Orbitz 2009 Annual Report Download - page 97

During the year ended December 31, 2007, we recorded a full valuation allowance against $30 million of
foreign deferred tax assets related to portions of our U.K.-based business in accordance with SFAS No. 109.
SFAS No. 109 requires that companies assess whether valuation allowances should be established against their
deferred tax assets based on the consideration of all available evidence using a “more likely than not”
standard. Prior to the IPO, we had the ability to offset these losses with taxable income of Travelport
subsidiaries and affiliates in the U.K. As a result of the IPO, these subsidiaries are no longer in our U.K.
group and, as a result, their income is not available to offset our losses in the U.K. group at December 31,
2007.
During the year ended December 31, 2007, we also recorded an adjustment to reduce the deferred tax
assets and associated valuation allowance by $115 million, resulting in no impact to the net deferred income
tax asset. This adjustment related to the difference between the book and tax basis in the liability.
At December 31, 2008, we established valuation allowances against the majority of our deferred tax
assets. As a result, any changes in our gross deferred tax assets and liabilities during the year ended
December 31, 2008 were largely offset by corresponding changes in our valuation allowances, resulting in a
$1 million decrease in our net deferred tax assets.
As of December 31, 2008, we had a valuation allowance of $320 million, $272 million of which was
established in purchase accounting for the Blackstone Acquisition. Prior to January 1, 2009, to the extent that
any valuation allowances established in purchase accounting were reduced, these reductions were recorded as
adjustments to goodwill rather than the provision for income taxes (see Note 2 — Summary of Significant
Accounting Policies).
The net deferred tax asset at December 31, 2008 and December 31, 2007 amounted to $14 million and
$15 million, respectively. These net deferred tax assets relate to temporary tax to book differences in
non-U.S. jurisdictions, the realization of which is, in management’s judgment, more likely than not. We have
assessed, based on experience with relevant taxing authorities, our expectations of future taxable income,
carry-forward periods available and other relevant factors, that we will be more likely than not to recognize
this deferred tax asset.
As of December 31, 2008, we had U.S. federal and state net operating loss carry-forwards of
approximately $110 million and $153 million, respectively, which expire between 2021 and 2028. In addition,
we had $344 million of non-U.S. net operating loss carry-forwards, most of which do not expire. Additionally,
we have $4 million of U.S. federal and state income tax credit carry-forwards which expire between 2027 and
2028 and $1 million of U.S. federal income tax credits which have no expiration date. No provision has been
made for U.S. federal or non-U.S. deferred income taxes on approximately $9 million of accumulated and
undistributed earnings of foreign subsidiaries at December 31, 2008. A provision has not been established
because it is our present intention to reinvest the undistributed earnings indefinitely in those foreign operations.
The determination of the amount of unrecognized U.S. federal or non-U.S. deferred income tax liabilities for
unremitted earnings at December 31, 2008 is not practicable.
We adopted the provisions of FIN 48 effective January 1, 2007. Given the inherent complexities of the
business and that we are subject to taxation in a substantial number of jurisdictions, we routinely assess the
likelihood of additional assessment in each of the taxing jurisdictions. In accordance with FIN 48, we have
established a liability for unrecognized tax benefits that management believes to be adequate. Once
established, unrecognized tax benefits are adjusted if more accurate information becomes available, or a
change in circumstance or an event occurs necessitating a change to the liability.
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ORBITZ WORLDWIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)