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Expedia, Inc.
Notes to Consolidated Financial Statements
NOTE 1 — Organization and Basis of Presentation
Description of Business
Expedia, Inc. and its subsidiaries provide travel products and services to leisure and corporate travelers in
the United States and abroad. These travel products and services are offered through a diversified portfolio of
brands including: Expedia.com», hotels.com», Hotwire.com
TM
, the TripAdvisor»Media Network, our private
label programs (Worldwide Travel Exchange and Interactive Affiliate Network), Classic Vacations, Expedia
Local Expert, Egencia
TM
(formerly Expedia»Corporate Travel), eLong
TM
, Inc. (“eLong”) and Venere Net SpA
(“Venere”). In addition, many of these brands have related international points of sale. We refer to Expedia,
Inc. and its subsidiaries collectively as “Expedia,” the “Company,” “us,” “we” and “our” in these consolidated
financial statements.
Spin-Off from IAC/InterActiveCorp
On December 21, 2004, IAC/InterActiveCorp (“IAC”) announced its plan to separate into two indepen-
dent public companies. We refer to this transaction as the “Spin-Off.” A new company, Expedia, Inc., was
incorporated under Delaware law in April 2005, to hold substantially all of IAC’s travel and travel-related
businesses. On August 9, 2005, the Spin-Off from IAC was completed and Expedia, Inc. shares began trading
on The Nasdaq Global Select Market (“NASDAQ”) under the symbol “EXPE.”
Basis of Presentation
The accompanying consolidated financial statements include Expedia, Inc., our wholly-owned subsidiar-
ies, and entities we control, or in which we have a variable interest and are the primary beneficiary of
expected cash profits or losses. We record our investments in entities that we do not control, but over which
we have the ability to exercise significant influence, using the equity method. We record our investments in
entities over which we do not have the ability to exercise significant influence using the cost method. We have
eliminated significant intercompany transactions and accounts.
We believe that the assumptions underlying our consolidated financial statements are reasonable.
However, these consolidated financial statements do not present our future financial position, the results of our
future operations and cash flows.
Seasonality
We generally experience seasonal fluctuations in the demand for our travel products and services. For
example, traditional leisure travel bookings are generally the highest in the first three quarters as travelers plan
and book their spring, summer and holiday travel. The number of bookings decreases in the fourth quarter.
Because revenue in the merchant business is generally recognized when the travel takes place rather than when
it is booked, revenue typically lags bookings by several weeks or longer. As a result, revenue is typically the
lowest in the first quarter and highest in the third quarter. The macroeconomic downturn in the latter part of
2008 also affected our general revenue seasonality trends in the fourth quarter of 2008.
NOTE 2 — Significant Accounting Policies
Consolidation
Our consolidated financial statements include the accounts of Expedia, Inc., our wholly-owned subsidiar-
ies, and entities for which we control a majority of the entity’s outstanding common stock. We record minority
interest in our consolidated financial statements to recognize the minority ownership interest in our
consolidated subsidiaries. Minority interests in the earnings and losses of consolidated subsidiaries represent
F-7