Expedia 2014 Annual Report Download - page 57

Indefinite-Lived Intangible Assets. We base our measurement of fair value of indefinite-lived intangible
assets, which primarily consist of trade name and trademarks, using the relief-from-royalty method. This method
assumes that the trade name and trademarks have value to the extent that their owner is relieved of the obligation
to pay royalties for the benefits received from them. This method requires us to estimate the future revenue for
the related brands, the appropriate royalty rate and the weighted average cost of capital.
Definite-Lived Intangible Assets. We review the carrying value of long-lived assets or asset groups to be
used in operations whenever events or changes in circumstances indicate that the carrying amount of the assets
might not be recoverable. Factors that would necessitate an impairment assessment include a significant adverse
change in the extent or manner in which an asset is used, a significant adverse change in legal factors or the
business climate that could affect the value of the asset, or a significant decline in the observable market value of
an asset, among others. If such facts indicate a potential impairment, we would assess the recoverability of an
asset group by determining if the carrying value of the asset group exceeds the sum of the projected undiscounted
cash flows expected to result from the use and eventual disposition of the assets over the remaining economic life
of the primary asset in the asset group. If the recoverability test indicates that the carrying value of the asset
group is not recoverable, we will estimate the fair value of the asset group using appropriate valuation
methodologies, which would typically include an estimate of discounted cash flows. Any impairment would be
measured as the difference between the asset groups carrying amount and its estimated fair value.
The use of different estimates or assumptions in determining the fair value of our goodwill, indefinite-lived
and definite-lived intangible assets may result in different values for these assets, which could result in an
impairment or, in period in which an impairment is recognized, could result in a materially different impairment
charge.
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 record liabilities to address uncertain tax positions we have taken in previously filed tax returns or that
we expect to take in a future tax return. The determination for required liabilities is based upon an analysis of
each individual tax position, taking into consideration whether it is more likely than not that our tax position,
based on technical merits, will be sustained upon examination. For those positions for which we conclude it is
more likely than not it will be sustained, we recognize the largest amount of tax benefit that is greater than
50 percent likely of being realized upon ultimate settlement with the taxing authority. The difference between the
amount recognized and the total tax position is recorded as a liability. The ultimate resolution of these tax
positions may be greater or less than the liabilities recorded.
Other Long-Term Liabilities
Various Legal and Tax Contingencies. We record liabilities to address potential exposures related to
business and tax positions we have taken that have been or could be challenged by taxing authorities. In addition,
we record liabilities associated with legal proceedings and lawsuits. These liabilities are recorded when the
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