Expedia 2012 Annual Report Download - page 73

economic hedges in the future. Our goal in managing our foreign exchange risk is to reduce to the extent
practicable our potential exposure to the changes that exchange rates might have on our earnings, cash flows and
financial position. We make a number of estimates in conducting hedging activities including in some cases the
level of future bookings, cancellations, refunds, customer stay patterns and payments in foreign currencies. In the
event those estimates differ significantly from actual results, we could experience greater volatility as a result of
our hedges.
In December 2012, we entered into a definitive agreement to acquire 61.6% equity position in trivago for
total consideration of €477 million. The transaction is expected to close in the first half of 2013 pending approval
from relevant competition authorities. If the euro was to increase or decrease 10% from the December 31, 2012
exchange rate, the fluctuation would result in an increase or decrease to the purchase price of approximately $60
million.
Future net transaction gains and losses are inherently difficult to predict as they are reliant on how the
multiple currencies in which we transact fluctuate in relation to the U.S. dollar, the relative composition and
denomination of current assets and liabilities each period, and our effectiveness at forecasting and managing,
through balance sheet netting or the use of derivative contracts, such exposures. As an example, if the foreign
currencies in which we hold net asset balances were to all weaken 10% against the U.S. dollar and foreign
currencies in which we hold net liability balances were to all strengthen 10% against the U.S. dollar, we would
recognize foreign exchange losses of approximately $1 million based on our foreign currency forward positions
(excluding the impact of forward positions economically hedging our merchant revenue exposures) and the net
asset or liability balances of our foreign denominated cash and cash equivalents, accounts receivable, deferred
merchant bookings and merchant accounts payable balances as of December 31, 2012. As the net composition of
these balances fluctuate frequently, even daily, as do foreign exchange rates, the example loss could be
compounded or reduced significantly within a given period.
During 2012, 2011 and 2010, we recorded net foreign exchange rate losses of $16 million ($7 million
excluding the contracts economically hedging our forecasted merchant revenue), $8 million ($5 million
excluding the contracts economically hedging our forecasted merchant revenue) and $16 million ($8 million
excluding the contracts economically hedging our forecasted merchant revenue). As we increase our operations
in international markets, our exposure to fluctuations in foreign currency exchange rates increases. The economic
impact to us of foreign currency exchange rate movements is linked to variability in real growth, inflation,
interest rates, governmental actions and other factors. These changes, if material, could cause us to adjust our
financing and operating strategies.
Part II. Item 8. Consolidated Financial Statements and Supplementary Data
The Consolidated Financial Statements and Schedule listed in the Index to Financial Statements, Schedules
and Exhibits on page F-1 are filed as part of this report.
Part II. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Part II. Item 9A. Controls and Procedures
Changes in Internal Control over Financial Reporting.
There were no changes to our internal control over financial reporting that occurred during the quarter ended
December 31, 2012 that have materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.
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