Expedia 2009 Annual Report Download - page 85

Expedia, Inc.
Notes to Consolidated Financial Statements — (Continued)
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 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
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 authoritative guidance issued by the FASB related to uncertain tax
positions. This guidance relates 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.
Occupancy Tax
Some states and localities impose a transient occupancy or accommodation tax on the use or occupancy of
hotel accommodations. Generally, hotels charge taxes based on the room rate paid to the hotel and remit these
taxes to the various tax authorities. When a customer books a room through one of our travel services, we collect
a tax recovery charge from the customer which we pay to the hotel. We do not collect or remit occupancy taxes,
nor do we pay occupancy taxes to the hotel operator on the portion of the customer payment we retain. Some
jurisdictions have questioned our practice in this regard. While the applicable tax provisions vary among the
jurisdictions, we generally believe that we are not required to collect and remit such occupancy taxes. We are
engaged in discussions with tax authorities in various jurisdictions to resolve this issue. Some tax authorities
have brought lawsuits or have levied assessments asserting that we are required to collect and remit occupancy
tax. The ultimate resolution in all jurisdictions cannot be determined at this time. We have established a reserve
for the potential settlement of issues related to hotel occupancy taxes when determined to be probable and
estimable. See Note 14 —Commitment and Contingencies for further discussion.
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