Expedia 2013 Annual Report Download - page 97

Redeemable Noncontrolling Interests
We have noncontrolling interests in majority owned entities, which are carried at fair value as the
noncontrolling interests contain certain rights, whereby we may acquire and the minority shareholders may sell to
us the additional shares of the companies. Changes in fair value of the shares for which the minority holders may
sell to us are recorded to the noncontrolling interest and as charges or credits to retained earnings (or additional
paid-in capital in the absence of retained earnings). Fair value determinations require high levels of judgment
(“Level 3” on the fair value hierarchy) and are based on various valuation techniques, including market
comparables and discounted cash flow projections.
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.
Discontinued Operations
In determining whether a group of assets disposed (or to be disposed) of should be presented as a
discontinued operation, we make a determination of whether the group of assets being disposed of comprises a
component of the entity; that is, whether it has historic operations and cash flows that can be clearly
distinguished (both operationally and for financial reporting purposes). We also determine whether the cash
flows associated with the group of assets have been significantly (or will be significantly) eliminated from the
ongoing operations of Expedia as a result of the disposal transaction and whether we have no significant
continuing involvement in the operations of the group of assets after the disposal transaction. If these
determinations can be made affirmatively, the results of operations of the group of assets being disposed of (as
well as any gain or loss on the disposal transaction) are aggregated for separate presentation apart from
continuing operating results of Expedia in the consolidated financial statements. See Note 4 — Discontinued
Operations for a summary of discontinued operations.
Derivative Instruments
Derivative instruments are carried at fair value on our consolidated balance sheets. The fair values of the
derivative financial instruments generally represent the estimated amounts we would expect to receive or pay
upon termination of the contracts as of the reporting date.
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