Expedia 2012 Annual Report Download - page 92

interest in our consolidated financial statements to recognize the minority ownership interest in our consolidated
subsidiaries. Noncontrolling interest in the earnings and losses of consolidated subsidiaries represent the share of
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.
We characterize our minority interest in eLong as a noncontrolling interest and classify it as a component of
stockholders’ equity in our consolidated financial statements. Noncontrolling interests with shares redeemable at
the option of the minority holders are not significant and therefore have been included in other long-term
liabilities. See “Redeemable Noncontrolling Interest” below for further information.
eLong has 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, eLong is the
primary beneficiary 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 transactional taxes,
such as potential settlements related to occupancy and excise taxes; loss contingencies; loyalty program
liabilities; 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 collectability 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
factors that should be considered are: whether we are the primary obligor in the arrangement (strong indicator);
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