Expedia 2011 Annual Report Download - page 22

policies and procedures in various jurisdictions in the United States and abroad, which are subject to change at
any time. Our businesses are also subject to laws, rules and regulations applicable to providers of primary
ticketing and ticket resale services, which in some cases regulate the amount of transaction and other fees that
they may be charged in connection with primary ticketing sales and/or the ticket prices that may be charged in
the case of ticket resale services, and new legislation of this nature is introduced from time to time in various
(and is pending in certain) jurisdictions in which our businesses sell tickets and provide services. The failure of
our businesses to comply with these laws and regulations could result in fines and/or proceedings against us by
governmental agencies and/or consumers, which if material, could adversely affect our business, financial
condition and results of operations.
In addition, the application of various domestic and international sales, use, value-added and other tax laws,
rules and regulations to our historical and new products and services is subject to interpretation by applicable
taxing authorities. While we believe that we are compliant with current tax provisions, taxing authorities may
take a contrary position and such positions may adversely affect our business, financial condition and results of
operations.
We are involved in various legal proceedings and may experience unfavorable outcomes, which could
adversely affect our business and financial condition.
We are involved in various legal proceedings and claims involving property, personal injury, contract,
alleged infringement of third-party intellectual property rights and other claims, including, but not limited to, the
legal proceedings described in Part I, Item 3, Legal Proceedings. These matters may involve claims for
substantial amounts of money or for other relief that might necessitate changes to our business or operations. The
defense of these actions is and may continue to be both time consuming and expensive. If these legal proceedings
were to result in unfavorable outcomes, it could have a material adverse effect on our business and financial
performance.
Our effective tax rate is impacted by a number of factors that could have a material impact on our
financial results and could increase the volatility of those results.
Due to the global nature of our business, we are subject to income taxes in the United States and many
different countries. Significant judgment is required in determining our worldwide provision for income taxes. In
the ordinary course of our business, there are many transactions and calculations where the ultimate tax
determination is uncertain. We regularly are under audit by tax authorities. Although we believe our tax estimates
are reasonable, the final determination of tax audits could be materially different from our historical income tax
provisions and accruals. The results of an audit could have a material effect on our financial position, results of
operations, or cash flows in the period or periods for which that determination is made.
In addition, we earn an increasing portion of our income, and accumulate a greater portion of our cash flow,
in foreign jurisdictions. Any repatriation of funds currently held in foreign jurisdictions may result in higher
effective tax rates and incremental cash tax payments. In addition, there have been proposals to amend U.S. tax
laws that would significantly impact the manner in which U.S. companies are taxed on foreign earnings.
Although we cannot predict whether or in what form any legislation will pass, if enacted, it could have a material
adverse impact on our U.S. tax expense and our cash flows.
System interruption and the lack of redundancy in our information systems may harm our businesses.
We rely on computer systems to facilitate and process transactions. We have experienced and may in the
future experience system interruptions that make some or all of these systems unavailable or prevent us from
efficiently fulfilling orders or providing services to third parties. Significant interruptions, outages or delays in
our internal systems, or systems of third parties that we rely upon including multiple co-location providers for
data centers and network access, or deterioration in the performance of such systems, would impair our ability to
process transactions and decrease our quality of service that we can offer to our travelers. These interruptions
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