Orbitz 2008 Annual Report Download - page 65

Download and view the complete annual report

Please find page 65 of the 2008 Orbitz annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 146

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146

Impairment of Long-Lived Assets, Goodwill and Indefinite-Lived Intangible Assets
Long-Lived Assets
We evaluate the recoverability of our tangible long-lived assets, including capitalized software and other finite-lived intangible assets, when circumstances
indicate the carrying value of those assets may not be recoverable pursuant to SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets"
("SFAS No. 144"). This analysis is performed by comparing the respective carrying values of the assets to the current and expected future cash flows, on an
undiscounted basis. If this analysis indicates that the carrying value of these assets is not recoverable, the carrying value is reduced to fair value through an
impairment charge to our consolidated statements of operations. The evaluation of long-lived assets for impairment requires assumptions about operating
strategies and estimates of future cash flows. An estimate of future cash flows requires us to assess current and projected market conditions as well as operating
performance. A variation of the assumptions used could lead to a different conclusion regarding the recoverability of an asset and could have a significant effect
on the consolidated financial statements.
Goodwill and Other Intangibles
As required by SFAS No. 142, "Goodwill and Other Intangible Assets," we assess the carrying value of goodwill for impairment annually, or more
frequently if circumstances indicate impairment may have occurred. We assess goodwill for possible impairment using a two-step method in which the carrying
value of our reporting units is compared to their fair values. Step one of the impairment test is used as a screening process to identify a potential goodwill
impairment. Step two is used to measure the amount of the goodwill impairment, if any exists. Application of the goodwill impairment test requires
management's judgment, including the identification of reporting units, assigning assets and liabilities to reporting units and determining the fair value of each
reporting unit. We determine the fair value of our reporting units utilizing discounted future cash flows and incorporate assumptions we believe marketplace
participants would utilize. We use market multiples and other factors to corroborate the discounted cash flow results, if available.
Our trademarks and trade names are indefinite-lived intangible assets. We test these assets for impairment on an annual basis or upon a triggering event, by
comparing the carrying amount to their estimated fair value. If the estimated fair value is less than the carrying amount of the intangible assets, then the carrying
value is reduced to fair value through an impairment charge recorded to the consolidated statement of operations. The estimated fair value is generally
determined on the basis of discounted future cash flows.
We perform our annual impairment testing of goodwill and indefinite-lived intangible assets in the fourth quarter of each year subsequent to completing our
annual forecasting process. Our testing for impairment involves estimates of our future cash flows, which requires us to assess current and projected market
conditions as well as operating performance. Our estimates may differ from actual cash flows due to changes in our operating performance, capital structure or
requirements for operating and capital expenditures as well as changes to general economic conditions and the travel industry in particular. We must also make
estimates and judgments in the selection of a discount rate that reflects the risk inherent in those future cash flows. The impairment analysis may also require
certain assumptions about other businesses with limited financial histories. A variation of the assumptions used could lead to a different conclusion regarding the
carrying value of an asset and could have a significant effect on the consolidated financial statements.
Accounting for Income Taxes
We account for income taxes in accordance with SFAS No. 109, "Accounting for Income Taxes." Accordingly, our provision for income taxes is
determined using the asset and liability method. Under
58
Source: Orbitz Worldwide, In, 10-K/A, August 28, 2008