill is impaired. If the entity determines that it is more likely than not that the goodwill of one or more of its reporting units is impaired, the entity should perform Step 2 of the goodwill impairment test for those reporting unit(s). Any resulting goodwill impairment should be recorded as a cumulative-effect adjustment to beginning retained earnings in the period of adoption. Any goodwill impairments occurring after the initial adoption of the revised guidance should be included in earnings as required by Section 350-20-35. The revised guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2010. Early adoption is not permitted. The Company is currently evaluating the impact on its consolidated financial statements of adopting this guidance.

In December 2010, FASB issued revised guidance on the "Disclosure of Supplementary Pro Forma Information for Business Combinations." The revised guidance specifies that if a public entity presents comparative financial statements, the entity should disclose revenue and earnings of the combined entity as though the business combination(s) that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period only. The revised guidance also expands the supplemental pro forma disclosures to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings. The revised guidance is effective prospectively for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2010. The Company has not early adopted the new guidance and is currently evaluating the impact on its consolidated financial statements of adopting this guidance.

Segment Information

12 Months Ended

Dec. 31, 2010

Segment Information

Segment Information

5. Segment Information

The Company has restated the presentation of its segments for prior periods to conform to the current presentation, and it will restate all comparable periods hereafter.

The following tables present summary information by segment (in thousands):


Year Ended December 31, 2010
	Brand Advertising, Wireless and Others
	Brand Advertising			Wireless			Others			Brand Advertising, Wireless and Others			Online Game			Sponsored Search			Intercompany Eliminations			Consolidated
Revenues (1)	$	222,659		$	52,319		$	2,837		$	277,815		$	327,153		$	18,922		$	(11,113	)	$	612,777
Segment cost of revenues		(81,881	)		(28,041	)		(1,484	)		(111,406	)		(29,658	)		(14,275	)		32			(155,307	)

Segment gross profit (loss)	$	140,778		$	24,278		$	1,353			166,409			297,495			4,647			(11,081	)		457,470

SBC (2) in cost of revenues											(4,806	)		(194	)		0			0			(5,000	)

Gross profit											161,603			297,301			4,647			(11,081	)		452,470

Operating expenses:
Product development											(17,520	)		(33,481	)		(14,907	)		0			(65,908	)
Sales and marketing											(59,892	)		(40,782	)		(10,545	)		10,840			(100,379	)
General and administrative											(16,727	)		(13,752	)		(2,124	)		0			(32,603	)
Amortization of intangible assets											(366	)		(38	)		(154	)		0			(558	)
SBC (2) in operating expenses											(10,573	)		(8,400	)		(3,503	)		15			(22,491	)

Total operating expenses											(105,078	)		(96,453	)		(31,233	)		10,825			(221,939	)


Operating profit											56,525			200,848			(26,586	)		256			230,531
Other income (expense)											632			(1,394	)		(28	)		0			(790	)
Interest income and exchange difference											921			3,628			(75	)		0			4,474
Income tax expense											(7,853	)		(28,178	)		0			0			(36,031	)

Income from continuing operations										$	50,225		$	174,904		$	(26,689	)	$	256		$	198,184

Note (1):

The intercompany elimination for segment revenues mainly consists of the marketing services provided by the brand advertising segment (banner advertisements etc.) to the online game segment (conducted via Changyou).

Note (2):

"SBC" stands for share-based compensation expense.


Year Ended December 31, 2009
	Brand Advertising, Wireless and Others
	Brand Advertising			Wireless			Others			Brand Advertising, Wireless and Others			Online Game			Sponsored Search			Intercompany Eliminations			Consolidated
Revenues (1)	$	197,180		$	60,809		$	1,281		$	259,270		$	267,585		$	8,621		$	(20,237	)	$	515,239
Segment cost of revenues		(58,664	)		(34,370	)		(2,362	)		(95,396	)		(17,194	)		(9,688	)		32			(122,246	)

Segment gross profit (loss)	$	138,516		$	26,439		$	(1,081	)		163,874			250,391			(1,067	)		(20,205	)		392,993

SBC (2) in cost of revenues											(825	)		(324	)		0			0			(1,149	)

Gross profit											163,049			250,067			(1,067	)		(20,205	)		391,844

Operating expenses:
Product development											(16,682	)		(19,944	)		(11,588	)		0			(48,214	)
Sales and marketing											(66,849	)		(39,787	)		(6,209	)		(20,094	)		(92,751	)
General and administrative											(15,673	)		(13,347	)		(910	)		0			(29,930	)
Amortization of intangible assets											(383	)		(5	)		0			0			(388	)
SBC (2) in operating expenses											(2,348	)		(13,077	)		(745	)		0			(16,170	)

Total operating expenses											(101,935	)		(86,160	)		(19,452	)		(20,094	)		(187,453	)


Operating profit											61,114			163,907			(20,519	)		(111	)		204,391
Other income (expense) (3)											97,005			158			(21	)		(96,800	)		342
Interest income and exchange difference											1,722			3,275			4			0			5001
Income tax expense											(11,089	)		(22,656	)		0			0			(33,745	)

Income from continuing operations										$	148,752		$	144,684		$	(20,536	)	$	(96,911	)	$	175,989

Note (1):

Note (2):

"SBC" stands for share-based compensation expense.

Note (3):

In the second quarter of 2009, Changyou declared a dividend distribution of $96.8 million to Sohu Game. Both Changyou and Sohu Game are within the Sohu Group.


Year Ended December 31, 2008
	Brand Advertising, Wireless and Others
	Brand Advertising			Wireless			Others			Brand Advertising, Wireless and Others			Online Game			Sponsored Search			Intercompany Eliminations			Consolidated
Revenues (1)	$	199,254		$	47,046		$	4,579		$	250,879		$	201,845		$	6,313		$	(29,986	)	$	429,051
Segment cost of revenues		(58,243	)		(24,538	)		(2,667	)		(85,448	)		(14,619	)		(6,075	)		66			(106,076	)

Segment gross profit (loss)	$	141,011		$	22,508		$	1,912			165,431			187,226			238			(29,920	)		322,975

SBC (2) in cost of revenues											(1,224	)		(14	)		0			0			(1,238	)

Gross profit											164,207			187,212			238			(29,920	)		321,737

Operating expenses:
Product development											(16,150	)		(18,893	)		(7,921	)		0			(42,964	)
Sales and marketing											(69,191	)		(38,907	)		(3,856	)		28,159			(83,795	)
General and administrative											(12,757	)		(8,649	)		(1,313	)		1,761			(20,958	)
Amortization of intangible assets											(746	)		(50	)		0			0			(796	)
SBC (2) in operating expenses											(2,815	)		(5,333	)		(1,234	)		0			(9,382	)

Total operating expenses											(101,659	)		(71,832	)		(14,324	)		29,920			(157,895	)


Operating profit											62,548			115,380			(14,086	)		0			163,842
Other income (expense)											(262	)		(278	)		5			0			(535	)
Interest income and exchange difference											3,332			990			(34	)		0			4,288
Income tax expense											(903	)		(8,106	)		0			0			(9,009	)

Income from continuing operations										$	64,715		$	107,986		$	(14,115	)	$	0		$	158,586

Note (1):

Note (2):

"SBC" stands for share-based compensation expense.


	As of December 31, 2010
	Brand Advertising, Wireless and Others		Online Game		Sponsored Search		Intercompany Eliminations			Consolidated
Cash and cash equivalents (1)	$	277,910	$	350,957	$	49,522	$	0		$	678,389
Accounts receivable, net		61,134		1,464		5		0			62,603
Fixed assets, net		54,461		53,659		12,507		0			120,627
Total assets (2)		626,202		502,311		65,170		(6,093	)		1,187,590

Note (1):

The cash and cash equivalents are mainly denominated in RMB and in U.S. dollars. For a discussion of concentration of risk which the Company is exposed to, please refer to Note 23 - Concentration Risks - Operation Risk.

Note (2):

The intercompany elimination for segment assets mainly consists of marketing services provided by the brand advertising segment to the online game segment (conducted through Changyou).


	As of December 31, 2009
	Brand Advertising, Wireless and Others		Online Game		Sponsored Search		Intercompany Eliminations			Consolidated
Cash and cash equivalents (1)	$	335,551	$	226,901	$	1,330	$	0		$	563,782
Accounts receivable, net		43,095		3,395		120		0			46,610
Fixed assets, net		53,847		49,178		12,063		0			115,088
Total assets (2)		531,148		289,391		13,794		(6,060	)		828,273

Note (1):

Note (2):

The intercompany elimination for segment assets mainly consists of marketing services provided by the brand advertising segment to the online game segment (conducted through Changyou).

Share-based Compensation Expense

12 Months Ended

Dec. 31, 2010

Share-based Compensation Expense

Share-based Compensation Expense

6. Share-based Compensation Expense

Sohu, Changyou and Sogou all have incentive plans for the granting of share-based awards, including common stock/ ordinary shares, share options, restricted shares and restricted share units, to their employees and directors. As of December 31, 2010, no share-based awards had been granted by Sogou; therefore no share-based compensation expense was recognized under the Sogou 2010 Share Incentive Plan.

Share-based compensation expense is recognized as costs and/or expenses in the consolidated financial statements based on the fair values of the related share-based awards on their grant dates. Share-based compensation expense is charged to the shareholders' equity section in the consolidated balance sheets. See Note 20 - Sohu.com Inc. Shareholders' Equity - Stock Incentive Plan.

Share-based compensation expense was recognized in costs and/or expenses for the years ended December 31, 2010, 2009 and 2008, respectively, as follows (in thousands):


	Year Ended December 31,
Share-based compensation expense	2010		2009		2008
Cost of revenues	$	5,000	$	1,149	$	1,238
Product development expenses		9,692		8,729		6,749
Sales and marketing expenses		5,027		747		896
General and administrative expenses		7,772		6,694		1,737

	$	27,491	$	17,319	$	10,620

There was no capitalized share-based compensation expense for the years ended December 31, 2010, 2009 and 2008.

