Expedia 2015 Annual Report Download - page 95

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 our redeemable and non-redeemable noncontrolling
interest entities.
We characterize our minority interest in AirAsia-Expedia as a non-redeemable 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.
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; acquisition purchase price allocations; stock-based compensation
and accounting for derivative instruments.
Reclassifications
We have reclassified certain amounts related to our prior period results to conform to our current period
presentation. We also included a reclassification on our consolidated balance sheet as of December 31, 2014 to
correct the immaterial presentation of cash dividends as a reduction to retained earnings to the extent the
Company maintained retained earnings instead of additional paid-in capital.
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.
We also evaluate the presentation of revenue on a gross versus a net basis. The consensus of the
authoritative accounting literature is that the presentation of revenue as “the gross amount billed to a customer
because it has earned revenue from the sale of goods or services or the net amount retained (that is, the amount
billed to a customer less the amount paid to a supplier) because it has earned a commission or fee” is a matter of
judgment that depends on the relevant facts and circumstances. In making an evaluation of this issue, some of the
factors that should be considered are: whether we are the primary obligor in the arrangement (strong indicator);
whether we have general supply risk (before customer order is placed or upon customer return) (strong
indicator); and whether we have latitude in establishing price. The guidance clearly indicates that the evaluations
of these factors, which at times can be contradictory, are subject to significant judgment and subjectivity. If the
conclusion drawn is that we perform as an agent or a broker without assuming the risks and rewards of ownership
of goods, revenue should be reported on a net basis. For our primary transaction-based revenue models, discussed
below, we have determined net presentation is appropriate for the majority of revenue transactions.
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