Expedia 2014 Annual Report Download - page 101

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, Australian dollar, British pound
sterling, Canadian dollar and Japanese yen.
Contingent Liabilities
We have a number of regulatory and legal matters outstanding, as discussed further in Note 17 —
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 of 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
taxes to the various tax authorities. When a customer books a room through one of our travel services, we collect
a tax recovery charge from the customer which we pay to the hotel. We calculate the tax recovery charge by
applying the occupancy tax rate supplied to us by the hotels to the amount that the hotel has agreed to receive for
the rental of the room by the consumer. In all but a limited number of jurisdictions, we do not collect or remit
occupancy taxes, nor do we pay occupancy taxes to the hotel operator on the portion of the customer payment we
retain. Some jurisdictions have questioned our practice in this regard. While the applicable tax provisions vary
among the jurisdictions, we generally believe that we are not required to collect and remit such occupancy taxes.
We are engaged in discussions with tax authorities in various jurisdictions to resolve this issue. Some tax
authorities have brought lawsuits or have levied assessments asserting that we are required to collect and remit
occupancy tax. The ultimate resolution in all jurisdictions cannot be determined at this time. We have established
a reserve for the potential settlement of issues related to hotel occupancy taxes when determined to be probable
and estimable. See Note 17 — Commitments and Contingencies for further discussion.
Recent Accounting Policies Not Yet Adopted
In May 2014, the FASB issued new guidance on revenue from contracts with customers (Topic 606). The
core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods
or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in
exchange for those goods or services. Additionally, the new guidance specifies the accounting for some costs to
obtain or fulfill a contract with a customer. The update requires an entity to apply the new guidance in one of two
methods: (1) retrospectively to each prior reporting period presented, or (2) retrospectively with the cumulative
effect of initially applying this update recognized at the date of initial application. The new guidance will be
effective for annual reporting periods beginning after December 15, 2016, including interim periods within that
reporting period. We are in the process of evaluating the impact of the adoption of this new guidance on our
consolidated financial statements.
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