Item 16. Form 10-K Summary.

None.

Signatures

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	BOOKING HOLDINGS INC.
	By:	/s/ Glenn D. Fogel
		Name:	Glenn D. Fogel
		Title:	Chief Executive Officer and President
		Date:	February 27, 2019

Power of Attorney

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Glenn D. Fogel, David I. Goulden and Peter J. Millones, and each of them severally, his or her true and lawful attorney-in-fact with power of substitution and resubstitution to sign in his or her name, place and stead, in any and all capacities, to do any and all things and execute any and all instruments that such attorney may deem necessary or advisable under the Securities Exchange Act of 1934 and any rules, regulations and requirements of the Securities and Exchange Commission in connection with this Annual Report on Form 10-K and any and all amendments hereto, as fully and for all intents and purposes as he or she might do or could do in person, and hereby ratifies and confirms all said attorneys-in-fact and agents, each acting alone, and his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature		Title		Date
/s/ Glenn D. Fogel		Director, Chief Executive Officer and President		February 27, 2019
Glenn D. Fogel
/s/ Jeffery H. Boyd		Director, Chairman of the Board		February 27, 2019
Jeffery H. Boyd
/s/ David I. Goulden		Executive Vice President and Chief Financial		February 27, 2019
David I. Goulden		Officer (Principal Financial Officer and Principal Accounting Officer)
/s/ Timothy M. Armstrong		Director		February 27, 2019
Timothy M. Armstrong
/s/ Jeffrey E. Epstein		Director		February 27, 2019
Jeffrey E. Epstein
/s/ James M. Guyette		Director		February 27, 2019
James M. Guyette
/s/ Robert J. Mylod Jr.		Director		February 27, 2019
Robert J. Mylod Jr.
/s/ Charles H. Noski		Director		February 27, 2019
Charles H. Noski
/s/ Nancy B. Peretsman		Director		February 27, 2019
Nancy B. Peretsman
/s/ Thomas E. Rothman		Director		February 27, 2019
Thomas E. Rothman
/s/ Craig W. Rydin		Director		February 27, 2019
Craig W. Rydin
/s/ Lynn M. Vojvodich		Director		February 27, 2019
Lynn M. Vojvodich
/s/ Mirian Graddick-Weir		Director		February 27, 2019
Mirian Graddick-Weir
/s/ Nicholas J. Read		Director		February 27, 2019
Nicholas J. Read

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page No.
Report of Independent Registered Public Accounting Firm	71
Consolidated Balance Sheets at December 31, 2018 and 2017	72
Consolidated Statements of Operations for the years ended December 31, 2018, 2017 and 2016	73
Consolidated Statements of Comprehensive Income for the years ended December 31, 2018, 2017 and 2016	74
Consolidated Statements of Changes in Stockholders' Equity for the years ended December 31, 2018, 2017 and 2016	75
Consolidated Statements of Cash Flows for the years ended December 31, 2018, 2017 and 2016	76
Notes to Consolidated Financial Statements	77

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Booking Holdings Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Booking Holdings Inc. and subsidiaries (the "Company") as of December 31, 2018 and 2017, the related consolidated statements of operations, comprehensive income, changes in stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2018, including the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows, for each of the three years in the period ended December 31, 2018, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 27, 2019, expressed an unqualified opinion on the Company's internal control over financial reporting.

Change in Accounting Principle

As discussed in Note 2 to the consolidated financial statements, the Company has changed its method of accounting for the recognition and measurement of financial instruments in 2018 due to the adoption of an accounting standard update.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ DELOITTE & TOUCHE LLP

Stamford, Connecticut

February 27, 2019

We have served as the Company’s auditor since 1997.

Booking Holdings Inc.

