Orbitz 2008 Annual Report Download - page 79

Download and view the complete annual report

Please find page 79 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

ORBITZ WORLDWIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. Summary of Significant Accounting Policies (Continued)
When customers assemble a dynamic vacation package, we may offer them the ability to book a mix of travel products that use both the retail and merchant
model. For example, travel products booked in a dynamic vacation package may include a combination of air, hotel and car reservations. We recognize net
revenue for each portion of the package in accordance with the relevant service provided for air, hotel and car reservations.
Under both the retail and merchant models, we recognize revenue for service fees charged to customers for booking travel reservations. This revenue is
recognized at the time we recognize the net revenue for the corresponding travel product. We also may receive override commissions from travel suppliers if we
meet certain contractual volume thresholds. These commissions are recognized upon notification by the respective airline.
We utilize global distribution systems ("GDS") services provided by Galileo, Worldspan and Amadeus. Under GDS service agreements, we earn revenue in
the form of an incentive payment for each segment that is processed through a GDS. Revenue is recognized for these incentive payments at the time the travel
reservation is processed through the GDS, which is generally at the time of booking.
We also generate other revenue, which is primarily comprised of revenue from advertising, including sponsoring links on our websites, and travel insurance.
Advertising revenue is derived primarily from the delivery of advertisements on our websites and is recognized either at the time of display of each individual
advertisement, or ratably over the advertising delivery period, depending on the terms of the advertising contract. Revenues generated from sponsoring links and
travel insurance revenue are both recognized upon notification from the alliance partner that a transaction has occurred.
Cost of Revenue
Cost of revenue is comprised of direct costs incurred to generate revenue, including credit card processing fees and costs for our call center operations, data
processing and related technology costs. Such costs consist primarily of internal system and software maintenance fees, data communications and other expenses
associated with operating our websites and payments to outside contractors for customer service.
Marketing Expense
Marketing expense includes online marketing such as search and banner advertising, and traditional offline marketing such as traditional television, radio
and print advertising. Online advertising expense is recognized based on the terms of the individual agreements, which are generally over the ratio of the number
of impressions delivered over the total number of contracted impressions, or pay-per-click, or on a straight-line basis over the term of the contract. Traditional
offline marketing expense is recognized in the period in which it is incurred.
Income Taxes
We account for income taxes in accordance with Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes" ("SFAS
No. 109"). Accordingly, our provision for income taxes is determined using the asset and liability method. Under this method, deferred tax assets and liabilities
are calculated based upon the temporary differences between the financial statement and
72
Source: Orbitz Worldwide, In, 10-K/A, August 28, 2008