Orbitz 2008 Annual Report Download - page 82

Download and view the complete annual report

Please find page 82 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)
Allowance for Doubtful Accounts
Our accounts receivable are reported in the consolidated balance sheets net of an allowance for doubtful accounts. We provide for estimated bad debts based
on our assessment of our ability to realize receivables, considering historical collection experience, the general economic environment, and specific customer
information. When we determine that a receivable is not collectable, the account is written-off. Bad debt expense is recorded in selling, general and
administrative expenses in the consolidated statements of operations. We recorded bad debt expense of $2 million, almost nil, $1 million and almost nil during
the year ended December 31, 2007, the period from August 23, 2006 to December 31, 2006 and January 1, 2006 to August 22, 2006, and the year ended
December 31, 2005, respectively.
Property and Equipment, Net
Property and equipment is recorded at cost, net of accumulated depreciation and amortization. We depreciate and amortize property and equipment over
their estimated useful lives using the straight-line method. The estimated useful lives by asset category are:
Asset Category
Estimated Useful Life
Leasehold improvements Shorter of asset's useful life or non-cancelable lease term
Capitalized software 3 - 10 years
Furniture, fixtures and equipment 3 - 7 years
We capitalize the costs of software developed for internal use in accordance with Statement of Position ("SOP") No. 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use" ("SOP 98-1") and EITF Issue No. 00-2, "Accounting for Website Development Costs."
Capitalization commences when the preliminary project stage of the application has been completed and it is probable that the project will be completed and used
to perform the function intended. Amortization commences when the software is placed into service.
We also capitalize interest on internal software development projects in accordance with SFAS No. 34, "Capitalization of Interest Cost," and SOP 98-1. The
amount of interest capitalized is computed by applying our weighted average borrowing rate to the average amount of accumulated expenditures in the period.
We capitalized $3 million of interest during the year ended December 31, 2007 and nil during the periods from August 23, 2006 to December 31, 2006 and
January 1, 2006 to August 22, 2006 and the year ended December 31, 2005.
We evaluate the recoverability of our tangible long-lived assets, including property and equipment 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." This analysis is performed by comparing the respective carrying values of the assets to the current and expected future cash flows to be
generated from these assets, on an undiscounted basis. If this analysis indicates that the carrying value of an asset is not recoverable, the carrying value is reduced
to fair value through an impairment charge to the consolidated statements of operations.
75
Source: Orbitz Worldwide, In, 10-K/A, August 28, 2008