Expedia 2013 Annual Report Download - page 92

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NOTE 2 — Significant Accounting Policies
Consolidation
Our consolidated financial statements include the accounts of Expedia, Inc., our wholly-owned subsidiaries,
and entities for which we control a majority of the entity’s outstanding common stock. We record noncontrolling
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, such as trivago, have been included in redeemable noncontrolling interests.
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; redeemable noncontrolling interests; 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.
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