Share-based compensation expense recognized for share-based awards granted by Sohu and Changyou, respectively, was as follows (in thousands):


	Year Ended December 31,
Share-based compensation expense	2010		2009		2008
For share-based awards granted by Sohu	$	19,000	$	4,176	$	5,868
For share-based awards granted by Changyou		8,491		13,143		4,752

	$	27,491	$	17,319	$	10,620

Other Income (Expense)

12 Months Ended

Dec. 31, 2010

Other Income (Expense)

Other Income (Expense)

8. Other Income (Expense)

The following table summarizes the Company's other income (expense) (in thousands):


	Year Ended December 31,
	2010			2009		2008
Government grant	$	1,546		$	146	$	0
Other investment loss		(1,030	)		0		0
Charitable donation		(1,208	)		0		(573	)
Receipts of tax refunds and reversal of certain taxes previously accrued		0			16		11
Other income from write-off of long-aged payables		0			109		0
Others		(98	)		71		27

	$	(790	)	$	342	$	(535	)

Balance Sheet Components (in thousands)

12 Months Ended

Dec. 31, 2010

Balance Sheet Components (in thousands)

Balance Sheet Components (in thousands)

9. Balance Sheet Components (in thousands)


	As of December 31,
	2010			2009
Cash and cash equivalents
Cash	$	322,614		$	254,912
Time deposits with three-month maturities or less		355,775			308,870

	$	678,389		$	563,782


Accounts receivable, net
Accounts receivable	$	65,149		$	47,982
Allowance for doubtful accounts:
Balance at beginning of year		(1,372	)		(2,119	)
Additional provision for bad debt		(2,090	)		(1,548	)
Write-offs		626			1,905
Cash collection		290			390

Balance at end of year		(2,546	)		(1,372	)

	$	62,603		$	46,610


Prepaid and other current assets
Receivable from equity investees	$	4,983		$	0
Prepaid content and license		3,172			1,797
Individual income tax receivable from employees for exercise or settlement of share-based awards		2,543			15
Employee advances		2,330			2,611
Prepaid cost of revenue		1,451			763
VAT refund receivable		1,214			1,001
Rental deposit		1,148			679
Prepaid advertising and promotion fees		718			1,127
Prepaid professional fees		457			414
Corporate income tax refund receivable		46			46
Others		2,354			2,328

	$	20,416		$	10,781


Fixed assets, net
Computer equipment and hardware	$	88,996		$	70,911
Office building		77,527			75,184
Leasehold improvements		21,119			17,382
Vehicles		1,641			1,340
Office furniture		2,286			1,464

Fixed assets, gross		191,569			166,281
Accumulated depreciation		(70,942	)		(51,193	)

	$	120,627		$	115,088



Prepaid non-current assets
Prepayments for the office building-Sohu	$	66,071	$	21,968
Prepayments for the office building-Changyou		59,794		0
Prepaid content and license		7,906		1,245
Others		8,960		2,994

	$	142,731	$	26,207


Other accrued liabilities
Contract deposits from customers	$	10,589	$	9,281
Accrued professional fees		4,009		4,212
Tax payable for exercise or settlement of share-based awards		2,382		3,148
Others		4,194		398

	$	21,174	$	17,035


Receipts in advance and deferred revenue
Receipts in advance
Generated from brand advertising business	$	7,793	$	1,506
Generated from online game business		20,970		21,889
Generated from sponsored search business		5,904		4,679
Generated from wireless and others business		2,405		188

Total receipts in advance		37,072		28,262
Deferred revenue		14,441		8,682

	$	51,513	$	36,944

Fair Value Measurements

12 Months Ended

Dec. 31, 2010

Fair Value Measurements

Fair Value Measurements

10. Fair Value Measurements

Fair Value of Financial Instruments

Level 1 - observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 - include other inputs that are directly or indirectly observable in the marketplace.

Level 3 - unobservable inputs which are supported by little or no market activity.

The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The following table sets forth the financial instruments, measured at fair value, by level within the fair value hierarchy as of December 31, 2010 (in thousands):


			Fair value measurement at reporting date using
Items	As of December 31, 2010		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash equivalents:
Time deposits	$	355,775	$	0	$	355,775	$	0

Investment in debt securities		75,529		0		0		75,529

Total	$	431,304	$	0	$	355,775	$	75,529

The following table sets forth the financial instruments, measured at fair value, by level within the fair value hierarchy as of December 31, 2009 (in thousands):


			Fair value measurement at reporting date using
Items	As of December 31, 2009		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash equivalents:
Time deposits	$	308,870	$	0	$	308,870	$	0

Investment in debt securities		0		0		0		0

Total	$	308,870	$	0	$	308,870	$	0

The following table sets forth the reconciliation of the fair value measurements using significant unobservable inputs (level 3) from December 31, 2009 to December 31, 2010 (in thousands):


	Fair Value Measurements
	Using Significant Unobservable Inputs (Level 3) Debt Securities
Beginning balance at December 31, 2009	$	0
Purchase		74,615
Gains included in other income		914

Ending balance at December 31, 2010	$	75,529

Cash Equivalents

The Company's cash equivalents consist of time deposits placed with banks. The fair values of demand deposits and time deposits placed with banks are determined based on the pervasive interest rates in the market, which are also the interest rates as stated in the contracts with the banks. The Company classifies the valuation techniques that use the pervasive interest rates input as Level 2.

Investment in Debt Securities

In September 2010, the Company purchased from a PRC-based company (the "Debtor") a convertible debt security with a principal amount of $74.6 million (equal to RMB 0.5 billion) with an initial maturity of twelve months subject to extension at the Company's election in its sole discretion for additional sequential six-month periods, and bearing interest at the rate of 3.8% per annum, payable quarterly in cash. The Debtor's obligations on the debt are secured by a pledge from the Debtor's parent company of its entire equity interest in the Debtor. Under the terms of the security, if the Company continues to extend the maturity to March 31, 2014, it will have an option, exercisable on March 31, 2014, to convert the outstanding principal into fixed percentages of equity interest in two companies which are affiliates of the Debtor. For the year ended December 31, 2010, the interest income generated from this debt security amounted to $0.74 million.

The Company elected the fair value option to account for its investments in debt securities at their initial recognition. The changes in fair value generated from currency translation with the amount of $0.9 million were recognized in other income for the year ended December 31, 2010. There is no difference between the fair value and the unpaid principal balance of the debt securities as of December 31, 2010. To estimate its fair value, the Company used the income approach, which considers the estimated future return from the investment and the probabilities of getting these returns. The Company classifies the valuation techniques that use these inputs as Level 3 of fair value measurement. See above "Fair Value of Financial Instruments".

- Definition

This item represents the complete disclosure regarding the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments, assets, and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the Company is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risk is are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References+ Details

Business Combination

12 Months Ended

Dec. 31, 2010

Business Combination

Business Combination

11. Business Combination

In May 2010, Changyou acquired 100% of the equity interests in ICE HK and its subsidiary and VIE (collectively "ICE Group"), which are engaged in online games development and operations in China, for cash consideration of $7.0 million. Since Changyou has unilateral control of ICE Group as a result of its control of 100% of the voting equity interests, Changyou began to consolidate ICE Group's financial statements commencing with the acquisition. Changyou views the acquisition of ICE Group as an integral piece of its strategy to expand its online game business in China.

On the acquisition date, the allocation of the purchase price of the assets acquired and liabilities assumed based on their fair values was as follows (in thousands):


	As of May 31, 2010
Tangible assets acquired	$	4,091
Identifiable intangible assets		252
Game under development		769
Goodwill		10,258
Liabilities assumed		(8,370	)

Total	$	7,000

The excess of the purchase price over tangible assets, identifiable intangible assets (mainly registered game players and game operating platform) and game under development acquired and liabilities assumed was recorded as goodwill. The acquired identifiable intangible assets were valued by various approaches, including the income approach and the replacement cost approach, as appropriate. As of December 31, 2010, no measurement period adjustment had been recorded.

Prior to the acquisition, ICE Group did not prepare its financial statements under accounting principles generally accepted in the United States of America. Changyou determined that the cost of reconstructing the financial statements of ICE Group for the periods prior to the acquisition outweighed its benefits. Based on Changyou's assessment of the acquired companies' financial performance, ICE Group on its own or in total is not considered material to Changyou. Thus Changyou believes that the presentation of pro forma financial information with regard to a summary of the results of operations of Changyou for the business combination is not necessary.

Total identifiable intangible assets acquired upon consolidation mainly include game operating platform of $221,000, and registered game players of $31,000, which have an estimated weighted average useful life of two years. Total goodwill of $10.3 million primarily represents the expected synergies from combining operations of Changyou and ICE Group, which are complementary to each other. In accordance with ASC 350, goodwill is not amortized but is tested for impairment and is not deductible for tax purposes.

Goodwill

12 Months Ended

Dec. 31, 2010

Goodwill

Goodwill

12. Goodwill

The changes in the carrying value of goodwill by segment are as follows (in thousands):


	Brand Advertising			Online Game		Sponsored Search			Wireless		Total
Balance as of December 31, 2008
Goodwill	$	50,315		$	0	$	7,477		$	15,439	$	73,231
Accumulated impairment losses		(17,676	)		0		0			0		(17,676	)

		32,639			0		7,477			15,439		55,555

Transactions in 2009
Foreign currency translation adjustment		0			0		0			0		0
Impairment losses		0			0		0			0		0

Balance as of December 31, 2009	$	32,639		$	0	$	7,477		$	15,439	$	55,555


Balance as of December 31, 2009
Goodwill	$	50,315		$	0	$	7,477		$	15,439	$	73,231
Accumulated impairment losses		(17,676	)		0		0			0		(17,676	)

		32,639			0		7,477			15,439		55,555

Transactions in 2010
Acquisitions		0			10,258		1,885			0		12,143
Foreign currency translation adjustment		6			0		57			0		63
Inter-segment transfers		7,477			0		(7,477	)		0		0
Impairment losses		0			0		0			0		0

Balance as of December 31, 2010	$	40,122		$	10,258	$	1,942		$	15,439	$	67,761

Intangible Assets, Net

12 Months Ended

Dec. 31, 2010

Intangible Assets, Net

Intangible Assets, Net

13. Intangible Assets, Net

The following table summarizes the Company's intangible assets, net (in thousands):


	As of December 31, 2010
Items	Gross Carrying Amount		Accumulated Amortization			Impairment			Net Carrying Amount
Computer software	$	11,950	$	(7,920	)	$	0		$	4,030
Operating rights for licensed games		8,428		(1,352	)		(2,016	)		5,060
Trademarks and domain names		4,617		(2,092	)		0			2,525
Marketing rights and others		3,671		(3,654	)		0			17
Customer lists		2,343		(2,343	)		0			0
Developed technologies		2,107		(1,000	)		(933	)		174
Others		1,580		(1,580	)		0			0

Total	$	34,696	$	(19,941	)	$	(2,949	)	$	11,806


	As of December 31, 2009
Items	Gross Carrying Amount		Accumulated Amortization			Impairment		Net Carrying Amount
Computer software	$	8,873	$	(6,527	)	$	0	$	2,346
Operating rights for licensed games		3,536		(402	)		0		3,134
Trademarks and domain names		3,785		(1,662	)		0		2,123
Marketing rights and others		3,663		(3,629	)		0		34
Customer lists		2,343		(2,343	)		0		0
Developed technologies		1,170		(874	)		0		296
Others		1,580		(1,580	)		0		0

Total	$	24,950	$	(17,017	)	$	0	$	7,933

As of December 31, 2010, estimated amortization expenses for future periods are expected to be as follows:


For the year ending December 31,	(in thousands)
2011	$	3,128
2012		2,869
2013		2,143
2014		1,596
2015		1,028
Thereafter		1,042

Total expected amortization expense	$	11,806

Impairment for Long-Lived Assets	12 Months Ended
Impairment for Long-Lived Assets	Dec. 31, 2010
Impairment for Long-Lived Assets
Impairment for Long-Lived Assets	14. Impairment for Long-Lived Assets The Company's long-lived assets include fixed assets, intangible assets and prepaid non-current assets. The carrying amounts of long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is evaluated by a comparison of the carrying amount of assets to future undiscounted net cash flows expected to be generated by the assets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amounts of the assets exceed the fair value of the assets evaluated by the estimated cash flows method (discounted). Assets to be disposed of are reported at the lower of the carrying amount or fair value less cost to sell. At the end of each year, the Company tests impairment of long-lived assets at the reporting unit level and recognizes impairment in the event that the carrying value exceeds the fair value of each reporting unit. For the year ended December 31, 2010, Changyou, the Company's majority-owned subsidiary, had recognized $2.9 million impairment loss for intangible assets in product development expense. For the year ended December 31, 2009 and 2008, the Company was not aware of the occurrence of any event or change of circumstances that would result in material impairment losses in long-lived assets and so did not recognize any impairment loss for those long-lived assets.