CONSOLIDATED BALANCE SHEETS

(In millions, except share and per share data)

		December 31,
		2018				2017
ASSETS
Current assets:
Cash and cash equivalents		$	2,624			$	2,542
Short-term investments in marketable securities		3,660				4,860
Accounts receivable, net of allowance for doubtful accounts of $61 and $39, respectively		1,523				1,218
Prepaid expenses and other current assets		600				415
Total current assets		8,407				9,035
Property and equipment, net		656				480
Intangible assets, net		2,125				2,177
Goodwill		2,910				2,738
Long-term investments		8,408				10,873
Other assets		181				148
Total assets		$	22,687			$	25,451
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable		$	1,134			$	668
Accrued expenses and other current liabilities		1,399				1,139
Deferred merchant bookings		1,022				980
Convertible debt		—				711
Total current liabilities		3,555				3,498
Deferred income taxes		370				481
Long-term U.S. transition tax liability		1,166				1,251
Other long-term liabilities		162				147
Long-term debt		8,649				8,810
Total liabilities		13,902				14,187
Commitments and Contingencies (See Note 14)
Convertible debt		—				3
Stockholders' equity:
Common stock, $0.008 par value, authorized 1,000,000,000 shares, 62,948,762 and 62,689,097 shares issued, respectively		—				—
Treasury stock, 17,317,126 and 14,216,819 shares, respectively		(14,711		)		(8,699		)
Additional paid-in capital		5,445				5,783
Retained earnings		18,367				13,939
Accumulated other comprehensive income (loss)		(316		)		238
Total stockholders' equity		8,785				11,261
Total liabilities and stockholders' equity		$	22,687			$	25,451

See Notes to Consolidated Financial Statements.

Booking Holdings Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except share and per share data)

		Year Ended December 31,
		2018				2017				2016
Agency revenues		$	10,480			$	9,714			$	7,982
Merchant revenues		2,987				2,133				2,048
Advertising and other revenues		1,060				834				713
Total revenues		14,527				12,681				10,743
Cost of revenues						242				415
Gross profit						12,439				10,328
Operating expenses:
Performance marketing		4,447				4,161				3,479
Brand marketing		509				435				327
Sales and other expenses		830				517				422
Personnel, including stock-based compensation of $317, $261 and $250, respectively		2,042				1,660				1,350
General and administrative		699				576				452
Information technology		233				189				142
Depreciation and amortization		426				363				309
Impairment of goodwill		—				—				941
Total operating expenses		9,186				7,901				7,422
Operating income		5,341				4,538				2,906
Other (expense) income:
Interest income		187				157				95
Interest expense		(269		)		(254		)		(208		)
Net unrealized losses on marketable equity securities		(367		)		—				—
Impairment of investments		—				(8		)		(63		)
Foreign currency transactions and other		(57		)		(34		)		(17		)
Total other expense		(506		)		(139		)		(193		)
Earnings before income taxes		4,835				4,399				2,713
Income tax expense		837				2,058				578
Net income		$	3,998			$	2,341			$	2,135
Net income applicable to common stockholders per basic common share		$	84.26			$	47.78			$	43.14
Weighted-average number of basic common shares outstanding (in 000's)		47,446				48,994				49,491
Net income applicable to common stockholders per diluted common share		$	83.26			$	46.86			$	42.65
Weighted-average number of diluted common shares outstanding (in 000's)		48,017				49,954				50,063

See Notes to Consolidated Financial Statements.

Booking Holdings Inc.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions)

		Year Ended December 31,
		2018				2017				2016
Net income (1)		$	3,998			$	2,341			$	2,135
Other comprehensive income (loss), net of tax
Foreign currency translation adjustments, net of tax charge of $12, tax benefit of $175, and tax charge of $34, respectively (2)		(114		)		297				(95		)
Net unrealized (losses) gains on marketable securities, net of tax benefit of $2 and tax charges of $81 and $15, respectively (1) (3) (4)		(199		)		76				(285		)
Comprehensive income		$	3,685			$	2,714			$	1,755

(1) The Company realized net gains of $1 million related to investments in debt securities sold for both years ended December 31, 2017 and 2016.

(2) Foreign currency translation adjustments result from currency fluctuations on the translation of the Company's non-U.S. Dollar denominated net assets, net of the impact of net investment hedges.

During the year ended December 31, 2018, the Company recorded a tax benefit of $41 million related to foreign currency translation adjustments to its one-time deemed repatriation tax liability recorded at December 31, 2017 and current year foreign earnings subject to U.S. federal and state income tax, resulting from the introduction of the U.S. Tax Cuts and Jobs Act (the "Tax Act"). Prior to January 1, 2018, foreign currency translation adjustments excluded U.S. federal and state income taxes as a result of the Company's intention to indefinitely reinvest the earnings of its international subsidiaries outside of the United States.

