Orbitz 2008 Annual Report Download - page 83

ORBITZ WORLDWIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. Summary of Significant Accounting Policies (Continued)
Goodwill, Trademarks and Other Intangible Assets
Goodwill represents the excess of the purchase price over the estimated fair value of the underlying assets acquired and liabilities assumed in the acquisition
of a business. We assign goodwill to reporting units that are expected to benefit from the business combination as of the acquisition date. Goodwill is not subject
to amortization; however, it is assessed at least annually for impairment.
Our indefinite-lived intangible assets are comprised of trademarks and trade names, which are not subject to amortization. Our finite-lived intangible assets
are primarily comprised of customer and vendor relationships and are amortized over their estimated useful lives, generally 3 to 14 years, using the straight-line
method. Our intangible assets primarily relate to the acquisition of entities accounted for using the purchase method of accounting and are estimated by
management based on the fair value of assets received.
In accordance with 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. 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.
We test our indefinite-lived intangible 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. In 2005, we determined that the carrying values of goodwill as well as certain indefinite and finite-lived intangible assets exceeded
their estimated fair values. As a result, we recorded a charge of $400 million to the impairment of goodwill and intangible assets line in the consolidated
statements of operations, of which $241 million related to goodwill, $114 million related to indefinite-lived intangible assets and $45 million related to
finite-lived intangible assets. In 2006, we completed impairment testing prior to the date of the Blackstone Acquisition because the offer price indicated a need
for an assessment prior to our annual testing date. As a result, we recorded a charge of $122 million to the impairment of goodwill and intangible assets line in
the consolidated statements of operations, of which $115 million related to goodwill, $6 million related to other indefinite-lived intangible assets and $1 million
related to finite-lived intangible assets.
Tax Sharing Liability
We have a liability included in our consolidated balance sheets that relates to a tax sharing agreement between Orbitz and the Founding Airlines. The
agreement governs the allocation of approximately $277 million of tax benefits resulting from a taxable exchange that took place in
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Source: Orbitz Worldwide, In, 10-K/A, August 28, 2008