Expedia 2005 Annual Report Download - page 70

Expedia, Inc.
Notes to Consolidated Financial Statements Ì (Continued)
that the tradename and trademarks have value to the extent that their owner is relieved of the obligation
to pay royalties for the benefits received from them.
Intangible Assets with Definite Lives and Other Long-Lived Assets
In accordance with SFAS No. 144, ""Accounting for the Impairment or Disposal of Long-Lived
Assets,'' we review the carrying value of intangible assets with definite lives and other long-lived assets,
which we amortize on a straight-line basis over the estimated useful lives of two to ten years, on a regular
basis for the existence of facts that may indicate that the assets are impaired. If such facts indicate a
potential impairment, we estimate the fair value of the asset using appropriate valuation methodologies,
usually based on estimated future discounted cash flows. If the fair value is determined to be less than an
asset's carrying value, we then further evaluate to determine whether or not the carrying value is
unrecoverable. Our analyses are based on available information and on assumptions and projections that we
consider to be reasonable and supportable.
Our impairment evaluations as of October 1, 2005, 2004 and 2003, indicated that we did not have any
impairment to our goodwill, intangible assets and long-lived assets.
Investments
We record investments using the cost basis when we do not have the ability to exercise significant
influence over the investee and generally when our ownership in the investee is less than 20%. We record
investments using the equity method when we have the ability to exercise significant influence over the
investee. We periodically evaluate the recoverability of investments and record a write-down if a decline in
value is determined to be other-than-temporary.
Income Taxes
In accordance with SFAS No. 109, ""Accounting for Income Taxes,'' we record income taxes under
the liability method. Deferred tax assets and liabilities reflect the expected future tax consequences of
temporary differences between the carrying amounts of assets and liabilities for book and tax purposes. We
determine deferred income taxes based on the differences in accounting methods and timing between
financial statement and income tax reporting. Accordingly, we determine the deferred tax asset or liability
for each temporary difference based on the tax rates that we expect will be in effect when we realize the
underlying items of income and expense. We consider many factors when assessing the likelihood of future
realization of our deferred tax assets, including our recent earnings experience by jurisdiction, expectations
of future taxable income, and the carryforward periods available to us for tax reporting purposes, as well as
other relevant factors. We may establish a valuation allowance to reduce deferred tax assets to the amount
we expect to realize. Due to inherent complexities arising from the nature of our businesses, future
changes in income tax law, tax sharing agreements or variances between our actual and anticipated
operating results, we make certain judgments and estimates. Therefore, actual income taxes could vary
from these estimates.
Occupancy Tax
Some states and localities impose a transient occupancy or accommodation tax, or a form of sales tax,
on the use or occupancy of hotel accommodations. Hotel operators generally collect and remit these taxes
to the various tax authorities. Consistent with this practice, when a customer books a room through one of
our travel services, the hotel charges the customer taxes based on the room rate paid to the hotel, we pay
the hotel those taxes invoiced by the hotel and we recover an equivalent amount from the customer. We
do not collect or remit occupancy taxes on the portion of the customer payment we retain, and some
jurisdictions have questioned our practice in this regard. While the applicable tax provisions vary among
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