Income Taxes

12 Months Ended

Dec. 31, 2010

Income Taxes

Income Taxes

15. Income Taxes

Income Tax Expense and Effective Tax Rate

Income Tax Expense

Sohu and Changyou.com (US) Inc. are subject to income taxes in the United States ("U.S."). The majority of the subsidiaries and VIEs of the Company are based in mainland China and are subject to income taxes in the PRC. These China-based subsidiaries and VIEs conduct substantially all of the Company's operations, and generate most of the Company's income.

The components of income before income taxes are as follows (in thousands):


	Year ended December 31,
	2010			2009			2008
Income before income tax expenses
Income from China operations		258,183			134,240			176,428
Income (loss) from non China operations	$	(23,968	)	$	75,494		$	(8,833	)

Total income before income tax expenses	$	234,215		$	209,734		$	167,595


Income tax expenses applicable to China operations
Current income tax expense	$	35,202		$	29,880		$	3,042
Deferred tax		(1,850	)		(985	)		(475	)
Withholding tax for dividend distribution		0			0			4,950

Subtotal income tax expenses applicable to China operations		33,352			28,895			7,517
Foreign income tax expenses		1,712			3,905			470
Foreign withholding tax expenses		967			945			1,022

Total income tax expenses	$	36,031		$	33,745		$	9,009

In 2010, of the $36.0 million income tax expense, $33.4 million was for China-based income, which mainly arose from the Company's online game business. In accordance with U.S. GAAP, the Company realized $1.2 million of windfall tax benefits from existing U.S. federal net operating losses ("NOL") generated from excess tax deductions related to share-based awards, which reduced its taxes payable in 2010. This excess tax benefit was correspondingly charged to the shareholders' equity section in the consolidated balance sheets using the with-and-without approach and presented as a cash outflow from operating activities and a cash inflow from financing activities. Realizing this benefit reduced the amount of taxes payable and does not otherwise involve cash flows.

The Company did not have any significant interest or penalties associated with tax positions for the year ended December 31, 2010.

The combined effects of the income tax exemption and reduction available to the Company are as follows (in thousands, except per share data):


	Year Ended December 31,
	2010		2009		2008
Tax holiday effect	$	43,113	$	35,911	$	48,413
Basic net income per share effect		1.14		0.94		1.27

Effective Tax Rate

The following is a reconciliation between the U.S. federal statutory rate and the Company's effective tax rate:


	Year Ended December 31,
	2010			2009			2008
U.S. federal statutory rate:		35	%		35	%		34	%
Effect of tax holidays applicable to the subsidiaries and the VIEs		(18	%)		(17	%)		(29	%)
Tax differential from statutory rate applicable to the subsidiaries and the VIEs		(14	%)		(12	%)		(11	%)
Effect of withholding taxes		0	%		0	%		4	%
Changes in valuation allowance for deferred tax assets		9	%		7	%		6	%
Others		3	%		3	%		1	%

		15	%		16	%		5	%

PRC Corporate Income Tax

Related to New and High Technology Enterprises

Under the previous PRC income tax law, which expired on December 31, 2007, New and High Technology Enterprises ("NHTEs") located in the Zhongguancun zone of Beijing ("BJ ZGC") were exempted from income tax for three years beginning with their first year of operations and were entitled to a 50% tax reduction to 7.5% for the subsequent three years and 15% thereafter. The years during which NHTEs enjoy preferential tax rates are known as "tax holidays."

Effective January 1, 2008, the current PRC Corporate Income Tax Law (the "CIT Law") imposes a unified income tax rate of 25% for both domestic and wholly foreign-owned enterprises ("WFOEs") but grants preferential tax treatments to NHTEs. Under the CIT Law, NHTEs can enjoy a preferential income tax rate of 15% for three years but need to re-apply after the end of the three-year period. The current CIT Law provides grandfathering treatment allowing NHTEs to continue to enjoy their unexpired tax holidays under the previous PRC income tax law, as long as these NHTEs continue to meet the criteria for NHTEs under the current CIT Law and were (i) qualified as NHTEs under the previous PRC income tax law, and (ii) established before March 16, 2007.

Three China-based subsidiaries, Beijing Sohu New Era Information Technology Co., Ltd. ("Sohu Era"), Beijing Sohu New Media Information Technology Co., Ltd. ("Sohu Media") and Beijing Sogou Technology Development Co., Ltd. ("Sogou Technology"), qualified as NHTEs during the year ended December 31, 2008. These three companies will reapply for qualification in 2011. Two China-based VIEs, Beijing Sohu Internet Information Service Co., Ltd. ("Sohu Internet") and Beijing Sogou Information Service Co., Ltd. ("Sogou Information"), qualified as NHTEs during the year ended December 31, 2009. These two companies will reapply for qualification in 2012. For the fiscal years 2009 and 2010, Sohu Era and Sohu Internet were subject to a 15% income tax rate; and Sohu Media, Sogou Technology and Sogou Information enjoyed a 7.5% income tax rate due to their unexpired tax holidays.

Related to Software Enterprises

Under the current CIT Law, a Software Enterprise can enjoy an income tax exemption for two years beginning with its first profitable year and a 50% tax reduction to a rate of 12.5% for the subsequent three years.

In 2008, the China-based subsidiary and the VIE of Changyou, Beijing AmazGame Age Internet Technology Co., Ltd. ("AmazGame") and Beijing Gamease Age Digital Technology Co., Ltd. ("Gamease") qualified as Software Enterprises. As a result, both AmazGame and Gamease became subject to 0% income tax rate for the full year 2008 and a 50% tax reduction to a rate of 12.5% from the fiscal year 2009 through the fiscal year 2011. Beijing Changyou Gamespace Software Technology Co., Ltd. ("Gamespace"), Beijing Guanyou Gamespace Digital Technology Co., Ltd. ("Guanyou Gamespace"), ICE Information Technology (Shanghai) Co., Ltd. ("ICE WFOE") and Shanghai ICE Information Technology Co., Ltd. ("Shanghai ICE") have been qualified as "Software Enterprises" and will be entitled to an income tax exemption for two years beginning with their first profitable year and 50% tax reduction for the subsequent three years.

PRC Withholding Tax on Dividends

The current CIT Law imposes a 10% withholding income tax for dividends distributed by foreign invested enterprises to their immediate holding companies outside mainland China. A lower withholding tax rate will be applied if there is a tax treaty arrangement between mainland China and the jurisdiction of the foreign holding company. Distributions to holding companies in Hong Kong that satisfy certain requirements specified by PRC tax authorities, for example, will be subject to a 5% withholding tax rate.

In the fourth quarter of 2008, AmazGame declared a dividend to its immediate holding company in Hong Kong and a withholding tax of approximately $5.0 million was accrued based on a 5% withholding tax rate. Such $5.0 million withholding tax was paid in the third quarter of 2009, based on the approval of the PRC local tax authority.

As of December 31, 2010, the Company had not recorded any withholding tax on the retained earnings of its foreign invested enterprises in the PRC, since the Company intends to reinvest its earnings to further expand its business in mainland China, and its foreign invested enterprises do not intend to declare dividends to their immediate foreign holding companies.

U.S. Federal Income Tax

As of December 31, 2010, the Company had U.S. NOL of approximately $24.1 million available to offset against future federal income tax liabilities, which was generated from excess tax deductions related to share-based awards. The U.S. NOL will expire from 2020.

The Company does not provide for U.S. federal income taxes or tax benefits on the undistributed earnings or losses of its international subsidiaries or VIEs because in the foreseeable future the Company does not have the intention to repatriate those undistributed earnings or losses to U.S. where it would be subject to U.S. Corporate Income Tax, except that, under certain circumstances, the Company may repatriate to the U.S. income that will be subject to U.S. Alternative Minimum Tax. As of December 31, 2010 and 2009, these cumulative undistributed earnings are included in consolidated retained earnings on the balance sheets and amounted to $554.4 million and $409.6 million, respectively. An estimated $194.0 million and $143.4 million in U.S. income and foreign withholding taxes would be due if these earnings were remitted as dividends, after payment of all deferred taxes as of December 31, 2010 and 2009.

Deferred Tax Assets and Liabilities

Significant components of the Company's deferred tax assets and liabilities consist of the following (in thousands):


	As of December 31,
	2010			2009
Deferred tax assets:
Net operating loss from operations	$	31,120		$	7,448
Net operating loss from exercise or settlement of share-based awards		1,439			2,857
Share-based compensation		684			257
Intangible assets transfer		3,782			2,246
Accrued bonus and commissions		2,451			2,084
Fixed assets related		2,626			2,114

Total deferred tax assets		42,102			17,006
Less: Valuation allowance		(38,812	)		(15,569	)

Net deferred tax assets	$	3,290		$	1,437


Deferred tax liabilities
Intangible assets from an acquisition	$	(395	)	$	(172	)
Others		0			(15	)

Total deferred tax liabilities	$	(395	)	$	(187	)

Uncertain Tax Positions

The Company did not have any significant unrecognized uncertain tax positions as of December 31, 2010. The following table summarizes the activity related to the Company's gross unrecognized tax benefits from January 1, 2008 to December 31, 2010 (in thousands):


	As of December 31,
	2010		2009		2008
Beginning balance	$	3,067	$	0	$	0
Increases related to prior year tax positions		0		0		0
Decreases related to prior year tax positions		0		0		0
Increases related to current year tax positions		0		3,067		0

Ending balance	$	3,067	$	3,067	$	0

No significant interest or penalties associated with uncertain tax positions were accrued for the year ended December 31, 2010.

For the years ended December 31, 2010 and 2009, the total amount of unrecognized tax benefits that, if recognized, would affect the Company's effective tax rate was $3.1 million.

The Company does not anticipate the total amounts of unrecognized tax benefits will significantly increase or decrease within twelve months of December 31, 2010.

