Expedia 2013 Annual Report Download - page 94

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Agency Hotel, Car and Cruise. In addition to air tickets, our agency revenue comes from certain hotel
transactions as well as cruise and car rental reservations. We generally record agency revenue from hotel, cruise
and car reservations on an accrual basis when the travel occurs. We record an allowance for cancellations on this
revenue based on historical experience.
Packages. Packages assembled by travelers through the packaging model on our websites generally include
a merchant hotel component and some combination of an air, car or destination services component. The
individual package components are recognized in accordance with our revenue recognition policies stated above.
Advertising. We record advertising revenue ratably over the advertising period or upon delivery of
advertising impressions, depending on the terms of the advertising contract. We record revenue from click-
through fees charged to our travel partners for traveler leads sent to the travel partners’ websites. We record
revenue from click-through fees after the traveler makes the click-through to the related travel partners’ websites.
Other. We record revenue from all other sources either upon delivery or when we provide the service.
Collaborative Arrangement
During 2013, we entered into an exclusive, long-term strategic marketing agreement with Travelocity,
whereby Expedia powers or will power the technology platforms for Travelocity’s existing websites in the
United States and Canada, while providing Travelocity access to our supply and customer services. Travelocity is
focusing its efforts on promoting its brand and marketing the broad offering of travel services and supply made
available through the agreement. Travelocity remains wholly-owned by Sabre Holdings Corporation (“Sabre”),
and independent of Expedia, Inc. Under the terms of the agreement, Travelocity is compensated through a
performance-based marketing fee related to bookings powered by Expedia made through Travelocity-branded
websites in the United States and Canada. We account for the strategic marketing agreement under the applicable
authoritative accounting guidance surrounding collaborative arrangements whereby Expedia is the principal party
in the transaction with the customer. Revenue earned on the Travelocity websites is recorded as a component of
Expedia’s net revenue in accordance with our revenue recognition policies and the related marketing fee is
recorded as selling and marketing expense. No amounts were received or recognized between the parties before
launch. Brand Expedia launched hotel and air products on the Travelocity-branded websites for the United States
during the fourth quarter of 2013 and expects to complete the majority of the migration of the remaining products
and the Canada website during the first half of 2014.
Expedia has a variable interest in Travelocity as determined in accordance with the applicable authoritative
accounting guidance. We are not the primary beneficiary as we do not have power to direct the activities that
most significantly impact Travelocity’s economic performance, promoting its brand and marketing travel
services. Our exposure to loss under this arrangement is primarily commercial in nature, the maximum of which
cannot be quantified.
Cash and Cash Equivalents
Our cash and cash equivalents include cash and liquid financial instruments, including money market funds
and time deposit investments, with maturities of 90 days or less when purchased.
Short-term and Long-term Investments
We determine the appropriate classification of our investments in marketable securities at the time of
purchase and reevaluate such designation at each balance sheet date. Based on our intent and ability to hold
certain assets until maturity, we may classify certain debt securities as held to maturity and measure them at
amortized cost. Investments classified as available for sale are recorded at fair value with unrealized holding
gains and losses recorded, net of tax, as a component of accumulated other comprehensive income. Realized
gains and losses from the sale of available for sale investments, if any, are determined on a specific identification
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