Orbitz 2009 Annual Report Download - page 79

expected to benefit from the business combination as of the acquisition date. Goodwill is not subject to
amortization.
Our indefinite-lived intangible assets include our trademarks and trade names, which are not subject to
amortization. Our finite-lived intangible assets primarily include our customer and vendor relationships and are
amortized over their estimated useful lives, generally 3 to 8 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 and other indefinite-lived intangible assets for impairment annually, or more frequently whenever
events occur and circumstances change indicating potential impairment. We perform our annual impairment
testing of goodwill and other indefinite-lived intangible assets in the fourth quarter of each year, subsequent to
the completion of our annual planning process.
We assess goodwill for possible impairment using a two-step process. The first step is used to identify if
there is potential goodwill impairment. If step one indicates that an impairment may exist, a second step is
performed to measure the amount of the goodwill impairment, if any. Goodwill impairment exists when the
estimated fair value of goodwill is less than its carrying value. If impairment exists, the carrying value of the
goodwill is reduced to fair value through an impairment charge in our consolidated statements of operations.
For purposes of goodwill impairment testing, we estimate the fair value of our reporting units to which
goodwill is allocated using generally accepted valuation methodologies, including market and income based
approaches, and relevant data available through and as of the testing date. The market approach is a valuation
method in which fair value is estimated based on observed prices in actual transactions and on asking prices
for similar assets. Under the market approach, the valuation process is essentially that of comparison and
correlation between the subject asset and other similar assets. The income approach is a method in which fair
value is estimated based on the cash flows that an asset could be expected to generate over its useful life,
including residual value cash flows. These cash flows are then discounted to their present value equivalents
using a rate of return that accounts for the relative risk of not realizing the estimated annual cash flows and
for the time value of money. Variations of the income approach are used to estimate certain of the intangible
asset fair values.
We assess our trademarks and trade names for impairment by comparing their carrying value to their
estimated fair value. Impairment exists when the estimated fair value of the trademark or trade name is less
than its carrying value. If impairment exists, then the carrying value is reduced to fair value through an
impairment charge recorded to the consolidated statement of operations. We use a market or income valuation
approach, as described above, to estimate fair values of the relevant trademarks and trade names.
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 tax benefits resulting from
a taxable exchange that took place in connection with the Orbitz initial public offering in December 2003
(“Orbitz IPO”). As a result of this taxable exchange, the Founding Airlines incurred a taxable gain. The
taxable exchange also caused Orbitz to have additional future tax deductions for depreciation and amortization
due to the increased tax basis of its assets. The additional tax deductions for depreciation and amortization
may reduce the amount of taxes we are required to pay in future years. For each tax period during the term of
the tax sharing agreement, we are obligated to pay the Founding Airlines a significant percentage of the
amount of the tax benefit realized as a result of the taxable exchange. The tax sharing agreement commenced
upon consummation of the Orbitz IPO and continues until all tax benefits have been utilized.
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ORBITZ WORLDWIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)