Expedia 2013 Annual Report Download - page 30

any such individual directs a corporate opportunity to IAC instead of Expedia, or does not communicate
information regarding a corporate opportunity to Expedia because the officer or director has directed the
corporate opportunity to IAC. This corporate opportunity provision may have the effect of exacerbating the risk
of conflicts of interest between the companies because the provision effectively shields an overlapping director/
executive officer from liability for breach of fiduciary duty in the event that such director or officer chooses to
direct a corporate opportunity to IAC instead of Expedia.
We work closely with various business partners and rely on third-parties for many systems and
services, and therefore could be harmed by their activities.
We could be harmed by the activities of third parties that we do not control. We work closely with business
partners, including in connection with significant commercial arrangements and joint ventures, and through our
Expedia Affiliate Network business. We also rely on third-party service providers for certain customer care,
fulfillment, processing, systems development, technology and other services, including, increasingly, travel care
and information technology services. If these partners or third-party service providers experience difficulty or fail
to meet our requirements or standards or the requirements or standards of governmental authorities, it could
damage our reputation, make it difficult for us to operate some aspects of our business, or expose us to liability
for their actions which could have an adverse impact on our business and financial performance. Likewise, if the
third-party service providers on which we rely were to cease operations, temporarily or permanently, face
financial distress or other business disruption, we could suffer increased costs and delays in our ability to provide
similar services until an equivalent service provider could be found or we could develop replacement technology
or operations, any of which could also have an adverse impact on our business and financial performance.
We are exposed to various counterparty risks.
We are exposed to the risk that various counterparties, including financial entities, will fail to perform. This
creates risk in a number of areas, including with respect to our bank deposits and investments, foreign exchange
risk management, insurance coverages, and letters of credit. As it relates to deposits, as of December 31, 2013,
we held cash in bank depository accounts of $616 million (primarily in Bank of America, HSBC and JPMorgan
Chase) and held time deposits of approximately $131 million at financial institutions including, Australia and
New Zealand Banking Group, Nordea, and Sumitomo Mitsui Banking Corporation. Additionally, majority-
owned subsidiaries held cash of $45 million (primarily in Deutsche Bank, Industrial and Commercial Bank of
China, China Construction Bank, China Merchants Bank, and Bank of China) and held time deposits of
approximately $283 million at financial institutions including, Industrial and Commercial Bank of China, China
Merchants Bank, Bank of China, and Bank of Communications. As it relates to foreign exchange, as of
December 31, 2013, we were party to forward contracts with a notional value of approximately $282 million, the
fair value of which was approximately $2 million. The counterparties to these contracts were Credit Suisse
International, Standard Chartered Bank, Goldman Sachs Bank, JPMorgan Chase, Bank of America, US Bank,
Barclays Bank PLC, BNP Paribas, and HSBC. We employ forward contracts to hedge a portion of our exposure
to foreign currency exchange rate fluctuations. At the end of the deposit term or upon the maturity of the forward
contracts, the counterparties are obligated, or potentially obligated in the case of forward contracts, to return our
funds or pay us net settlement values. If any of these counterparties were to liquidate, declare bankruptcy or
otherwise cease operations, it may not be able to satisfy its obligations under these time deposits or forward
contracts.
In addition, due to instability in the economy we also face increased credit risk and payment delays from our
non-financial contract counterparties.
We have foreign exchange risk.
We conduct a significant and growing portion of our business outside the United States. As a result, we face
exposure to movements in currency exchange rates, particularly those related to the euro, British pound sterling,
Canadian dollar, Australian dollar, Japanese yen, Nordic currencies and Brazilian real.
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