Generated in the year of 2009

For PRC Corporate Income Tax, the PRC tax bureau communicated to some subsidiaries within the Sohu Group that certain expenses should not be treated as deductible for income tax purposes under the CIT Law, although the current CIT Law is silent in that regard. The Sohu Group had treated such expense as tax deductible in previous periods. This treatment had been communicated to the tax bureau, without the Sohu Group's receiving any objections or challenges with respect to prior PRC income tax filings. Based on the tax bureau's current interpretation, the Sohu Group concluded that it was more likely than not that such expenses would not be allowed by the tax bureau as deductions for income tax purposes. Hence, the Sohu Group recognized income tax expense of $1.2 million in the second quarter of 2009 as a result of the change in the tax bureau's position. In addition, the Sohu Group will not reverse this treatment unless it receives a written clarification issued by the tax authority that this kind of expense is deductible for income tax purposes. The situation is unchanged as of December 31, 2010.

Generated in the year of 2010

For PRC Corporate Income Tax, since the current CIT Law was put into effect as of January 1, 2008, guidance for this law has been issued continually. In April 2010, the State Administration of Tax ("SAT") issued a circular relating to the implementation of preferential tax treatments for NHTEs. However, to date, the Beijing local-level tax bureau has not implemented this circular and is holding the view that the relevant provisions might not apply to NHTEs in BJ ZGC. Therefore, the Company did not change its current practice. The Company expects more guidance will be issued in the future. Upon the issuance of such guidance, Sohu Group's effective tax rate might increase.

For U.S. Corporate Income Tax, the U.S. Congress was considering legislation that, if enacted in its current form, would retroactively reinstate certain favorable provisions that expired on January 1, 2010. This legislation was not enacted prior to the issuance of the Company's financial statements for the nine months ended September 30, 2010. As of September 30, 2010, the Company has recognized a $0.92 million income tax expense in its financial statements, because the above legislation has not been enacted. The accrual of this tax liability would cause a cash payment by the Company to the U.S. taxing authorities of $0.05 million, based on the utilization of existing U.S. federal net operating losses generated from excess tax deductions related to share-based awards of $0.87 million, for the nine months ended September 30, 2010. These excess tax deductions were treated under U.S. GAAP as an increase in shareholders' equity. In December 2010, the U.S. Congress enacted this legislation and these favorable tax provisions were reinstated retroactively to January 1, 2010. Therefore, the above amounts were reversed on the Company's financial statements in the fourth quarter in which such legislation is enacted, and it does not constitute an uncertain tax position any more.

China Contribution Plan	12 Months Ended
China Contribution Plan	Dec. 31, 2010
China Contribution Plan
China Contribution Plan	16. China Contribution Plan The Company's subsidiaries and VIEs in China participate in a government-mandated multi-employer defined contribution plan pursuant to which certain retirement, medical and other welfare benefits are provided to employees. Chinese labor regulations require the Company's subsidiaries and VIEs to pay to the local labor bureau a monthly contribution at a stated contribution rate based on the monthly basic compensation of qualified employees. The relevant local labor bureau is responsible for meeting all retirement benefit obligations; the Company's China-based subsidiaries and VIEs have no further commitments beyond their monthly contributions. For the years ended December 31, 2010, 2009 and 2008, the Company's China based subsidiaries and VIEs contributed a total of $35.4 million, $25.7 million and $17.7 million, respectively, to these funds.

Profit Appropriation	12 Months Ended
Profit Appropriation	Dec. 31, 2010
Profit Appropriation
Profit Appropriation	17. Profit Appropriation The Company's China-based subsidiaries and VIEs are required to make appropriations to certain non-distributable reserve funds. In accordance with the China Foreign Investment Enterprises laws, some of the Company's China-based subsidiaries, which are called WFOEs, have to make appropriations from their after-tax profit as determined under Generally Accepted Accounting Principles in the PRC (the "after-tax-profit under PRC GAAP") to non-distributable reserve funds, including (i) general reserve fund, (ii) enterprise expansion fund, and (iii) staff bonus and welfare fund. Each year, at least 10% of the after-tax-profit under PRC GAAP is required to be set aside as general reserve fund until such appropriations for the fund equal 50% of the paid-in capital of the applicable entity. The appropriation for the other two reserve funds is at the Company's discretion as determined by the Board of Directors of each entity. In accordance with the China Company Laws, some of the Company's China-based subsidiaries, which are called domestically funded enterprises, as well as the Company's VIEs, have to make appropriations from their after-tax-profit under PRC GAAP to non-distributable reserve funds, including a statutory surplus fund and a discretionary surplus fund. Each year, at least 10% of the after-tax-profit under PRC GAAP is required to be set aside as statutory surplus fund until such appropriations for the fund equal 50% of the paid-in capital of the applicable entity. The appropriation for the discretionary surplus fund is at the Company's discretion as determined by the Board of Directors of each entity. Upon certain regulatory approvals and subject to certain limitations, the general reserve fund and the statutory surplus fund can be used to offset prior year losses, if any, and can be converted into paid-in capital of the applicable entity. For the year ended December 31, 2010, the Company set up several new subsidiaries and VIEs, thus a $7.1 million general reserve funds and statutory surplus funds were appropriated for them. For the year ended December 31, 2009, as the cumulative general reserve funds and the statutory surplus funds equaled 50% of the China-based subsidiaries and VIEs' paid-in capital, no additional amounts were appropriated for them. For the year ended December 31, 2008, appropriations for the general reserve funds and statutory surplus funds totaled $7.1 million.

Commitments and Contingencies

12 Months Ended

Dec. 31, 2010

Commitments and Contingencies

Commitments and Contingencies

18. Commitments and Contingencies

Contractual Obligation

On November 20, 2009, the Company entered into an agreement to purchase an office building to be built in Beijing, which will serve as the Company's headquarters, for a purchase price of approximately $110 million. On August 20, 2010, the purchase price was adjusted to $120 million to cover additional purchased floor area. As of December 31, 2010, $66 million had been paid and was recognized as prepaid non-current assets in the Company's consolidated financial statements. The remaining $54 million payment will be settled in installments as various stages of the development plan are completed. Construction is expected to be completed by the end of 2012.

On August 23, 2010, Changyou entered into an agreement to purchase an office building to be built in Beijing, which will serve as its headquarters, for a purchase price of approximately $150 million. As of December 31, 2010, $60 million had been paid and was recognized as prepaid non-current assets in the Company's consolidated financial statements. The remaining $90 million payment will be settled in installments as various stages of the development plan are completed. Construction is expected to be completed by the end of 2012.

The Sohu Group also has some commitments related to future minimum content and service purchases, operating lease obligations, and license fees for games developed by third-parties which are presented in the following table (in thousands):


As of December 31,	Content and service purchases		Operating lease obligations		License fees for games developed by third-parties		Total minimum payments required
2011	$	45,885	$	6,633	$	1,374	$	53,892
2012		23,656		2,666		453		26,775
2013		562		2,726		0		3,288
2014		10		2,132		0		2,142
2015		5		2,132		0		2,137
Thereafter		0		0		0		0

Total minimum payments required	$	70,118	$	16,289	$	1,827	$	88,234

Litigation

The Sohu Group is a party to various litigation matters which it considers routine and incidental to its business. Management does not expect the results of any of these actions to have a material adverse effect on the Company's business, results of operations or financial condition.

In March 2008, the Sohu Group was sued by four major record companies, Sony BMG, Warner, Universal and Gold Label, which alleged that the Sohu Group provided music search links and download services that violated copyrights they owned. As of December 31, 2010, the lawsuits with these four record companies were still in process. At this stage, an estimation of the loss cannot be made.

Long-term Tax Payable for Uncertain Tax Positions

As a result of its adoption of ASC 740, during 2009, the Company recognized unrecognized tax benefit of $3.1 million and recognized related long-term tax payable, as ASC 740 specifies that tax positions for which the timing of the ultimate resolution is uncertain should be recognized as long-term liabilities. At this time, the Company is unable to make a reasonably reliable estimate of the timing of payments in individual years beyond twelve months due to uncertainties in the timing of tax audit outcomes. See Note 15 - Income Taxes - Uncertain Tax Positions.

Laws and Regulations

The Chinese market in which the Sohu Group operates poses certain macro-economic and regulatory risks and uncertainties. These uncertainties extend to the ability to operate an Internet business, and to conduct brand advertising, online game, sponsored search, and wireless and other services in the PRC. Though the PRC has, since 1978, implemented a wide range of market-oriented economic reforms, continued reforms and progress towards a full market-oriented economy are uncertain. In addition, the telecommunication, information, and media industries remain highly regulated. Restrictions are currently in place and are unclear with respect to which segments of these industries foreign-owned entities, like the Sohu Group, may operate. The Chinese government may issue from time to time new laws or new interpretations of existing laws to regulate areas such as telecommunication, information and media.

Regulatory risks also encompass the interpretation by the tax authorities of current tax laws and regulations, including the applicability of certain preferential tax treatments. The Sohu Group's legal structure and scope of operations in China could be subjected to restrictions, which could result in severe limits on its ability to conduct business in the PRC.

The Sohu Group's sales, purchase and expense transactions are generally denominated in RMB and a significant portion of the Sohu Group's assets and liabilities are denominated in RMB. The RMB is not freely convertible into foreign currencies. In China, foreign exchange transactions are required by law to be transacted only by authorized financial institutions. Remittances in currencies other than RMB by its subsidiaries in China may require certain supporting documentation in order to effect the remittance.

VIEs

12 Months Ended

Dec. 31, 2010

VIEs

VIEs

19. VIEs

To satisfy PRC laws and regulations, the Company conducts certain business in the PRC through its VIEs. The Company consolidates all of its wholly-owned and majority-owned VIEs, of which the Company is the primary beneficiary, in its consolidated financial statements. The Company has one VIE where the Company is not the primary beneficiary, and this VIE is not consolidated in the Company's consolidated financial statements.

Consolidated VIEs within the Sohu Group

The consolidated VIEs are directly or indirectly owned by Dr. Charles Zhang ("Dr. Zhang"), the Company's Chairman, Chief Executive Officer and a major shareholder, and certain executive officer and employees of the Sohu Group. Capital for these VIEs was funded by the Sohu Group through loans provided to Dr. Zhang and those executive officer and employees, and was initially recorded as loans to related parties. These loans are eliminated for accounting purposes against the capital of the VIEs upon consolidation.

Under contractual agreements with the Sohu Group, Dr. Zhang and those executive officer and employees of the Sohu Group who are shareholders of the VIEs are required to transfer their ownership in these entities to the Sohu Group, if permitted by PRC laws and regulations, or, if not so permitted, to designees of the Sohu Group at any time to repay the loans outstanding. All voting rights of the VIEs are assigned to the Sohu Group, and the Sohu Group has the right to designate all directors and senior management personnel of the VIEs, also has the obligation to absorb losses of the VIEs. Dr. Zhang and those executive officer and employees of the Sohu Group who are shareholders of the VIEs have pledged their shares in the VIEs as collateral for the loans. As of December 31, 2010, the aggregate amount of these loans was $14.2 million.

