Orbitz 2014 Annual Report Download - page 45

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In February 2014, the Company entered into an agreement with Amadeus to provide GDS services. This contract requires
the Company to meet certain minimum annual booking requirements beginning in 2016 through the end of the contract at
December 31, 2019.
(d) Represents payments in connection with the tax sharing agreement with the Founding Airlines (see Note 8 - Tax Sharing
Liability of the Notes to Consolidated Financial Statements).
(e) Excluded from the above table are $3.3 million of liabilities for uncertain tax positions for which the period of settlement
is not currently determinable.
Other Commercial Commitments and Off-Balance Sheet Arrangements
In the ordinary course of business, we obtain surety bonds and bank guarantees, issued for the benefit of third parties, to
secure performance of certain of our obligations (see Note 9 - Commitments and Contingencies of the Notes to Consolidated
Financial Statements).
We are also required to issue letters of credit to certain suppliers and non-U.S. regulatory and government agencies.
CRITICAL ACCOUNTING POLICIES
The preparation of our consolidated financial statements and related notes in conformity with generally accepted
accounting principles requires us to make judgments, estimates and assumptions that affect the amounts reported therein. An
accounting policy is considered to be critical if it meets the following two criteria:
• the policy requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at
the time the estimate is made; and
• different estimates that reasonably could have been used or changes in the estimates that are reasonably likely to
occur from period to period would have a material impact on our consolidated financial statements.
We believe that the estimates and assumptions used when preparing our consolidated financial statements were the most
appropriate at that time. However, events that are outside of our control cannot be predicted and, as such, they cannot be
contemplated in evaluating such estimates and assumptions. We have discussed these estimates with our Audit Committee of
the Board of Directors.
Presented below are those accounting policies that we believe require subjective and complex judgments that could
potentially affect our reported results. Although we believe these policies to be the most critical, other accounting policies also
have a significant effect on our consolidated financial statements and certain of these policies may also require the use of
estimates and assumptions (see Note 2 - Summary of Significant Accounting Policies of the Notes to Consolidated Financial
Statements).
Revenue Recognition
Merchant revenues are from transactions where we are the merchant of record and have the ability to determine the price
charged to the customer. We have agreements with suppliers that provide our customers the ability to book their supply (for
example, air tickets or hotel rooms) that we sell through our sites. We present merchant revenues on a net basis in accordance
with Accounting Standards Codification (“ASC”) 605-45, Revenue Recognition - Principal Agent Considerations. Based upon
evaluation of our merchant transactions and in accordance with the various indicators identified in the ASC, we concluded that
our suppliers assume the majority of the business risks, including the risk of unsold air tickets or hotel rooms. As such, we
recognize revenues for merchant transactions at the net amount, which is the amount charged to the customer less the amount to
be paid to the supplier.
We accrue for the cost of merchant hotel and merchant car transactions based on amounts we expect to be invoiced by
suppliers. Based on our historical experience and contract terms, we reverse a portion of the accrued cost, which increases net
revenue, when we determine it is not probable that we will be required to pay the supplier. Actual amounts could be greater or
less than the amounts estimated due to changes in supplier billing practices or changes in traveler behavior.
The Company issues credits in the form of points related to its loyalty programs. The value of points earned by loyalty
program members is included in accrued liabilities and recorded as a reduction of revenue at the time the points are earned,