Expedia 2009 Annual Report Download - page 101

Expedia, Inc.
Notes to Consolidated Financial Statements — (Continued)
A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows, in
thousands:
Balance at January 1, 2008 ................................................... $173,593
Increases to tax positions related to the current year ............................... 15,883
Decreases to tax positions related to the prior year ................................ (22,520)
Audit settlements paid during 2008 ............................................ (4,911)
Interest and penalties ....................................................... 17,794
Balance at December 31, 2008 ................................................ 179,839
Increases to tax positions related to the current year ............................... 2,117
Increases to tax positions related to the prior year ................................. 21,911
Decreases to tax positions related to the prior year ................................ (11,560)
Audit settlements paid during 2009 ............................................ (4,351)
Interest and penalties ....................................................... 2,752
Balance at December 31, 2009(1) ............................................. $190,708
(1) As of December 31, 2009, we had $191 million of unrecognized tax benefits, of which $190 million is
classified as long-term and included in other long-term liabilities.
Included in the balance at December 31, 2009 and 2008 were $46 million and $68 million of liabilities for
uncertain tax positions that, if recognized, would decrease our provision for income taxes. Also included in the
balance at December 31, 2009 were $128 million, of which $6 million and $3 million was added in 2009 and
2008, of excess tax benefits that resulted from our Chairman and Senior Executive’s exercises of stock options
during 2007 and 2005. If the IRS were to make a final determination that IAC and not Expedia were entitled to
such deductions, then under the terms of our tax sharing agreement, IAC would pay to Expedia an amount equal
to any such tax benefit at such time as it were actually realized by IAC. Therefore, an unfavorable outcome
related to this position would not materially impact our cash flows.
We recognize interest and penalties related to our liabilities for uncertain tax positions in income tax
expense. As of December 31, 2009 and 2008, we had approximately $24 million accrued for both periods for the
potential payment of estimated interest and penalties. During the years ended December 31, 2009, 2008 and
2007, we recognized approximately $(1) million, $12 million and $4 million of interest (income) expense, net of
federal benefit and penalties, related to our liabilities for uncertain tax positions.
NOTE 10 — Stockholders’ Equity
Common Stock and Class B Common Stock
Our authorized common stock consists of 1.6 billion shares of common stock with par value of $0.001 per
share, and 400 million shares of Class B common stock with par value of $0.001 per share. Both classes of
common stock qualify for and share equally in dividends, if declared by our Board of Directors, and generally
vote together on all matters. Common stock is entitled to one vote per share and Class B common stock is
entitled to 10 votes per share. Holders of common stock, voting as a single, separate class are entitled to elect
25% of the total number of directors. Class B common stockholders may, at any time, convert their shares into
common stock, on a one for one share basis. Upon conversion, the Class B common stock is retired and is not
available for reissue. In the event of liquidation, dissolution, distribution of assets or winding-up of Expedia, Inc.,
the holders of both classes of common stock have equal rights to receive all the assets of Expedia, Inc. after the
rights of the holders of the preferred stock have been satisfied.
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