As of December 31, 2010, the total assets for the consolidated VIEs were $157.6 million, mainly comprising cash and cash equivalents, accounts receivable and fixed assets. As of December 31, 2010, the total liabilities for the consolidated VIEs were $70.2 million, mainly comprising receipts in advance and deferred revenue and accrued liabilities to suppliers and agents. These balances are reflected in Sohu's consolidated financial statements with intercompany transactions eliminated.

Under the contractual arrangements with the VIEs, the Company has the power to direct activities of the VIEs, and can have assets transferred freely out of the VIEs without any restrictions. Therefore the Company considers that there is no asset of a consolidated VIE that can be used only to settle obligations of the VIE, except for registered capital and PRC statutory reserves of the VIEs amounting to a total of $32.5 million as of December 31, 2010. As all the consolidated VIEs are incorporated as limited liability companies under the PRC Company Law, creditors of the VIEs do not have recourse to the general credit of the Company for any of the liabilities of the consolidated VIEs, which consisted of receipts in advance and deferred revenue of $38.0 million, accrued liabilities to suppliers and agents of $18.9 million, tax payable of $11.1 million, and other accrued liabilities of $2.2 million, totalled $70.2 million. Currently there is no contractual arrangement that could require the Company to provide additional financial support to the consolidated VIEs. As the Company is conducting certain business in the PRC mainly through the VIEs, the Company may provide such support on a discretionary basis in the future, which could expose the Company to a loss.

The following is a summary of the consolidated VIEs within the Sohu Group:

For Brand Advertising Business

Sohu Entertainment

Beijing Sohu Entertainment Culture Media Co., Ltd. ("Sohu Entertainment") was incorporated in the PRC in 2002 and is engaged in entertainment and advertising business in the PRC. As of December 31, 2010, the registered capital of Sohu Entertainment was $1.2 million. Xin Wang (Belinda Wang), the Company's Co-President and Chief Operating Officer, and another employee of the Sohu Group, hold 80% and 20% interests, respectively, in this entity.

Tu Xing Tian Xia

Beijing Tu Xing Tian Xia Information Consultancy Co., Ltd. ("Tu Xing Tian Xia") was incorporated in the PRC in 1999 and is engaged in mapping services in the PRC. Tu Xing Tian Xia was acquired by the Company in 2005. As of December 31, 2010, the registered capital of Tu Xing Tian Xia was $0.2 million. High Century and Sohu Internet hold 56.1% and 43.9% interests, respectively, in this entity.

Donglin

Beijing Sohu Donglin Advertising Co., Ltd. ("Donglin") was incorporated in the PRC in 2010 and is engaged in advertising services in the PRC. As of December 31, 2010, the registered capital of Donglin was $1.5 million. High Century and Sohu Internet each holds a 50% interest in this entity.

Pilot New Era

Beijing Pilot New Era Advertising Co., Ltd. ("Pilot New Era") was incorporated in the PRC in 2010 and is engaged in advertising services in the PRC. As of December 31, 2010, the registered capital of Pilot New Era was $0.7 million. High Century and Sohu Internet each holds a 50% interest in this entity.

Focus Yiju

Beijing Focus Yiju Network Information Technology Co., Ltd. ("Focus Yiju") was incorporated in the PRC in 2010 and is engaged in advertising services in the PRC. High Century holds a 70% interest in Focus Yiju.

For Online Game Business

Gamease

Gamease was incorporated in the PRC in August 2007. As of December 31, 2010, the registered capital of Gamease was $1.3 million. Tao Wang, Chief Executive Officer of Changyou, and Dewen Chen, President and Chief Operating Officer of Changyou hold 60% and 40% interests, respectively, in this entity.

Shanghai ICE

Shanghai ICE was incorporated in the PRC in April 2005. Shanghai ICE and ICE WFOE were acquired by Changyou in May 2010. As of December 31, 2010, the registered capital of Shanghai ICE was $1.2 million. Two employees of Changyou each hold a 50% interest in this entity.

Guanyou Gamespace

Guanyou Gamespace was incorporated in the PRC in August 2010. As of December 31, 2010, the registered capital of Guanyou Gamespace was $1.5 million. Tao Wang, Chief Executive Officer of Changyou, and Dewen Chen, President and Chief Operating Officer of Changyou hold 60% and 40% interests, respectively, in this entity.

For Sponsored Search Business

Sogou Information

Sogou Information was incorporated in the PRC in 2005 and is engaged in providing Internet information services in the PRC. As of December 31, 2010, the registered capital of Sogou Information was $2.5 million. Two employees of the Sohu Group each hold a 50% interest in this entity.

For Wireless and Others Businesses

Sohu Internet

Sohu Internet was incorporated in the PRC in 2003 and is engaged in Internet information, wireless and advertising services in the PRC. As of December 31, 2010, the registered capital of Sohu Internet was $14.9 million. High Century and Sohu Entertainment hold 75% and 25% interests, respectively, in this entity.

GoodFeel

Beijing GoodFeel Information Technology Co., Ltd. ("GoodFeel") was incorporated in the PRC in 2001 and is engaged in value-added telecommunication services in the PRC. GoodFeel was acquired by the Company in 2004. As of December 31, 2010, the registered capital of GoodFeel was $1.2 million. Two employees of the Sohu Group, hold 58.1% and 41.9% interests, respectively, in this entity.

High Century

High Century was incorporated in the PRC in 2001 and is engaged in investment holding in the PRC. As of December 31, 2010, the registered capital of High Century was $4.6 million. Dr. Zhang and another employee of the Sohu Group, hold 80% and 20% interests, respectively, in this entity.

21 East Beijing

Beijing 21 East Culture Development Co., Ltd. ("21 East Beijing") was acquired in October 2006. As of December 31, 2010, the registered capital of 21 East Beijing was $0.1 million. High Century holds a 70% interest in this entity.

New 21 East

New 21 East Art Development (Beijing) Co., Ltd. ("New 21 East") was incorporated in December 2007. As of December 31, 2010, the registered capital of New 21 East is $1.4 million. High Century holds a 70% interest in this entity.

VIEs Not Consolidated within the Sohu Group

In 2010, in order to diversify Changyou's marketing channels for its games, Changyou acquired a 50% equity interest in Shanghai Jing Mao Cultural Communications Ltd. ("Shanghai Jingmao") and its affiliate. Although Shanghai Jingmao and its affiliate are variable interest entities, Changyou is not the primary beneficiary because Changyou is not able to direct their activities, and therefore Changyou does not consolidate them. The investment is being accounted for under the equity method of accounting. As of December 31, 2010, Changyou's maximum exposure to loss as a result of its involvement with the investees is $7.9 million, which includes the balance of Changyou's original investment cost, after netting of the investment losses, of $2.9 million and funds provided for the investees' working capital needs recorded as prepaid and other current assets of $5.0 million in the Company's consolidated financial statements.

- Definition

Disclosure of variable interest entities (VIE), including, but not limited to the nature, purpose, size, and activities of the VIE, the carrying amount and classification of consolidated assets that are collateral for the VIE's obligations, lack of recourse if creditors (or beneficial interest holders) of a consolidated VIE have no recourse to the general credit of the primary beneficiary. An enterprise that holds a significant variable interest in a VIE but is not the primary beneficiary may disclose the nature of its involvement with the VIE and when that involvement began, the nature, purpose, size, and activities of the VIE and the enterprise's maximum exposure to loss as a result of its involvement with the VIE.

+ References+ Details

Sohu.com Inc. Shareholders' Equity

12 Months Ended

Dec. 31, 2010

Sohu.com Inc. Shareholders' Equity

Sohu.com Inc. Shareholders' Equity

20. Sohu.com Inc. Shareholders' Equity

Summary of Sohu.com Inc.'s outstanding shares (in thousands):


	Number of Outstanding Shares As of December 31,
	2010		2009			2008
Common stock:
Balance, beginning of year		37,749		38,095			37,715
Issuance of common stock		276		405			881
Repurchase of common stock		0		(751	)		(501	)

Balance, end of year		38,025		37,749			38,095

Stockholder Rights Plan

Sohu adopted a stockholder rights plan (the "Plan") in 2001. The Plan is designed to deter coercive takeover tactics, including the accumulation of shares in the open market or through private transactions, and to prevent an acquirer from gaining control of Sohu without offering a fair and adequate price and terms to all of Sohu's stockholders. In general, the Plan vests stockholders of Sohu with rights to purchase preferred stock of Sohu at a substantial discount from those securities' fair market value upon a person or group acquiring without the approval of the Board of Directors more than 20% of the outstanding shares of common stock of Sohu. Any person or group who triggers the purchase right distribution becomes ineligible to participate in the Plan, causing substantial dilution of such person or group's holdings. The rights will expire on July 25, 2011.

Treasury Stock

Treasury stock consists of shares repurchased by Sohu that are no longer outstanding and are held by Sohu. Treasury stock is accounted for under the cost method.

For the year ended December 31, 2010, the Company did not purchase any shares of its common stock. For the years ended December 31, 2009 and 2008, the Company repurchased 751,224 and 501,686 shares of its common stock for total consideration of $40 million and $20 million, respectively, under the share repurchase plan approved by the Board of Directors in October 2008, which expired in 2009.

Stock Incentive Plan

1) Sohu.com Inc. Share-based Awards

Sohu's 2000 Stock Incentive Plan

Sohu's 2000 Stock Incentive Plan (the "Sohu 2000 Stock Incentive Plan") provided for the issuance of up to 9,500,000 shares of common stock, including those issued pursuant to the exercise of share options and upon vesting and settlement of restricted share units. The maximum term of any issued stock right under the Sohu 2000 Stock Incentive Plan is ten years from the grant date. The Sohu 2000 Stock Incentive Plan expired on January 24, 2010 and a new plan (i.e., Sohu's 2010 Stock Incentive Plan discussed below) was adopted on July 2, 2010. As of the expiration date, 9,128,724 shares of common stock had been issued or were subject to issuance upon the vesting and exercise of share options or the vesting and settlement of restricted share units granted under the plan.

For the years ended December 31, 2010, 2009 and 2008, total share-based compensation expense recognized for awards under the Sohu 2000 Stock Incentive Plan was $19.0 million, $4.2 million and $5.8 million, respectively.

i) Summary of share option activity

A summary of share options activity under the Sohu 2000 Stock Incentive Plan as of and for the year ended December 31, 2010 is presented below:


Options	Number Of Shares (in thousands)			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value (1) (in thousands)
Outstanding at January 1, 2010		555		$	16.55		4.54	$	22,625
Exercised		(129	)		16.52
Forfeited or expired		0

Outstanding at December 31, 2010		426			16.56		3.55		20,017

Vested at December 31, 2010		426			16.56		3.55		20,017

Exercisable at December 31, 2010		426			16.56		3.55		20,017

Note (1):

The aggregate intrinsic value in the preceding table represents the difference between Sohu's closing stock price of $63.49 on December 31, 2010 and the exercise price of share options. The total intrinsic value of share options exercised for the year ended December 31, 2010 was $5.9 million.

