Orbitz 2010 Annual Report Download - page 80

Download and view the complete annual report

Please find page 80 of the 2010 Orbitz annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 129

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129

interest bearing bank account balances, U.S. treasury funds and investment grade institutional money market
accounts.
Cash and Cash Equivalents
We consider highly liquid investments purchased with an original maturity of three months or less to be
cash equivalents. These short-term investments are stated at cost, which approximates market value.
Allowance for Doubtful Accounts
Our accounts receivable are reported in our consolidated balance sheets net of an allowance for doubtful
accounts. We provide for estimated bad debts based on our assessment of our ability to realize receivables,
considering historical collection experience, the general economic environment and specific customer informa-
tion. When we determine that a receivable is not collectable, the account is written-off. Bad debt expense is
recorded in selling, general and administrative expense in our consolidated statements of operations. We
recorded bad debt expense of $1 million, almost nil and $2 million during the years ended December 31,
2009, December 31, 2008 and December 31, 2007, respectively.
Property and Equipment, Net
Property and equipment is recorded at cost, net of accumulated depreciation and amortization. We
depreciate and amortize property and equipment over their estimated useful lives using the straight-line
method. The estimated useful lives by asset category are:
Asset Category Estimated Useful Life
Leasehold improvements. ............ Shorter of asset’s useful life or non-cancelable lease term
Capitalizedsoftware................ 3-10years
Furniture, fixtures and equipment ...... 3-7years
We capitalize the costs of software developed for internal use when the preliminary project stage of the
application has been completed and it is probable that the project will be completed and used to perform the
function intended. Amortization commences when the software is placed into service.
We also capitalize interest on internal software development projects. The amount of interest capitalized
is computed by applying our weighted average borrowing rate to qualifying expenditures. We capitalized
almost nil, $1 million and $3 million of interest during the years ended December 31, 2009, December 31,
2008 and December 31, 2007, respectively.
We evaluate the recoverability of our long-lived assets, including property and equipment and finite-lived
intangible assets, when circumstances indicate that the carrying value of those assets may not be recoverable.
This analysis is performed by comparing the carrying values of the assets to the current and expected future
cash flows to be generated from these assets, on an undiscounted basis. If this analysis indicates that the
carrying value of an asset is not recoverable, the carrying value is reduced to fair value through an impairment
charge in our consolidated statements of operations.
Goodwill, Trademarks and Other Intangible Assets
Goodwill represents the excess of the purchase price over the estimated fair value of the underlying assets
acquired and liabilities assumed in the acquisition of a business. We assign goodwill to reporting units that are
expected to benefit from the business combination as of the acquisition date. Goodwill is not subject to
amortization.
80
ORBITZ WORLDWIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)