Expedia 2012 Annual Report Download - page 100

Fair Value Recognition, Measurement and Disclosure
The carrying amounts of cash and cash equivalents and restricted cash and cash equivalents 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.
We disclose the fair value of our financial instruments based on the fair value hierarchy using the following
three categories:
Level 1 — Valuations based on quoted prices for identical assets and liabilities in active markets.
Level 2 — Valuations based on observable inputs other than quoted prices included in Level 1, such as
quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets
and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by
observable market data.
Level 3 — Valuations based on unobservable inputs reflecting the Company’s own assumptions, consistent
with reasonably available assumptions made by other market participants. These valuations require
significant judgment.
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 38% of its total revenue for the year ended December 31,
2011 and approximately 34% of its total revenue for the nine months ended September 30, 2012.
Financial instruments, which potentially subject us to concentration of credit risk, consist primarily of cash
and cash equivalents and corporate debt securities. 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 prime institutional money market funds as well as bank (both interest
and non-interest bearing) account balances denominated in U.S. dollars, euros, British pound sterling, Canadian
dollar, Australian dollar, Japanese yen and Chinese renminbi.
Contingent Liabilities
We have a number of regulatory and legal matters outstanding, as discussed further in Note 15 —
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.
Occupancy Tax
Some states and localities impose a transient occupancy or accommodation tax on the use or occupancy of
hotel accommodations. Generally, hotels collect taxes based on the room rate paid to the hotel and remit these
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