The following table summarizes significant ranges of outstanding and exercisable options as of December 31, 2010:


	Options Outstanding as of December 31, 2010						Options Exercisable as of December 31, 2010
Range of Exercise Price	Number Outstanding (in thousands)		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price		Number Exercisable (in thousands)		Weighted Average Exercise Price
$0.86 - $2.27		25		1.08	$	1.27		25	$	1.27
$7.63 - $8.39		82		2.02		7.98		82		7.98
$15.40 - $16.84		40		3.88		16.41		40		16.41
$17.00 - $20.78		209		4.36		17.89		209		17.89
$22.86 - $34.51		70		3.61		28.28		70		28.28

		426						426

There were no options granted under Sohu's 2000 Stock Incentive Plan during the years ended December 31, 2010, 2009 and 2008. For the year ended December 31, 2010, no share-based compensation expense was recognized for share options under Sohu's 2000 Stock Incentive Plan because the requisite service periods for share options had ended by the end of 2009. For the years ended December 31, 2009 and 2008, total share-based compensation expense recognized for share options under Sohu's 2000 Stock Incentive Plan was $0.9 million and $1.3 million, respectively.

For the years ended December 31, 2010, 2009 and 2008, total cash received from the exercise of share options amounted to $2.1 million, $4.1 million and $13.1 million, respectively.

ii) Summary of restricted share unit activity

A summary of restricted share units activity under the Sohu 2000 Stock Incentive Plan as of and for the year ended December 31, 2010 is presented below:


Restricted Share Units	Number of Units (in thousands)			Weighted-Average Grant-Date Fair Value
Unvested at January 1, 2010		209		$	33.41
Granted		731			61.23
Vested		(139	)		30.87
Forfeited		(95	)		55.88

Unvested at December 31, 2010		706			59.69

Expected to vest thereafter		525			59.57

For the years ended December 31, 2010, 2009 and 2008, total share-based compensation expense recognized for restricted share units was $19.0 million, $3.3 million and $4.5 million, respectively.

As of December 31, 2010, there was $17.1 million of unrecognized compensation expense related to unvested restricted share units. The expense is expected to be recognized over a weighted average period of 1.2 years. The total fair value on their respective vesting dates of restricted share units vested during the years ended December 31, 2010, 2009 and 2008 was $6.2 million, $8.5 million and $9.5 million, respectively.

Sohu's 2010 Stock Incentive Plan

On July 2, 2010, the Company's shareholders approved Sohu's 2010 Stock Incentive Plan (the "Sohu 2010 Stock Incentive Plan"), which provides for the issuance of up to 1,500,000 shares of common stock, including those issued pursuant to the vesting and settlement of restricted share units and pursuant to the exercise of share options. The maximum term of any issued stock right under the Sohu 2010 Stock Incentive Plan is ten years from the grant date. The Sohu 2010 Stock Incentive Plan will expire on July 1, 2020. As of December 31, 2010, 1,480,000 shares were available for grant under the Sohu 2010 Stock Incentive Plan.

A summary of restricted share units activity under the Sohu 2010 Stock Incentive Plan as of and for the year ended December 31, 2010 is presented below:


Restricted Share Units	Number of Units (in thousands)			Weighted-Average Grant-Date Fair Value
Unvested at January 1, 2010		0
Granted		23		$	70.88
Vested		0
Forfeited		(3	)		70.88

Unvested at December 31, 2010		20			70.88

Expected to vest thereafter		15			70.88

For the years ended December 31, 2010, total share-based compensation expense recognized for restricted share units was $29,000.

As of December 31, 2010, there was $1.2 million of unrecognized compensation expense related to unvested restricted share units. The expense is expected to be recognized over a weighted average period of 1.4 years.

2) Changyou.com Limited Share-based Awards

On December 31, 2008, Changyou reserved 2,000,000 of its ordinary shares, which included 1,774,000 Class B ordinary shares and 226,000 Class A ordinary shares, for issuance to certain of its executive officers and to certain of its employees as incentive compensation under Changyou's 2008 Share Incentive Plan (the "Changyou 2008 Share Incentive Plan").

In March 2009, the 2,000,000 reserved ordinary shares were subject to a ten-for-one share split effected by Changyou and became 20,000,000 ordinary shares.

Through December 31, 2010, Changyou has granted under the Changyou 2008 Share Incentive Plan 11,000,000 Class B ordinary shares and 4,000,000 Class B restricted ordinary shares to Tao Wang through Prominence and 4,463,000 Class A and Class B restricted share units (settleable by Changyou's issuance of Class A ordinary shares and Class B ordinary shares, respectively) to certain of its executive officers other than Tao Wang and to certain of its employees.

For the years ended December 31, 2010, 2009 and 2008, total share-based compensation expense recognized for awards under the Changyou 2008 Share Incentive Plan was $8.5 million, $13.1 million and $4.8 million, respectively.

Share-based Awards granted before Changyou's Initial Public Offering

i) Share-based Award to Tao Wang, Chief Executive Officer of Changyou

As discussed above in Note 2 - Changyou Transactions, in January 2008, Sohu communicated to and agreed with Tao Wang to grant him 700,000 ordinary shares and 800,000 restricted ordinary shares, in lieu of his contingent right in Beijing Fire Fox. The difference between the fair values ("Incremental Fair Value"), of these 700,000 ordinary shares and 800,000 restricted ordinary shares and Tao Wang's contingent right in Beijing Fire Fox was accounted for as share-based compensation expense.

In February 2009, 200,000 Class B restricted ordinary shares held by Prominence became vested. Upon this vesting, the number of Class B ordinary shares held beneficially by Tao Wang increased to 900,000 shares and the number of Class B restricted ordinary shares held beneficially by Tao Wang decreased to 600,000 shares.

On March 16, 2009, the ordinary shares described above, which had been issued as 700,000 Class B ordinary shares and 800,000 Class B restricted ordinary shares in January 2009 and had become 900,000 Class B ordinary shares and 600,000 Class B restricted ordinary shares in February 2009 as a result of vesting, became 9,000,000 Class B ordinary shares and 6,000,000 Class B restricted ordinary shares, respectively, as a result of a ten-for-one share split effected by Changyou on that date.

For the 700,000 ordinary shares, because the terms of the issuance of these ordinary shares had been approved and were communicated to and agreed with Tao Wang as of January 2, 2008, this was considered the grant date. Accordingly, the Incremental Fair Value was determined as of that date. The portion of the Incremental Fair Value related to these ordinary shares, equal to $1.8 million, was recognized as share-based compensation expense in product development expenses for the three months ended March 31, 2008.

For the 800,000 restricted ordinary shares, as a result of the modification of their vesting terms in April 2008, the portion of the Incremental Fair Value related to these shares, equal to $7.0 million, was determined in April 2008, and was accounted for as share-based compensation expense over the vesting period starting from the date of the modification, following the accelerated basis of attribution. A summary of activity for these restricted ordinary shares as of and for the year ended December 31, 2010 is presented below. The shares and their fair value presented in the following table have been revised on a retroactive basis to give effect to the ten-for-one share split.


Class B Restricted Ordinary Shares	Number of Shares (in thousands)			Weighted-Average Grant-Date Fair Value
Unvested at January 1, 2010		6,000		$	1.36
Granted		0
Vested		(2,000	)		1.36

Unvested at December 31, 2010		4,000			1.36

Expected to vest thereafter		4,000			1.36

For the years ended December 31, 2010, 2009 and 2008, total share-based compensation expense recognized for the above-mentioned Class B restricted ordinary shares was $1.2 million, $2.3 million and $3.0 million, respectively.

As of December 31, 2010, there was $0.5 million of unrecognized compensation expense related to the unvested Class B restricted ordinary shares. The total fair value of Class B restricted ordinary shares vested to Tao Wang on their respective vesting dates during the years ended December 31, 2010, 2009 and 2008 was $32.7 million, $16.0 million and nil, respectively.

The fair value of the ordinary shares and restricted ordinary shares was assessed using the income approach/discounted cash flow method, with a discount for lack of marketability given that the shares underlying the award were not publicly traded at the time of grant, and was determined partly in reliance on a report prepared by a qualified professional appraiser using management's estimates and assumptions. This assessment required complex and subjective judgments regarding Changyou's projected financial and operating results, its unique business risks, the liquidity of its ordinary shares and its operating history and prospects at the time the grants were made.

ii) Share-based Awards to Executive Officers (other than Tao Wang) and Certain Key Employees

In April 2008, Changyou approved and communicated to executive officers other than Tao Wang the grant of an aggregate of 180,000 restricted ordinary shares and to certain key employees the grant of an aggregate of 94,000 restricted share units of Changyou (settleable in ordinary shares upon vesting). These restricted ordinary shares and restricted share units were subject to vesting over a four-year period commencing on February 1, 2008, with initial vesting also subject to the listing of Changyou's ordinary shares in an initial public offering by Changyou. The fair value of the awards at grant date was recognized in the consolidated statement of operations starting from April 2, 2009, when ADSs representing Changyou's Class A ordinary shares were first listed on the NASDAQ Global Select Market.

On January 15, 2009, Changyou issued 180,000 Class B restricted ordinary shares to executive officers other than Tao Wang and granted 94,000 Class B restricted share units to certain key employees, the grant of which had been approved and communicated in April 2008 as described above.

On March 13, 2009, Changyou exchanged the 180,000 Class B restricted ordinary shares for Class B restricted share units (settleable in Class B ordinary shares), that otherwise have the same vesting and other terms as applied to the Class B restricted ordinary shares described above. Following the exchange, Class B restricted share units granted to executive officers other than Tao Wang and certain key employees totaled 274,000.

On March 16, 2009, the above 274,000 Class B restricted share units became 2,740,000 Class B restricted share units as a result of the ten-for-one share split effected on that date.

A summary of activity for the above Class B restricted share units as of and for the year ended December 31, 2010 is presented below. The shares and their fair values presented in the following table have been revised on a retroactive basis to give effect to the ten-for-one share split.


Class B Restricted Share Units	Number of Units (in thousands)			Weighted-Average Grant-Date Fair Value
Unvested at January 1, 2010		2,055		$	1.98
Granted		0
Vested		(685	)		1.98
Forfeited		(50	)		1.98

Unvested at December 31, 2010		1,320			1.98

Expected to vest thereafter		1,320			1.98

For the years ended December 31, 2010 and 2009, total share-based compensation expense recognized for the above 2,740,000 Class B restricted share units was $0.9 million and $4.1 million, respectively.

As of December 31, 2010, there was $0.4 million of unrecognized share-based compensation expense related to the unvested Class B restricted share units. The total fair value of Class B restricted share units vested to Changyou's executive officers (other than Tao Wang) and its employees on their respective vesting dates during the years ended December 31, 2010 and 2009 was $11.2 million and $12.4 million, respectively.

