Expedia 2005 Annual Report Download - page 69

Expedia, Inc.
Notes to Consolidated Financial Statements Ì (Continued)
Cash and Cash Equivalents
Our cash and cash equivalents include cash and liquid financial instruments with original maturities of
90 days or less when purchased.
Accounts Receivable
Accounts receivable are generally due within thirty days and are recorded net of an allowance for
doubtful accounts. We consider accounts outstanding longer than the contractual payment terms as past
due. We determine our allowance by considering a number of factors, including the length of time trade
accounts receivable are past due, previous loss history, a specific traveler's ability to pay its obligations to
us, and the condition of the general economy and industry as a whole.
Property and Equipment
We record property and equipment at cost, net of accumulated depreciation and amortization. We
also capitalize certain costs incurred related to the development of internal use software in accordance with
Statement of Position 98-1, ""Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use,'' and EITF No. 00-02, ""Accounting for Website Development Costs.'' We capitalize costs
incurred during the application development stage related to the development of internal-use software. We
expense costs incurred related to the planning and post-implementation phases of development as incurred.
We compute depreciation using the straight-line method over the estimated useful lives of the assets,
which range from three to five years for computer equipment and capitalized software development, and
three to seven years for furniture and other equipment. We amortize leasehold improvement using the
straight-line method, over the shorter of the estimated useful life of the improvement or the remaining
term of the lease.
Goodwill and Indefinite-Lived Intangible Assets
In accordance with SFAS No. 142, ""Goodwill and Other Intangible Assets,'' (""SFAS 142''), goodwill
is assigned to reporting units that are expected to benefit from the synergies of the business combination as
of the acquisition date. We assess goodwill and indefinite-lived intangible assets, neither of which are
amortized, for impairment annually at the beginning of the fourth quarter, or more frequently if events and
circumstances indicate impairment may have occurred.
In the evaluation of goodwill for impairment, we first compare the fair value of reporting unit to the
carrying value. If the carrying value of the reporting unit exceeds the fair value, the goodwill of the
reporting unit is potentially impaired and we proceed to step two of the impairment analysis which we will
record an impairment loss equal to the excess of the carrying value of the reporting unit's goodwill over its
implied fair value.
In evaluation of indefinite-lived intangible assets, an impairment charge is recorded for the excess the
carrying value of indefinite-lived intangible assets over their fair value.
We generally base our measurement of fair value of reporting units on a blend of an analysis of the
present value of estimated future discounted cash flows and a comparison of revenue and operating income
multiples for companies of similar industry and/or size. Our analysis is based on available information and
on assumptions and projections that we consider to be reasonable and supportable. The discounted cash
flow analysis considers the likelihood of possible outcomes and is based on our best estimates of projected
future cash flows. We base our measurement of fair value of indefinite-lived intangible asset, which
primarily consist of tradename and trademarks using the relief-from-royalty method. This method assumes
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