Orbitz 2009 Annual Report Download - page 80

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We use discounted cash flows in calculating and recognizing the tax sharing liability. We review the
calculation of the tax sharing liability on a quarterly basis and make revisions to our estimated timing of
payments when appropriate. We also assess whether there are any significant changes, such as changes in
timing of payments and tax rates, that could materially affect the present value of the tax sharing liability.
Although the expected gross remaining payments that may be due under this agreement are $226 million as of
December 31, 2008, the timing of payments may change. Any changes in timing of payments are recognized
prospectively as accretions to the tax sharing liability in our consolidated balance sheets and interest expense
in our consolidated statements of operations.
Equity-Based Compensation
In accordance with SFAS No. 123(R), “Share-Based Payments” (“SFAS No. 123(R)”), we measure
equity-based compensation cost at fair value and recognize the corresponding compensation expense on a
straight-line basis over the service period during which awards are expected to vest. We include equity-based
compensation expense in the selling, general and administrative line of our consolidated statements of
operations. The fair value of restricted stock and restricted stock units is determined based on the average of
the high and low price of our common stock on the date of grant. The fair value of stock options is determined
on the date of grant using the Black-Scholes valuation model. The amount of equity-based compensation
expense recorded each period is net of estimated forfeitures. We estimate forfeitures based on historical
employee turnover rates, the terms of the award issued and assumptions regarding future employee turnover.
Recently Issued Accounting Pronouncements
In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS No. 157”), which
defines fair value, establishes a framework for measuring fair value and expands disclosure about fair value
measurements. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007. However, in
February 2008, the FASB issued FASB Staff Position No. FAS 157-2, “Effective Date of FASB Statement
No. 157” (“FSP 157-2”), which delayed the effective date of SFAS No. 157 for one year for non-financial assets
and non-financial liabilities, except for items that are recognized or disclosed at fair value in the financial
statements on a recurring basis. Our adoption of SFAS No. 157 on January 1, 2008 for our financial assets and
liabilities did not have a material impact on our consolidated financial position or results of operations. We do
not expect the adoption of SFAS No. 157 for our non-financial assets and non-financial liabilities, effective
January 1, 2009, to have a material impact on our consolidated financial position or results of operations.
In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and
Financial Liabilities” (“SFAS No. 159”), which provides companies with an option to report selected financial
assets and liabilities at fair value. SFAS No. 159’s objective is to reduce both complexity in accounting for
financial instruments and the volatility in earnings caused by measuring related assets and liabilities differently.
SFAS No. 159 helps to mitigate this type of accounting-induced volatility by enabling companies to report
related assets and liabilities at fair value, which would likely reduce the need for companies to comply with
detailed rules for hedge accounting. SFAS No. 159 also establishes presentation and disclosure requirements
designed to facilitate comparisons between companies that choose different measurement attributes for similar
types of assets and liabilities. SFAS No. 159 requires companies to provide additional information that will
help investors and other users of financial statements to more easily understand the effect of their choice to
use fair value on their earnings. It also requires companies to display the fair value of those assets and
liabilities for which they have chosen to use fair value on the face of the balance sheet. SFAS No. 159 was
effective on January 1, 2008. We have chosen not to apply the provisions of SFAS No. 159 to any of our
existing financial assets and liabilities.
In December 2007, the FASB issued SFAS No. 141(R), which establishes principles and requirements for the
reporting entity in a business combination, including recognition and measurement in the financial statements of
80
ORBITZ WORLDWIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)