The methods Changyou used to determine the fair value as of the April 2008 grant date of these Class B restricted share units were the same as the methods used for the restricted ordinary shares granted to Tao Wang as described above.

iii) Share-based Awards to Other Employees

On February 17, 2009, Changyou granted an aggregate of 45,600 Class A restricted share units (settleable in Class A ordinary shares) to certain of its employees. These restricted share units are subject to vesting over a four-year period commencing upon the completion of the listing of Changyou's Class A ordinary shares in an initial public offering by Changyou. The grant date fair value of the awards was recognized in Sohu's consolidated statements of operations starting from April 2, 2009, when ADSs representing Changyou's Class A ordinary shares were first listed on the NASDAQ Global Select Market.

On March 16, 2009, the above 45,600 Class A restricted share units became 456,000 Class A restricted share units as a result of a ten-for-one share split effected on that date.

A summary of activity for the Class A restricted share units as of and for the year ended December 31, 2010 is presented below. The shares and fair value presented in the following table have been revised on a retroactive basis to give effect to the ten-for-one share split.


Class A Restricted Share Units	Number of Units (in thousands)			Weighted-Average Grant-Date Fair Value
Unvested at January 1, 2010		432		$	8.00
Granted		0
Vested		(108	)		8.00
Forfeited		(42	)		8.00

Unvested at December 31, 2010		282			8.00

Expected to vest thereafter		254			8.00

For the years ended December 31, 2010 and 2009, total share-based compensation expense recognized for the above 456,000 Class A restricted share units was $1.0 million and $1.4 million, respectively.

As of December 31, 2010, there was $0.9 million of unrecognized share-based compensation expense related to the unvested Class A restricted share units. The total fair value of Class A restricted share units vested to Changyou's employees on their respective vesting dates during the years ended December 31, 2010 and 2009 was $1.7 million and nil, respectively.

The fair value of these Class A restricted share units as of the February 17, 2009 grant date was determined based on Changyou's offering price for its initial public offering, which was $8.00 per Class A ordinary share.

Share-based Awards granted after Changyou's Initial Public Offering

i) Share-based Awards to Executive Officers (other than Tao Wang) and Certain Key Employees

As of December 31, 2010, Changyou had granted an aggregate of 1,227,000 Class A restricted share units (settleable in Class A ordinary shares) to certain of its executive officers other than Tao Wang and to certain of its employees. These Class A restricted share units are subject to vesting over a four-year period commencing on their grant dates. A summary of activity for the Class A restricted share units as of and for the year ended December 31, 2010 is presented below.


Class A Restricted Share Units	Number of Units (in thousands)			Weighted-Average Grant-Date Fair Value
Unvested at January 1, 2010		1,200		$	12.41
Granted		27			17.27
Vested		(300	)		12.41
Forfeited		(2	)		17.08

Unvested at December 31, 2010		925			12.54

Expected to vest thereafter		923			12.53

For the years ended December 31, 2010 and 2009, total share-based compensation expense recognized for the above 1,227,000 Class A restricted share units was $5.3 million and $5.4 million, respectively.

As of December 31, 2010, there was $4.6 million of unrecognized compensation expense related to the unvested Class A restricted share units. The total fair value of Class A restricted share units vested during the years ended December 31, 2010 and 2009 was $4.9 million and nil, respectively.

The fair value of restricted share units as of their grant date was determined based on the market price of Changyou's ADSs on that date.

ii) Share-based Awards to Sohu Employees

On October 24, 2010, Changyou granted an aggregate of 40,000 Class A restricted share units (settleable upon vesting in Class A ordinary shares) to certain of Sohu employees for their involvement in the provision of certain online game links and advertising services to Changyou on Sohu's websites including the 17173.com website, under a Marketing Service Agreement between Changyou and Sohu. These Class A restricted share units are subject to vesting over a four-year period commencing on the grant date. The Company accounted for the Class A restricted share units granted by Changyou to Sohu's employees as share awards granted by Sohu to its employees. When preparing the Company's consolidated financial statements, share-based compensation expense for such restricted share units is recognized on an accelerated basis over the requisite service period and the fair value of restricted share units was determined based on the market price of Changyou's ADSs on the grant date.


Class A Restricted Share Units	Number of Units (in thousands)		Weighted-Average Grant-Date Fair Value
Unvested at January 1, 2010		0
Granted		40	$	18.00
Vested		0
Forfeited		0

Unvested at December 31, 2010		40		18.00

Expected to vest thereafter		40		18.00

For the year ended December 31, 2010, total share-based compensation expense recognized for the above 40,000 Class A restricted share units was $70,000.

As of December 31, 2010, there was $0.6 million of unrecognized compensation expense related to the unvested Class A restricted share units.

3) Sogou Inc. Share-based Awards

On October 20, 2010, Sogou adopted the Sogou 2010 Share Incentive Plan (the "Sogou 2010 Share Incentive Plan"), which provides for the issuance of up to 24,000,000 ordinary shares of Sogou to Sogou management and key employees as well as certain members of Sohu's executive management. The maximum term of any issued share right under the Sogou 2010 Share Incentive Plan is ten years from the grant date. The Sogou 2010 Share Incentive Plan will expire on October 19, 2020. As of December 31, 2010, no share rights had been issued under this Plan.

- Definition

Disclosures related to accounts comprising shareholders' equity, including other comprehensive income. Include disclosure of components of a stock option or other award plan under which share-based compensation is awarded to employees, typically comprised of the amount of unearned compensation (deferred compensation cost), compensation expense, and changes in the quantity and fair value of the shares granted, exercised, forfeited, and issued and outstanding pertaining to that plan. Disclosure may also include nature and general terms of such arrangements that existed during the period and potential effects of those arrangements on shareholders, effect of compensation cost arising from share-based payment arrangements on the income statement, method of estimating the fair value of the goods or services received, or the fair value of the equity instruments granted, during the period, cash flow effects resulting from share-based payment arrangements and, for registrants that accelerate vesting of out of the money share options, reasons for the decision to accelerate. This disclosure may also include: (1) balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings; (2) accumulated balance for each classification of other comprehensive income and total amount of comprehensive income; (3) amount and nature of changes in separate accounts, including the number of shares authorized and outstanding, number of shares issued upon exercise and conversion, and for other comprehensive income, the adjustments for reclassifications to net income; (4) rights and privileges of each class of stock authorized; (5) basis of treasury stock, if other than cost, and amounts paid and accounting treatment for treasury stock purchased significantly in excess of market; (6) dividends paid or payable per share and in the aggregate for each class of stock for each period presented; (7) dividend restrictions and accumulated preferred dividends in arrears (in aggregate and per share amount); (8) retained earnings appropriations or restrictions, such as dividend restrictions; (9) impact of change in accounting principle, initial adoption of new accounting principle and correction of an error in previously issued financial statements; (10) shares held in trust for Employee Stock Ownership Plan (ESOP); (11) deferred compensation related to issuance of capital stock; (12) note received for issuance of stock; (13) unamortized discount on shares; (14) description, terms and number of warrants or rights outstanding; (15) shares under subscription and subscription receivables; effective date of new retained earnings after quasi-reorganization and deficit eliminated by quasi-reorganization and, for a period of at least ten years after the effective date, the point in time from which the new retained dates; and (16) retroactive effective of subsequent change in capital structure.

+ References+ Details

Noncontrolling Interest

12 Months Ended

Dec. 31, 2010

Noncontrolling Interest Note

Noncontrolling Interest

21. Noncontrolling Interest

From January 1, 2009, the Company renamed its minority interest to noncontrolling interest and reclassified it in its consolidated balance sheets from the mezzanine section between liabilities and equity to a separate line item in equity as required by U.S. GAAP. The Company also expanded disclosures in the consolidated financial statements to clearly identify and distinguish the interests of Sohu from the interests of the noncontrolling shareholders of its subsidiaries. The Company has applied this presentation and disclosure requirements retrospectively for all periods presented for comparability.

The Company's majority-owned subsidiaries and VIEs which are consolidated in Sohu's consolidated financial statements but with noncontrolling interest recognized are mainly Changyou and Sogou.

Noncontrolling Interest in the Consolidated Balance Sheets

As of December 31, 2010 and 2009, noncontrolling interest in the consolidated balance sheets was $178.4 million and $68.0 million, respectively.


	As of December 31,
	2010		2009
Changyou	$	130,283	$	67,691
Sogou		47,196		0
Others		963		304

Total	$	178,442	$	67,995

Noncontrolling Interest of Changyou

As of December 31, 2010 and 2009, $130.3 million and $67.7 million, respectively, noncontrolling interest was recognized in Sohu's consolidated balance sheets, representing a 29% and a 26%, respectively, economic interest in Changyou's net assets and reflected the reclassification of Changyou's share-based compensation expense from shareholders' additional paid-in capital to noncontrolling interest.

Noncontrolling Interest of Sogou

As of December 31, 2010, $47.2 million noncontrolling interest was recognized in Sohu's consolidated balance sheets, representing Sogou's cumulative results of operations attributable to shareholders other than Sohu, along with these shareholders' original investments in the Series A Preferred Shares issued by Sogou.

Noncontrolling Interest in the Consolidated Statements of Operations

For the years ended December 31, 2010 and 2009, net income attributable to the noncontrolling interest in the consolidated statements of operations was $49.6 million and $28.6 million, respectively, compared with a net loss of $51,000 for the year ended December 31, 2008.


	Year Ended December 31,
	2010			2009			2008
Changyou	$	49,917		$	28,694		$	0
Sogou		(287	)		0			0
Others		(75	)		(92	)		(51	)

Total	$	49,555		$	28,602		$	(51	)

Noncontrolling Interest of Changyou

For the years ended December 31, 2010 and 2009, $49.9 million and $28.7 million, respectively, net income attributable to the noncontrolling interest was recognized in Sohu's consolidated statements of operations, representing a 29% and a 26%, respectively, economic interest in Changyou attributable to shareholders other than Sohu.

Noncontrolling Interest of Sogou

For the years ended December 31, 2010, $0.3 million net loss attributable to the noncontrolling interest was recognized in Sohu's consolidated statements of operations, representing Sogou's net loss attributable to shareholders other than Sohu.

Net Income per Share

12 Months Ended

Dec. 31, 2010

Net Income per Share

Net Income per Share

22. Net Income per Share

(1) Difference between Changyou's net income attributable to Sohu determined by:

the percentage of the total economic interest in Changyou held by Sohu, and

ii)

In the calculation of Sohu's diluted net income per share, all of Changyou's existing unvested restricted shares, unvested restricted share units, and vested restricted share units that have not yet been settled are treated as vested and settled by Changyou under the treasury stock method, causing the percentage of weighted average number of shares held by Sohu in Changyou to decrease. As a result, Changyou's net income attributable to Sohu on the diluted basis decreased accordingly. This impact is presented as "incremental dilution from Changyou" in the table below.

