Expedia 2009 Annual Report Download - page 89

Expedia, Inc.
Notes to Consolidated Financial Statements — (Continued)
Fair Value of Financial Instruments
The carrying amounts of cash and cash equivalents, restricted cash and cash equivalents and short-term
investments reported on our consolidated balance sheets approximate fair value as we maintain them with
various high-quality financial institutions. The accounts receivable are short-term in nature and are generally
settled shortly after the sale.
Certain Risks and Concentrations
Our business is subject to certain risks and concentrations including dependence on relationships with travel
suppliers, primarily airlines and hotels, dependence on third-party technology providers, exposure to risks
associated with online commerce security and credit card fraud. We also rely on global distribution system
partners and third-party service providers for certain fulfillment services, including one third-party service
provider for which we accounted for approximately 36% of its total revenue for the year ended December 31,
2008 and approximately 43% of its total revenue for the nine months ended September 30, 2009.
Financial instruments, which potentially subject us to concentration of credit risk, consist primarily of cash
and cash equivalents. We maintain some cash and cash equivalents balances with financial institutions that are in
excess of Federal Deposit Insurance Corporation insurance limits. Our cash and cash equivalents are primarily
composed of government and prime institutional money market funds as well as bank (both interest and
non-interest bearing) account balances denominated in U.S. dollars, Canadian dollars, euros and British pound
sterling.
Contingent Liabilities
We have a number of regulatory and legal matters outstanding, as discussed further in Note 14 —
Commitments and Contingencies. Periodically, we review the status of all significant outstanding matters to
assess the potential financial exposure. When (i) it is probable that an asset has been impaired or a liability has
been incurred and (ii) the amount of the loss can be reasonably estimated, we record the estimated loss in our
consolidated statements of operations. We provide disclosure in the notes to the consolidated financial statements
for loss contingencies that do not meet both these conditions if there is a reasonable possibility that a loss may
have been incurred that would be material to the financial statements. Significant judgment is required to
determine the probability that a liability has been incurred and whether such liability is reasonably estimable. We
base accruals made on the best information available at the time which can be highly subjective. The final
outcome of these matters could vary significantly from the amounts included in the accompanying consolidated
financial statements.
New Accounting Pronouncements
In June 2009, the FASB issued guidance on the consolidation of variable interest entities, which is effective
for fiscal years beginning after November 15, 2009. The new guidance requires revised evaluations of whether
entities represent variable interest entities, ongoing assessments of control over such entities, and additional
disclosures for variable interests. We are currently evaluating the impact the adoption of this guidance will have
on our consolidated financial statements.
In October 2009, the FASB issued guidance on revenue recognition to require companies to allocate
revenue in multiple-element arrangements based on an element’s estimated selling price if vendor-specific or
other third-party evidence of value is not available. This guidance is effective beginning January 1, 2011 with
earlier application permitted. We are currently evaluating both the timing and the impact the adoption of this
guidance will have on our consolidated financial statements.
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