Orbitz 2011 Annual Report Download - page 64

ORBITZ WORLDWIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
64
Allowance for Doubtful Accounts
Our accounts receivable are reflected 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 information. When we determine that a receivable is not
collectable, the account is charged to expense in our consolidated statements of operations. Bad debt expense is recorded in
selling, general and administrative expense in our consolidated statements of operations. During the years ended December 31,
2011, 2010 and 2009, we recorded bad debt expense of $0.3 million, $0 and $0.6 million, 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-cancellable lease term
Capitalized software 3 - 10 years
Furniture, fixtures and equipment 3 - 7 years
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. During the years ended December 31, 2011, 2010
and 2009, we capitalized $0, $0 and $0.1 million of interest, respectively.
We evaluate the recoverability of the carrying value 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 fully recoverable.
This analysis is performed by comparing the carrying values of the assets to the current and expected undiscounted future cash
flows to be generated from these assets, including estimated sales proceeds when appropriate. 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.
Our indefinite-lived intangible assets include our trademarks and trade names, which are not subject to amortization. Our
finite-lived intangible assets primarily include our customer and vendor relationships and are amortized over their estimated
useful lives, generally 4 to 8 years, using the straight-line method. Our intangible assets primarily relate to the acquisition of
entities accounted for using the purchase method of accounting and are estimated by management based on the fair value of
assets received.
We assess the carrying value of goodwill and other indefinite-lived intangible assets for impairment annually or more
frequently whenever events occur and circumstances change indicating potential impairment. We perform our annual
impairment testing of goodwill and other indefinite-lived intangible assets in the fourth quarter of each year. During the year
ended December 31, 2011, we changed our annual testing date from October 1 to December 31. With respect to our annual
goodwill testing date, we believe that this voluntary change in accounting method is preferable as it aligns the annual
impairment testing date with our long-range planning cycle, which is a significant element in the testing process. In connection
with this change, we first performed the test as of October 1, 2011 and then performed an additional annual impairment test as
of December 31, 2011. This change in our annual testing date, which was applied prospectively, does not delay, accelerate or
avoid an impairment charge. It was impracticable to apply this change retrospectively as it would require the application of