Expedia 2008 Annual Report Download - page 84

that would necessitate an impairment assessment include a significant adverse change in the extent or manner
in which an asset is used, a significant adverse change in legal factors or the business climate that could affect
the value of the asset, or a significant decline in the observable market value of an asset, among others. If
such facts indicate a potential impairment, we would assess the recoverability of an asset group by determining
if the carrying value of the asset group exceeds the sum of the projected undiscounted cash flows expected to
result from the use and eventual disposition of the assets over the remaining economic life of the primary
asset in the asset group. If the recoverability test indicates that the carrying value of the asset group is not
recoverable, we will estimate the fair value of the asset group using appropriate valuation methodologies
which would typically include an estimate of discounted cash flows. Any impairment would be measured as
the difference between the asset groups carrying amount and its estimated fair value. See Note 5 —Goodwill
and Intangible Assets, Net for discussion of impairment of other long-lived assets in 2008.
Assets held for sale, to the extent we have any, are reported at the lower of cost or fair value less costs to
sell.
Long-term Investments
We record investments, which are non-marketable, using the cost basis when we do not have the ability
to exercise significant influence over the investee and generally when our ownership in the investee is less
than 20%. We record investments using the equity method when we have the ability to exercise significant
influence over the investee.
We periodically evaluate the recoverability of investments and record a write-down to fair value if a
decline in value is determined to be other-than-temporary.
Income Taxes
In accordance with SFAS No. 109, Accounting for Income Taxes, we record income taxes under the
liability method. Deferred tax assets and liabilities reflect our estimation of the future tax consequences of
temporary differences between the carrying amounts of assets and liabilities for book and tax purposes. We
determine deferred income taxes based on the differences in accounting methods and timing between financial
statement and income tax reporting. Accordingly, we determine the deferred tax asset or liability for each
temporary difference based on the enacted tax rates expected to be in effect when we realize the underlying
items of income and expense. We consider many factors when assessing the likelihood of future realization of
our deferred tax assets, including our recent earnings experience by jurisdiction, expectations of future taxable
income, and the carryforward periods available to us for tax reporting purposes, as well as other relevant
factors. We may establish a valuation allowance to reduce deferred tax assets to the amount we believe is
more likely than not to be realized. Due to inherent complexities arising from the nature of our businesses,
future changes in income tax law, tax sharing agreements or variances between our actual and anticipated
operating results, we make certain judgments and estimates. Therefore, actual income taxes could materially
vary from these estimates.
On January 1, 2007, we adopted Financial Accounting Standards Board (“FASB”) Interpretation No. 48,
Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109 (“FIN 48”).
FIN 48 gives guidance related to the financial statement recognition and measurement of a tax position taken
or expected to be taken in a tax return, and requires that we recognize in our financial statements the impact
of a tax position, if that position is more likely than not to be sustained upon an examination, based on the
technical merits of the position.
F-12
Expedia, Inc.
Notes to Consolidated Financial Statements — (Continued)