Expedia 2010 Annual Report Download - page 79

net income or loss allocated to members or partners in our consolidated entities, which includes the
noncontrolling interest share of net income or loss from eLong as well as net income or loss from our redeemable
noncontrolling interest entities. eLong is a separately listed company on the NASDAQ and, therefore, subject to
its own audit which could result in possible adjustments that are not material to Expedia, Inc. but could be
material to eLong.
On January 1, 2009, we adopted authoritative guidance issued by the Financial Accounting Standards Board
(“FASB”) on noncontrolling interests. The guidance states that accounting and reporting for minority interests
are to be recharacterized as noncontrolling interests and classified as a component of equity. The calculation of
earnings per share continues to be based on income amounts attributable to the parent. Beginning on January 1,
2009, upon adoption, we recharacterized our minority interest as a noncontrolling interest and classified it as a
component of stockholders’ equity in our consolidated financial statements with the exception of shares
redeemable at the option of the minority holders, which are not significant and therefore have been included in
other long-term liabilities.
Certain of our subsidiaries that operate in China, including eLong, have variable interests in affiliated
entities in China in order to comply with Chinese laws and regulations, which restricts foreign investment in the
air-ticketing, travel agency and internet content provision businesses. Through a series of contractual agreements
with these affiliates and their shareholders, these subsidiaries are the primary beneficiaries of the cash losses or
profits of their variable interest affiliates. As such, although we do not own the capital stock of some of our
Chinese affiliates, based on our controlling ownership of the subsidiaries and these contractual arrangements, we
consolidate their results.
We have eliminated significant intercompany transactions and accounts in our consolidated financial
statements.
Accounting Estimates
We use estimates and assumptions in the preparation of our consolidated financial statements in accordance
with accounting principles generally accepted in the United States (“GAAP”). Our estimates and assumptions
affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the
date of our consolidated financial statements. These estimates and assumptions also affect the reported amount of
net income or loss during any period. Our actual financial results could differ significantly from these estimates.
The significant estimates underlying our consolidated financial statements include revenue recognition;
recoverability of current and long-lived assets, intangible assets and goodwill; income and indirect taxes, such as
potential settlements related to occupancy taxes; loss contingencies; stock-based compensation and accounting
for derivative instruments.
Reclassifications
We have reclassified certain amounts relating to our prior period results to conform to our current period
presentation.
Revenue Recognition
We recognize revenue when it is earned and realizable based on the following criteria: persuasive evidence
that an arrangement exists, services have been rendered, the price is fixed or determinable and collectibility is
reasonably assured.
We also evaluate the presentation of revenue on a gross versus a net basis. The consensus of the
authoritative accounting literature is that the presentation of revenue as “the gross amount billed to a customer
because it has earned revenue from the sale of goods or services or the net amount retained (that is, the amount
billed to a customer less the amount paid to a supplier) because it has earned a commission or fee” is a matter of
judgment that depends on the relevant facts and circumstances. In making an evaluation of this issue, some of the
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