Expedia 2006 Annual Report Download - page 79

Download and view the complete annual report

Please find page 79 of the 2006 Expedia annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 112

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112

value and recognized an impairment charge of $47.0 million in “Impairment of intangible asset” in our
consolidated statements of income. We based our measurement of fair value of the trade name intangible asset
using the relief-from-royalty method. This method assumes that a trade name has value to the extent that its
owner is relieved of the obligation to pay royalties for the benefits received therefrom.
The following table presents the changes in goodwill:
2006 2005
(In thousands)
Beginning Balance as of January 1 ............................. $5,859,730 $5,790,111
Additions .............................................. 12,483 140,482
Deductions............................................. (28,702) (50,777)
Foreign exchange translation ............................... 17,781 (20,086)
Ending Balance as of December 31 ............................ $5,861,292 $5,859,730
As of December 31, 2006 and 2005, approximately 80% of our goodwill was assigned to our North
American segment and approximately 17% to our European segment.
In 2006, the additions to goodwill relate primarily to the remaining purchase of TripAdvisor and Egencia
shares and other miscellaneous business acquisitions. The deductions from goodwill primarily relate to the
income tax benefit realized pursuant to the exercise of stock options assumed in business acquisitions that
were vested at the transaction date and are treated as a reduction in purchase price when the deductions are
realized.
In 2005, the additions to goodwill relate to new acquisitions, primarily eLong, as well as adjustments to
the carrying value of goodwill based upon the finalization of the valuation of intangible assets and their related
deferred tax impacts, and the deductions from goodwill relate to the income tax benefit realized pursuant to
the exercise of stock options assumed in business acquisitions that were vested at the transaction date and are
treated as a reduction in purchase price when the deductions are realized.
The following table presents the components of our intangible assets with definite lives as of
December 31, 2006 and 2005.
Cost
Accumulated
Amortization Net
Weighted
Average
Life
(Years) Cost
Accumulated
Amortization Net
Weighted
Average
Life
(Years)
December 31, 2006 December 31, 2005
(In thousands) (In thousands)
Distribution agreements . . . $177,426 $(132,643) $ 44,783 5.5 $177,426 $(105,502) $ 71,924 5.5
Supplier relationship . . . . . 212,101 (186,399) 25,702 4.2 211,670 (150,324) 61,346 4.2
Technology . . . . . . . . . . . . 196,197 (157,186) 39,011 4.5 187,540 (119,013) 68,527 4.6
Customer lists . . . . . . . . . . 25,396 (19,175) 6,221 4.7 25,163 (17,266) 7,897 4.7
Affiliate agreements . . . . . . 33,049 (11,594) 21,455 10.0 33,049 (8,289) 24,760 10.0
Domain names . . . . . . . . . 10,871 (3,812) 7,059 9.7 10,871 (1,920) 8,951 9.7
Other . . . . . . . . . . . . . . . . 49,052 (31,032) 18,020 6.5 47,364 (27,238) 20,126 6.4
Total . . . . . . . . . . . . . . . $704,092 $(541,841) $162,251 5.1 $693,083 $(429,552) $263,531 5.2
F-19
Expedia, Inc.
Notes to Consolidated Financial Statements — (Continued)