Priceline 2011 Annual Report Download - page 73

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72
priceline.com Incorporated
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS DESCRIPTION
Priceline.com Incorporated (the "Priceline Group", or the "Company") is a leading online travel company that offers
its customers hotel room reservations at over 210,000 hotels worldwide through the Booking.com, priceline.com and Agoda
brands. In the United States, the Company also offers its customers reservations for car rentals, airline tickets, vacation
packages, destination services and cruises through the priceline.com brand. The Company offers car rental reservations
worldwide through rentalcars.com (formerly known as TravelJigsaw), which we acquired in May 2010.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation — The Company’s Consolidated Financial Statements include the accounts of the Company and
its wholly-owned subsidiaries, including without limitation, priceline.com International Ltd. ("priceline.com International"),
Booking.com B.V., Booking.com Limited, priceline.com Europe Ltd, priceline.com Mauritius Company Limited (formerly
known as Agoda Company, Ltd.) ("Agoda"), and its majority-owned interest in TravelJigsaw Holdings Limited (known now as
the rentalcars.com business) since its acquisition in May 2010. All intercompany accounts and transactions have been
eliminated in consolidation. Investments in affiliates in which the Company does not have control, but has the ability to
exercise significant influence, are accounted for by the equity method.
Use of Estimates — The preparation of financial statements in conformity with accounting principles generally
accepted in the United States of America requires management to make estimates and assumptions that affect the amounts
reported in the financial statements and footnotes thereto. Actual results may differ significantly from those estimates. The
significant estimates underlying the Company’s Consolidated Financial Statements relate to, among other things, the
Company’s deferred tax valuation allowance, the Company’s accounting for state and local hotel occupancy and sales taxes,
stock-based compensation, the Company’s allowance for doubtful accounts, the valuation of goodwill and long-lived assets and
intangibles and the valuation of redeemable noncontrolling interests.
Fair Value of Financial Instruments — The Company’s financial instruments, including cash, restricted cash, accounts
receivable, accounts payable, accrued expenses and deferred merchant bookings, are carried at cost which approximates their
fair value because of the short-term nature of these financial instruments. See Notes 4, 5, 11 and 13 for information on fair
value for investments, derivatives, the Company’s outstanding Convertible Senior Notes, and redeemable noncontrolling
interests.
Cash and Cash Equivalents — Cash and cash equivalents consists primarily of cash and highly liquid investment
grade securities with an original maturity of three months or less.
Restricted Cash — Restricted cash at December 31, 2011 and 2010 collateralizes office leases and supplier
obligations.
Investments — The Company has classified its investments as available-for-sale securities. These securities are
carried at estimated fair value with the aggregate unrealized gains and losses related to these investments, net of taxes, reflected
as a part of "Accumulated other comprehensive loss" within stockholders’ equity.
The fair value of the investments is based on the specific quoted market price of the securities or comparable securities
at the balance sheet dates. Investments in debt securities are considered to be impaired when a decline in fair value is judged to
be other than temporary because the Company either intends to sell or it is more-likely-than not that it will have to sell the
impaired security before recovery. Once a decline in fair value is determined to be other than temporary, an impairment charge
is recorded and a new cost basis in the investment is established. If the Company does not intend to sell the debt security, but
it is probable that the Company will not collect all amounts due, then only the impairment due to the credit risk would be
recognized in earnings and the remaining amount of the impairment would be recognized in "Accumulated other
comprehensive loss" within stockholders’ equity. The marketable securities are presented as current assets on the Company’s
Consolidated Balance Sheets, if they are available to meet the short-term working capital needs of the Company. Investments
with a maturity date greater than one year from the balance sheet date are classified as long-term investments. See Notes 4 and
5 for further detail of investments.
Property and Equipment — Property and equipment are stated at cost less accumulated depreciation and amortization.
Depreciation and amortization of property and equipment is computed on a straight-line basis over the estimated useful lives of