Expedia 2013 Annual Report Download - page 100

Estimates of fair value are not intended to predict actual future events or the value ultimately realized by
employees who receive these awards, and subsequent events are not indicative of the reasonableness of our
original estimates of fair value. In determining the estimated forfeiture rates for stock-based awards, we
periodically conduct an assessment of the actual number of equity awards that have been forfeited to date as well
as those expected to be forfeited in the future. We consider many factors when estimating expected forfeitures,
including the type of award, the employee class and historical experience. The estimate of stock awards that will
ultimately be forfeited requires significant judgment and to the extent that actual results or updated estimates
differ from our current estimates, such amounts will be recorded as a cumulative adjustment in the period such
estimates are revised.
Earnings Per Share
We compute basic earnings per share by taking net income attributable to Expedia, Inc. available to
common stockholders divided by the weighted average number of common and Class B common shares
outstanding during the period excluding restricted stock and stock held in escrow. Diluted earnings per share
include the potential dilution that could occur from stock-based awards and other stock-based commitments
using the treasury stock or the as if converted methods, as applicable. For additional information on how we
compute earnings per share, see Note 14 — Earnings Per Share.
Fair Value Recognition, Measurement and Disclosure
The carrying amounts of cash and cash equivalents and restricted cash and cash equivalents reported on our
consolidated balance sheets approximate fair value as we maintain them with various high-quality financial
institutions. The accounts receivable are short-term in nature and are generally settled shortly after the sale.
We disclose the fair value of our financial instruments based on the fair value hierarchy using the following
three categories:
Level 1 — Valuations based on quoted prices for identical assets and liabilities in active markets.
Level 2 — Valuations based on observable inputs other than quoted prices included in Level 1, such as
quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets
and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by
observable market data.
Level 3 — Valuations based on unobservable inputs reflecting the Company’s own assumptions, consistent
with reasonably available assumptions made by other market participants. These valuations require
significant judgment.
Certain Risks and Concentrations
Our business is subject to certain risks and concentrations including dependence on relationships with travel
suppliers, primarily airlines and hotels, dependence on third-party technology providers, exposure to risks
associated with online commerce security and credit card fraud. We also rely on global distribution system
partners and third-party service providers for certain fulfillment services.
Financial instruments, which potentially subject us to concentration of credit risk, consist primarily of cash
and cash equivalents and corporate debt securities. We maintain some cash and cash equivalents balances with
financial institutions that are in excess of Federal Deposit Insurance Corporation insurance limits. Our cash and
cash equivalents are primarily composed of prime institutional money market funds as well as bank (both interest
and non-interest bearing) account balances denominated in U.S. dollars, euros, Australian dollar, British pound
sterling, Canadian dollar, Chinese renminbi and Japanese yen.
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