Expedia 2011 Annual Report Download - page 88

In the evaluation of indefinite-lived intangible assets, an impairment charge is recorded for the excess of the
carrying value of indefinite-lived intangible assets over their fair value. We base our measurement of fair value
of indefinite-lived intangible assets, which primarily consist of trade name and trademarks, using the relief-from-
royalty method. This method assumes that the trade name and trademarks have value to the extent that their
owner is relieved of the obligation to pay royalties for the benefits received from them.
Recoverability of Intangible Assets with Definite Lives and Other Long-Lived Assets
Intangible assets with definite lives and other long-lived assets are carried at cost and are amortized on a
straight-line basis over their estimated useful lives of one to twelve years. We review the carrying value of long-
lived assets or asset groups, including property and equipment, to be used in operations whenever events or
changes in circumstances indicate that the carrying amount of the assets might not be recoverable. Factors that
would necessitate an impairment assessment include a significant adverse change in the extent or manner in
which an asset is used, a significant adverse change in legal factors or the business climate that could affect the
value of the asset, or a significant decline in the observable market value of an asset, among others. If such facts
indicate a potential impairment, we would assess the recoverability of an asset group by determining if the
carrying value of the asset group exceeds the sum of the projected undiscounted cash flows expected to result
from the use and eventual disposition of the assets over the remaining economic life of the primary asset in the
asset group. If the recoverability test indicates that the carrying value of the asset group is not recoverable, we
will estimate the fair value of the asset group using appropriate valuation methodologies which would typically
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.
Assets held for sale, to the extent we have any, are reported at the lower of cost or fair value less costs to
sell.
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.
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.
Presentation of Taxes in the Income Statement
We present taxes that we collect from customers and remit to government authorities on a net basis in our
consolidated statements of operations.
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