Expedia 2012 Annual Report Download - page 101

taxes to the various tax authorities. When a customer books a room through one of our travel services, we collect
a tax recovery charge from the customer which we pay to the hotel. We calculate the tax recovery charge by
applying the occupancy tax rate supplied to us by the hotels to the amount that the hotel has agreed to receive for
the rental of the room by the consumer. In all but a limited number of jurisdictions, we do not collect or remit
occupancy taxes, nor do we pay occupancy taxes to the hotel operator on the portion of the customer payment we
retain. Some jurisdictions have questioned our practice in this regard. While the applicable tax provisions vary
among the jurisdictions, we generally believe that we are not required to collect and remit such occupancy taxes.
We are engaged in discussions with tax authorities in various jurisdictions to resolve this issue. Some tax
authorities have brought lawsuits or have levied assessments asserting that we are required to collect and remit
occupancy tax. The ultimate resolution in all jurisdictions cannot be determined at this time. We have established
a reserve for the potential settlement of issues related to hotel occupancy taxes when determined to be probable
and estimable. See Note 15 — Commitments and Contingencies for further discussion.
NOTE 3 — Acquisitions
During 2012, we acquired a travel management company in the Nordics. During 2011 and 2010, we
acquired a number of travel product and service companies. The following table summarizes the allocation of the
purchase price for all acquisitions made in the three years ended December 31, 2012, in thousands:
2012 2011 2010
Goodwill $129,156 $22,522 $13,305
Intangible assets with definite lives(1) 111,864 21,567 5,211
Net liabilities(2) (28,913) (590) (1,558)
Total(3) $212,107 $43,499 $16,958
(1) For 2012, acquired intangible assets primarily consist of customer and supplier relationship assets. In total,
the weighted average life of acquired intangible assets during 2012, 2011 and 2010 was 8.1 years, 3.7 years
and 3.5 years.
(2) Includes cash acquired of $13 million, $6 million and $1 million during 2012, 2011 and 2010.
(3) As of December 31, 2011, $3 million of the total purchase price was accrued with the remainder paid in
cash during the respective years.
Business combination accounting is preliminary for up to 12 months after the acquisition date and subject to
revision, and any change to the fair value of net assets acquired would be expected to lead to a corresponding
change to the amount of goodwill recorded on a retroactive basis. The results of operations of each of the
acquired businesses have been included in our consolidated results from each transaction closing date forward;
their effect on consolidated revenue and operating income during 2012, 2011 and 2010 was not significant.
In December 2012, we entered into a definitive agreement to acquire a 63% equity position (61.6% on a
fully diluted basis) in trivago GmbH, a leading metasearch company in Germany, for total consideration of
€477 million (approximately $647 million based on January 31, 2013 exchange rates) including €434 million in
cash as well as €43 million in Expedia, Inc. common stock to be issued in five equal increments on or about each
of the first through fifth anniversaries of the consummation of the acquisition. In connection with the acquisition,
we will have the right to purchase from the minority shareholders, and minority shareholders will have the right
to sell to us, 50% and 100% of the remaining shares of trivago at fair market value on the third and fifth
anniversaries, respectively, of the consummation of the acquisition. The transaction is expected to close in the
first half of 2013 pending approval from relevant competition authorities.
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