Expedia 2013 Annual Report Download - page 31

These exposures include but are not limited to re-measurement gains and losses from changes in the value
of foreign denominated assets and liabilities; translation gains and losses on foreign subsidiary financial results
that are translated into U.S. dollars upon consolidation; fluctuations in hotel revenue due to relative currency
movements from the time of booking to the time of stay; planning risk related to changes in exchange rates
between the time we prepare our annual and quarterly forecasts and when actual results occur; and the impact of
relative exchange rate movements on cross-border travel such as from Europe to the United States and the United
States to Europe.
Depending on the size of the exposures and the relative movements of exchange rates, if we choose not to
hedge or fail to hedge effectively our exposure, we could experience a material adverse effect on our financial
statements and financial condition. As we have seen in some recent periods, in the event of severe volatility in
exchange rates these exposures can increase, and the impact on our results of operations can be more
pronounced. In addition, the current environment and the increasingly global nature of our business have made
hedging these exposures both more complex and costly. We have increased and plan to continue increasing the
scope, complexity and duration of our foreign exchange risk management, and also plan to change data sources
and execution methods. 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
addition, an effective exchange rate hedging program is dependent upon effective systems, accurate and reliable
data sources, controls and change management procedures. In the event our estimates differ significantly from
actual results or if we fail to adopt effective hedging processes, we could experience greater volatility as a result
of our hedging activities.
We process, store and use personal information and other data, which subjects us to risks stemming
from possible failure to comply with governmental regulation and other legal obligations and potential
liability related to security breaches.
We may acquire personal or confidential information from users of our websites and mobile applications.
There are numerous laws regarding privacy and the storing, sharing, use, processing, disclosure and protection of
personal information and other consumer data, the scope of which are changing, subject to differing
interpretations, and may be inconsistent between countries or conflict with other rules. We strive to comply with
all applicable laws, policies, legal obligations and industry codes of conduct relating to privacy and data
protection. It is possible, however, that these obligations may be interpreted and applied in a manner that is
inconsistent from one jurisdiction to another and may conflict with other rules or the practices of the companies.
Any failure or perceived failure by us, or our service providers, to comply with the privacy policies, privacy-
related obligations to users or other third parties, or privacy related legal obligations, or any compromise of
security that results in the unauthorized release or transfer of personally identifiable information or other user
data, may result in governmental enforcement actions, litigation or public statements against the company by
consumer advocacy groups or others and could cause our customers and members to lose trust in the company,
which could have an adverse effect on our business.
The regulatory framework for privacy issues worldwide is currently in flux and is likely to remain so for the
foreseeable future. Practices regarding the collection, use, storage, transmission and security of personal
information by companies operating over the internet have recently come under increased public scrutiny. The
U.S. Congress and federal agencies, including the Federal Trade Commission and the Department of Commerce,
are reviewing the need for greater regulation for the collection and use of information concerning consumer
behavior on the internet, including regulation aimed at restricting certain targeted advertising practices. U.S.
courts are also considering the applicability of existing federal and state statutes, including computer trespass and
wiretapping laws, to the collection and exchange of information online. In addition, the European Union is in the
process of proposing reforms to its existing data protection legal framework, which may result in a greater
compliance burden for companies, including Expedia, with users in Europe and increased costs of compliance.
Potential security breaches to our systems or the systems of our service providers, whether resulting from
internal or external sources, could significantly harm our business. There can be no guarantee that our existing
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