Expedia 2010 Annual Report Download - page 87

a tax recovery charge from the customer which we pay to the hotel. We calculate the tax recovery charge by
applying the occupancy tax rate supplied to us by the hotels to the amount that the hotel has agreed to receive for
the rental of the room by the consumer. In all but a limited number of jurisdictions, 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 15 — Commitment and Contingencies for further discussion.
New Accounting Pronouncements
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 do not expect the adoption of this guidance to have a material impact on our
consolidated financial statements.
NOTE 3 — Acquisitions and Other Investments
During 2010, 2009 and 2008, we acquired a number of companies including various online travel media
content companies as well as travel product and service companies, which included the 2008 purchase of Venere,
an online travel provider based in Italy that focuses on hotel reservations under an agency model. The following
table summarizes the allocation of the purchase price for all acquisitions made in the three years ended
December 31, 2010, in thousands:
2010 2009 2008
Goodwill ............................................. $54,008 $ 51,947 $328,449
Intangible assets with definite lives(1) ...................... 13,359 23,897 112,968
Intangible assets with indefinite lives ....................... — — 47,641
Net liabilities and non-controlling interests acquired(2) ........ (5,138) (15,283) (14,486)
Total(3) ............................................ $62,229 $ 60,561 $474,572
(1) The weighted average life of acquired intangible assets during 2010, 2009 and 2008 was 5.1 years, 6.6 years
and 8.3 years.
(2) Includes cash acquired of $3 million, $7 million and $21 million during 2010, 2009 and 2008.
(3) As of December 31, 2010 and 2008, $9 million and $10 million of the total purchase price was accrued with
the remainder paid in cash during the respective years. For 2009, the total purchase price includes noncash
consideration of $20 million related to the removal of an equity method investment upon our acquisition of
a controlling interest, as discussed below, with the remainder paid in cash during the year.
In addition, during 2009 and 2008, we paid $10 million and $95 million of contingent purchase
consideration under prior acquisitions as well as other acquisition related-costs.
The purchase price allocation of the 2010 acquisitions is preliminary for up to 12 months after the
acquisition dates and subject to revision, and any change to the fair value of net assets acquired will lead to a
corresponding change to the purchase price allocable to goodwill on a retroactive basis. The results of operations
of each of the acquired businesses have been included in our consolidated results from each transaction closing
date forward; their effect on consolidated revenue and operating income during 2010, 2009 and 2008 was not
significant.
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