Expedia 2005 Annual Report Download - page 68

Download and view the complete annual report

Please find page 68 of the 2005 Expedia annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 98

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98

Expedia, Inc.
Notes to Consolidated Financial Statements Ì (Continued)
revenue six months in arrears, net of an allowance, when we determine it is not probable that we will be
required to pay the supplier, based on historical experience.
We generally contract in advance with lodging providers to obtain access to room allotments at
wholesale rates. Certain contracts specifically identify the number of potential rooms and the negotiated
rate of the rooms to which we may have access over the terms of the contracts, which generally range
from one to three years. Other contracts are not specific with respect to the number of rooms and the
rates of the rooms to which we may have access over the terms of the contracts. In either case we may
return unbooked hotel room allotments with no obligation to the lodging providers within a period specified
in each contract. For hotel rooms that are cancelled by the traveler after the specified period of time, we
charge the traveler a cancellation fee or penalty that is at least equal to the amount a hotel may invoice us
for the cancellation.
Beginning January 1, 2004, as part of the integration of our businesses, Hotels.com conformed its
merchant hotel business practices with those of our other businesses. As a result, we commenced
prospectively reporting revenue for Hotels.com on a net basis. This change in reporting did not affect gross
profit, operating income or net income.
Merchant Air
Generally, we determine the ticket price for merchant air transactions. We pay the cost of the airline
ticket within two weeks after booking. We record cash paid by the traveler as deferred merchant bookings
and the cost of the airline ticket as prepaid merchant bookings. When the flight occurs, we record the
difference between the deferred merchant bookings and the prepaid merchant bookings as revenue on a net
basis.
When we have nonrefundable and generally noncancelable merchant air transactions, with no
significant post-delivery obligations, we record revenue upon booking. We record a reserve for chargebacks
and cancellations at the time of the transaction based on historical experience.
Agency Air, Hotel, Car and Cruise
Our agency revenue comes from airline ticket transactions, certain hotel transactions as well as cruise
and car rental reservations. We record agency revenue on air transactions when the traveler books the
transaction, as we have no significant post-delivery obligations. We record agency revenue on hotel
reservations, cruise and car rental reservations either on an accrual basis for payments from a commission
clearinghouse, or on receipt of commissions from an individual supplier. We record an allowance for
cancellations and chargebacks on this revenue based on historical experience.
Click-Through Fees
We record revenue from click-through fees charged to our travel partners for traveler leads sent to the
travel partners' websites. We record revenue from click-through fees after the traveler makes the click-
through to the related travel partners' websites.
Advertising
We record advertising revenue ratably over the advertising period or upon delivery of advertising
impressions, depending on the terms of the advertising contract.
Other
We record revenue from all other sources either upon delivery or when we provide the service.
F-11