(2) Difference between Sogou's net income/loss attributable to Sohu determined by:

the Sogou Series A Terms and the terms of Sogou's restructuring, and

ii)

In the calculation of Sohu's basic net income per share, Sogou's net income/loss attributable to Sohu is determined according to the Sogou Series A Terms and the terms of Sogou's restructuring. In the calculation of Sohu's diluted net income per share, Sogou's net income/loss attributable to Sohu is determined by Sohu's shareholding percentage in Sogou, assuming, if the effect is dilutive, the convertible preferred shares issued by Sogou having been converted at the beginning of the period. The above difference is presented as "incremental dilution from Sogou" in the table below.

The following table presents the calculation of Sohu's basic and diluted net income per share (in thousands, except per share data)


	Year Ended December 31,
	2010			2009			2008
Numerator:
Net income from continuing operations attributable to Sohu.com Inc.	$	148,629		$	147,387		$	158,637
Gain from discontinued e-commerce operations attributable to Sohu.com Inc.		0			446			0

Net income attributable to Sohu.com Inc., basic		148,629			147,833			158,637
Effect of dilutive securities:
Incremental dilution from Changyou		(9,294	)		(8,561	)		0
Incremental dilution from Sogou		0			0			0

Net income attributable to Sohu.com Inc., diluted	$	139,335		$	139,272		$	158,637


Denominator:
Weighted average basic common shares outstanding		37,870			38,294			38,168
Effect of dilutive securities:
Share options and restricted share units		575			675			949

Weighted average diluted common shares outstanding		38,445			38,969			39,117


Basic net income per share attributable to Sohu.com Inc.
- Continuing operations	$	3.92		$	3.85		$	4.16
- Discontinued e-commerce operations		0.00			0.01			0.00

Basic net income per share attributable to Sohu.com Inc.	$	3.92		$	3.86		$	4.16


Diluted net income per share attributable to Sohu.com Inc.
- Continuing operations	$	3.62		$	3.56		$	4.06
- Discontinued e-commerce operations		0.00			0.01			0.00

Diluted net income per share attributable to Sohu.com Inc.	$	3.62		$	3.57		$	4.06

Concentration Risks	12 Months Ended
Concentration Risks	Dec. 31, 2010
Concentration Risks
Concentration Risks	23. Concentration Risks Because its operations are substantially conducted in the PRC, the Sohu Group is subject to PRC-related political, economic and legal risks. Besides these risks, the Sohu Group may also have the following concentration risks. *Operation Risk* For the years ended December 31, 2010, 2009 and 2008, there are no revenues from clients that individually represent greater than 10% of the total revenues. For the year ended December 31, 2010, 49% of the Sohu Group's total revenue and 91% of the Sohu Group's online game revenue was derived from a single massively multi-player online role-playing game called TLBB, which was launched in May 2007. Financial instruments that potentially subject the Company to concentration risks consist primarily of cash and cash equivalents, and investment in debt securities. Cash and cash equivalents in Sohu Group are mainly denominated in RMB and in U.S. dollars. Investment in debt securities are denominated in RMB. The Company may experience economic losses and negative impacts on earnings and equity as a result of fluctuations in the exchange rate between the U.S. dollar and the RMB. Moreover, the Chinese government imposes controls on the convertibility of RMB into foreign currencies and, in certain cases, the remittance of currency out of the PRC. The Company may experience difficulties in completing the administrative procedures necessary to obtain and remit foreign currency. *Credit Risk* As of December 31, 2010, approximately 77% of the Sohu Group's cash and cash equivalents were held in 14 financial institutions in China. The remaining cash and cash equivalents were held by financial institutions in U.S., Singapore, Hong Kong, United Kingdom, Malaysia, Korea and Vietnam. For the credit risk related to accounts receivable, the Sohu Group performs ongoing credit evaluations of its customers and, if necessary, maintains reserves for potential credit losses. Historically, such losses have been within management's expectations.

Subsequent Events	12 Months Ended
Subsequent Events	Dec. 31, 2010
Subsequent Events
Subsequent Events	24. Subsequent Events In January 2011, Changyou acquired the remaining 50% of the equity in Shanghai Jingmao and its affiliate. Shanghai Jingmao and its affiliate are primarily engaged in cinema advertising in China. The purpose of the acquisition was to secure additional advertising resources for the promotion of Changyou's online games. Following the completion of the transaction, Changyou holds 100% of the equity in Shanghai Jingmao and its affiliate and commenced consolidating them in its financial statements starting from February 1, 2011. Changyou is still in the process of doing valuation and purchase price allocation. The Company has performed an evaluation of subsequent events through the date the financial statements were issued, with no other material event or transaction needing recognition or disclosure found.

CONDENSED FINANCIAL INFORMATION OF REGISTRANT

12 Months Ended

Dec. 31, 2010

CONDENSED FINANCIAL INFORMATION OF REGISTRANT

CONDENSED FINANCIAL INFORMATION OF REGISTRANT

SCHEDULE I – CONDENSED FINANCIAL INFORMATION OF REGISTRANT

SOHU.COM INC.

CONDENSED BALANCE SHEETS

(in thousands)


	As of December 31,
	2010			2009
ASSETS
Current assets:
Cash and cash equivalents	$	5,229		$	2,635
Prepaid and other current assets		286			283
Due from subsidiaries and variable interest entities		3,806			3,952

Total current assets		9,321			6,870
Interests in subsidiaries and variable interest entities		790,169			606,390

Total assets	$	799,490		$	613,260

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accrued liabilities	$	3,373		$	3,479
Due to subsidiaries and variable interest entities		0			0

Total current liabilities		3,373			3,479


Shareholders' equity:
Common stock: $0.001 par value per share (75,400 share authorized; 38,025 and 37,749 shares issued and outstanding, respectively)		43			43
Additional paid-in capital		338,033			317,052
Treasury stock (5,389 shares)		(114,690	)		(114,690	)
Accumulated other comprehensive income		38,228			21,502
Retained earnings		534,503			385,874

Total shareholders' equity		796,117			609,781

Total liabilities and shareholders' equity	$	799,490		$	613,260

SOHU.COM INC.

CONDENSED STATEMENTS OF OPERATIONS

(in thousands)


	Year Ended December 31,
	2010			2009			2008
Revenues	$	0		$	0		$	0
Cost of revenues		0			0			0

Gross profit		0			0			0

Operating expenses:
General and administrative		5,293			3,835			3,366

Operating loss		(5,293	)		(3,835	)		(3,366	)

Equity in profit of subsidiaries and variable interest entities		155,595			154,616			155,328
Other expense		0			0			0
Interest income		10			1,202			6,675

Income before income tax expense		150,312			151,983			158,637
Income tax expense		1,683			4,150			0

Net income	$	148,629		$	147,833		$	158,637

SOHU.COM INC.

CONDENSED STATEMENTS OF CASH FLOWS

(in thousands)


	Year Ended December 31,
	2010			2009			2008
Cash flows from operating activities:
Net income	$	148,629		$	147,833		$	158,637
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Equity in profit of subsidiaries and variable interest entities		(155,595	)		(154,616	)		(155,328	)
Excess tax benefits from share-based payment arrangements		(1,169	)		(3,927	)		0
Amortization of other assets		0			0			0
Share-based compensation expense		2,184			854			952
Changes in current assets and liabilities:
Due to (from) subsidiaries and variable interest entities		146			(27,882	)		(64,580	)
Prepaid and other current assets		5			289			(231	)
Tax payable		1,303			4,152			0
Accrued liabilities		(248	)		2			(1,860	)

Net cash used in operating activities		(4,745	)		(33,295	)		(62,410	)
Cash flows from investing activities:
Net cash repatriated from (invested in) subsidiaries		4,042			(25,204	)		0
Dividend received		0			11,008			0
Receipts from collections of loans to a subsidiary		0			61,213			49,841

Net cash provided by investing activities		4,042			47,017			49,841
Cash flows from financing activities:
Redemption of zero coupon convertible senior notes		0			0			(6	)
Repurchase of common stock		0			(40,007	)		(19,997	)
Issuance of common stock		2,128			4,140			13,103
Excess tax benefits from share-based payment arrangements		1,169			3,927			0

Net cash provided by (used in) financing activities		3,297			(31,940	)		(6,900	)

Net increase (decrease) in cash and cash equivalents		2,594			(18,218	)		(19,469	)
Cash and cash equivalents at beginning of year		2,635			20,853			40,322

Cash and cash equivalents at end of year	$	5,229		$	2,635		$	20,853

NOTES TO SCHEDULE I – CONDENSED FINANCIAL INFORMATION OF SOHU.COM INC.

1.	The condensed financial statements of Sohu.com Inc. (the "Company") have been prepared in accordance with U.S. GAAP.

The Company records its investment in subsidiaries under the equity method. Such investment and long-term loans to subsidiaries are presented on the balance sheets as interests in subsidiaries and VIEs and the profit of the subsidiaries is presented as equity in profit of subsidiaries and VIEs on the statement of operations.

For VIEs where the Company is the primary beneficiary, the amount of the Company's investment is included on the balance sheets as interests in subsidiaries and VIEs and the profit or loss of the VIEs is included in equity in profit of subsidiaries and VIEs on the statement of operations.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in U.S. have been condensed or omitted. The footnote disclosures contain supplemental information relating to the operations of the Company and, as such, these statements should be read in conjunction with the notes to the Consolidated Financial Statements of the Company.

As of December 31, 2010 and 2009, there were no material contingencies, significant provisions of long-term obligations, mandatory dividend or redemption requirements of redeemable stocks or guarantees of the Company, except for those which have been separately disclosed in the Consolidated Financial Statements, if any.

4.	For the years ended December 31, 2010 and 2008, there were no cash dividends paid to the Company by its consolidated subsidiaries or VIEs. For the year ended December 31, 2009, there was $11 million in cash dividends paid to the Company by its consolidated subsidiaries.

5.	Related party transactions

On November 1, 2010, Sohu.com Limited and Sohu.com Inc. entered into a loan note of $5.7 million, with a fixed interest rate of 0.59% per annum for the payment of Stock Right Costs. This loan note is due on October 31, 2013.

For the year ended December 31, 2009, $61.2 million loan principal and $1.1 million loan interest were received from the Company's subsidiaries and VIEs as loan repayments. As of December 31 2009, there was no loan balance outstanding due from its subsidiaries and VIEs.

- Definition

This element can be used to encapsulate the entire condensed financial information disclosure, including the financial position, cash flows, and the results of operations of the registrant (parent company) as of the same dates or for the same periods for which audited consolidated financial statements are being presented. Alternatively, the details of this disclosure can be reported by the specific parent company taxonomy elements, indicating the appropriate date and period contexts in an instance document.

+ References+ Details

Advertising Expenses	12 Months Ended
Advertising Expenses	Dec. 31, 2010
Advertising Expenses
Advertising Expenses	7. Advertising Expenses Included in the sales and marketing expenses, advertising expenses generally represent the expenses of promotions to create or stimulate a positive image of the Company or a desire to buy the Company's products and services. Advertising expenses are expensed as incurred. For the years ended December 31, 2010, 2009 and 2008, advertising expenses recognized in the consolidated statements of operations was $60.8 million, $61.5 million and $47.4 million, respectively.