Expedia 2007 Annual Report Download - page 58

In 2007, certain of these notes were converted at fair value for $6.6 million of common stock, or
0.3 million shares. As additional notes are converted, the value of the derivative liability will be reduced and
our equity price risk will decrease accordingly. The conversion of the Ask Jeeves Notes during 2007 reduced
our obligation to issue our common stock from 0.8 million shares as of December 31, 2006, to 0.5 million
shares as of December 31, 2007.
As of December 31, 2007, each $1.00 fluctuation in our common stock will result in approximately
$0.5 million of change in the aggregate fair value of our Ask Jeeves Notes derivative liability. An increase in
our common stock price will result in a charge to our consolidated statements of income and a decrease in our
common stock price will result in a credit. The Ask Jeeves Notes are due June 1, 2008; upon maturity of these
notes, our obligation to satisfy demands for conversion ceases.
For additional information about the Ask Jeeves Notes, see Note 7 — Derivative Instruments, in the notes
to consolidated financial statements.
Part II. Item 8. Consolidated Financial Statements and Supplementary Data
The Consolidated Financial Statements and Schedule listed in the Index to Financial Statements,
Schedules and Exhibits on page F-1 are filed as part of this report.
Part II. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Part II. Item 9A. Controls and Procedures
Changes in Internal Control over Financial Reporting.
There were no changes to our internal control over financial reporting that occurred during the quarter
ended December 31, 2007 that have materially affected, or are reasonably likely to materially affect, our
internal control over financial reporting.
Evaluation of Disclosure Controls and Procedures.
As required by Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), our management, including our Chairman and Senior Executive, Chief Executive Officer and Chief
Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and
procedures (as defined in Rule 13a-15(e) under the Exchange Act). Based upon that evaluation, our Chairman
and Senior Executive, Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the
period covered by this report, our disclosure controls and procedures were effective.
Management’s Report on Internal Control over Financial Reporting.
Our management is responsible for establishing and maintaining adequate internal control over financial
reporting, as defined in Rule 13a-15(f) of the Exchange Act. Internal control over financial reporting is a
process to provide reasonable assurance regarding the reliability of our financial reporting for external
purposes in accordance with accounting principles generally accepted in the United States of America.
Management conducted an evaluation of the effectiveness of our internal control over financial reporting based
on the criteria for effective control over financial reporting described in Internal Control — Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this
evaluation, management has concluded that, as of December 31, 2007, the Company’s internal control over
financial reporting was effective. Management has reviewed its assessment with the Audit Committee. Ernst &
Young, LLP, an independent registered public accounting firm, has audited the effectiveness of our internal
control over financial reporting as of December 31, 2007, as stated in their report which is included below.
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