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We did not experience any significant impact from changes in interest rates for the years ended
December 31, 2008, 2007 or 2006.
Foreign Exchange Risk
We conduct business in certain international markets, primarily in Australia, Canada, China and the
European Union. Because we operate in international markets, we have exposure to different economic
climates, political arenas, tax systems and regulations that could affect foreign exchange rates. Our primary
exposure to foreign currency risk relates to transacting in foreign currency and recording the activity in
U.S. dollars. Changes in exchange rates between the U.S. dollar and these other currencies will result in
transaction gains or losses, which we recognize in our consolidated statements of operations.
To the extent practicable, we minimize our foreign currency exposures by maintaining natural hedges
between our current assets and current liabilities in similarly denominated foreign currencies. Additionally,
during the third and fourth quarter of 2008, we began using foreign currency forward contracts to
economically hedge certain merchant revenue exposures and in lieu of holding certain foreign currency cash
for the purpose of economically hedging our foreign currency-denominated merchant accounts payable and
deferred merchant bookings balances. These instruments are typically short-term and are recorded at fair value
with gains and losses recorded in Other, net. As of December 31, 2008, we had a net forward liability of
$1 million recorded in accrued expenses and other current liabilities. We may enter into additional foreign
exchange derivative contracts or other economic hedges in the future. Our goal in managing our foreign
exchange risk is to reduce to the extent practicable our potential exposure to the changes that exchange rates
might have on our earnings, cash flows and financial position. We make a number of estimates in conducting
hedging activities including in some cases the level of future bookings, cancellations, refunds and payments in
foreign currencies. In the event those estimates differ significantly from actual results, we could experience
greater volatility as a result of our hedges.
Future net transaction gains and losses are inherently difficult to predict as they are reliant on how the
multiple currencies in which we transact fluctuate in relation to the U.S. dollar, the relative composition and
denomination of current assets and liabilities each period, and our effectiveness at forecasting and managing,
through balance sheet netting or the use of derivative contracts, such exposures. As an example, if the foreign
currencies in which we hold net asset balances were to all weaken 10% against the U.S. dollar and foreign
currencies in which we hold net liability balances were to all strengthen 10% against the U.S. dollar, we
would recognize foreign exchange losses of approximately $8 million based on our foreign currency forward
positions and the net asset or liability balances of our foreign denominated cash and cash equivalents, accounts
receivable, deferred merchant bookings and merchant accounts payable balances as of December 31, 2008. As
the net composition of these balances fluctuate frequently, even daily, as do foreign exchange rates, the
example loss could be compounded or reduced significantly within a given period.
During 2008, 2007 and 2006 we recorded net foreign exchange rate gains (losses) of $(47) million,
$(22) million, and $10 million. As we increase our operations in international markets, our exposure to
fluctuations in foreign currency exchange rates increases. The economic impact to us of foreign currency
exchange rate movements is linked to variability in real growth, inflation, interest rates, governmental actions
and other factors. These changes, if material, could cause us to adjust our financing and operating strategies.
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.
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