Expedia 2009 Annual Report Download - page 82

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Expedia, Inc.
Notes to Consolidated Financial Statements — (Continued)
Merchant Hotel. Our travelers pay us for merchant hotel transactions prior to departing on their trip,
generally when they book the reservation. We record the payment in deferred merchant bookings until the stay
occurs, at which point we record the revenue. In certain nonrefundable, nonchangeable transactions where we
have no significant post-delivery obligations, we record revenue when the traveler completes the transaction on
our website, less a reserve for chargebacks and cancellations based on historical experience. Amounts received
from customers are presented net of amounts paid to suppliers. In certain instances when a supplier invoices us
for less than the cost we accrued, we generally recognize those amounts as revenue six months in arrears, net of
an allowance, when we determine it is not probable that we will be required to pay the supplier, based on
historical experience and contract terms.
We generally contract in advance with lodging providers to obtain access to room allotments at wholesale
rates. Certain contracts specifically identify the number of potential rooms and the negotiated rate of the rooms to
which we may have access over the terms of the contracts, which generally range from one to three years. Other
contracts are not specific with respect to the number of rooms and the rates of the rooms to which we may have
access over the terms of the contracts. In either case we may return unbooked hotel room allotments with no
obligation to the lodging providers within a period specified in each contract. For hotel rooms that are cancelled
by the traveler after the specified period of time, we charge the traveler a cancellation fee or penalty that is equal
to the amount a hotel may invoice us for the cancellation.
Merchant Air. Generally, we determine the ticket price for merchant air transactions. We generally pay the
cost of the airline ticket within a few weeks after booking. We record cash paid by the traveler as deferred
merchant bookings and the cost of the airline ticket as prepaid merchant bookings. When the flight occurs, we
record the difference between the deferred merchant bookings and the prepaid merchant bookings as revenue on
a net basis.
When we have nonrefundable and generally noncancelable merchant air transactions, with no significant
post-delivery obligations, we record revenue upon booking. We record a reserve for chargebacks and
cancellations at the time of the transaction based on historical experience.
Agency Air, Hotel, Car and Cruise. Our agency revenue comes from airline ticket transactions, certain
hotel transactions as well as cruise and car rental reservations. We record agency revenue on air transactions
when the traveler books the transaction, as we have no significant post-delivery obligations. We generally record
agency revenue on hotel reservations when the stay occurs. We record agency revenue on cruise and car rental
reservations either on an accrual basis for payments from a commission clearinghouse, or on receipt of
commissions from an individual supplier. We record an allowance for cancellations and chargebacks on this
revenue based on historical experience.
Packages. Packages assembled by travelers through the packaging model on our websites include a
merchant hotel component and some combination of an air, car or destination services component. The
individual package components are recognized in accordance with our revenue recognition policies stated above.
Click-Through Fees. We record revenue from click-through fees charged to our travel partners for traveler
leads sent to the travel partners’ websites. We record revenue from click-through fees after the traveler makes the
click-through to the related travel partners’ websites.
Advertising. We record advertising revenue ratably over the advertising period or upon delivery of
advertising impressions, depending on the terms of the advertising contract.
Other. We record revenue from all other sources either upon delivery or when we provide the service.
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