Foreign currency translation adjustments also include a tax charge of $53 million, a tax benefit of $175 million and a tax charge of $34 million for the years ended December 31, 2018, 2017 and 2016, respectively, associated with the Company's Euro-denominated debt, which is designated as a net investment hedge against the impact of currency fluctuations of the Company's Euro-denominated net assets (see Note 12).

(3) Net unrealized losses before tax on marketable securities of $190 million, net unrealized gains of $86 million and net unrealized losses of $332 million for the years ended December 31, 2018, 2017 and 2016, respectively, were not subject to income tax in the Netherlands. Net unrealized losses before tax of $7 million and gains before tax of $71 million and $62 million for the years ended December 31, 2018, 2017 and 2016, respectively, were taxable at a 25% tax rate in the Netherlands, resulting in a tax benefit of $2 million and tax charges of $18 million and $15 million for the years ended December 31, 2018, 2017 and 2016, respectively. The remaining net unrealized losses on marketable securities and related tax benefits for the year ended December 31, 2018 were associated with marketable debt securities held by a U.S. subsidiary.

For the year ended December 31, 2017, the Company also recorded a U.S. deferred tax liability of $63 million related to net cumulative unrealized gains associated with certain international investments.

(4) For periods beginning after December 31, 2017, marketable equity securities are reported at estimated fair value with changes in fair value recognized in net income rather than accumulated other comprehensive income within stockholders' equity, pursuant to the adoption of the accounting update on financial instruments in 2018 (see Note 2).

See Notes to Consolidated Financial Statements.

Booking Holdings Inc.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2018, 2017 and 2016

(In millions except share data)

	Common Stock							Treasury Stock							Additional Paid-in Capital				Retained Earnings				Accumulated Other Comprehensive Income (Loss)				Total
	Shares (in 000's)			Amount				Shares (in 000's)			Amount
Balance, December 31, 2015	62,040			$	—			(12,428	)		$	(5,827	)		$	5,185			$	9,192			$	245			$	8,795
Net income	—			—				—			—				—				2,135				—				2,135
Foreign currency translation adjustments	—			—				—			—				—				—				(95		)		(95		)
Net unrealized losses on marketable securities	—			—				—			—				—				—				(285		)		(285		)
Reclassification adjustment for convertible debt in mezzanine	—			—				—			—				(29		)		—				—				(29		)
Exercise of stock options and vesting of restricted stock units and performance share units	339			—				—			—				16				—				—				16
Repurchase of common stock	—			—				(763	)		(1,028		)		—				—				—				(1,028		)
Stock-based compensation and other stock-based payments	—			—				—			—				250				—				—				250
Excess tax benefits on stock-based awards and other equity deductions	—			—				—			—				61				—				—				61
Balance, December 31, 2016	62,379			$	—			(13,191	)		$	(6,855	)		$	5,483			$	11,327			$	(135	)		$	9,820
Cumulative effect of adoption of accounting standard updates	—			—				—			—				9				271				—				280
Net income	—			—				—			—				—				2,341				—				2,341
Foreign currency translation adjustments	—			—				—			—				—				—				297				297
Net unrealized gains on marketable securities	—			—				—			—				—				—				76				76
Reclassification adjustment for convertible debt in mezzanine	—			—				—			—				26				—				—				26
Exercise of stock options and vesting of restricted stock units and performance share units	160			—				—			—				5				—				—				5
Repurchase of common stock	—			—				(1,026	)		(1,844		)		—				—				—				(1,844		)
Stock-based compensation and other stock-based payments	—			—				—			—				261				—				—				261
Conversion of debt	150			—				—			—				(1		)		—				—				(1		)
Balance, December 31, 2017	62,689			$	—			(14,217	)		$	(8,699	)		$	5,783			$	13,939			$	238			$	11,261
Cumulative effect of adoption of accounting standard updates	—			—				—			—				—				430				(241		)		189
Net income	—			—				—			—				—				3,998				—				3,998
Foreign currency translation adjustments	—			—				—			—				—				—				(114		)		(114		)
Net unrealized losses on marketable securities	—			—				—			—				—				—				(199		)		(199		)
Reclassification adjustment for convertible debt in mezzanine	—			—				—			—				3				—				—				3
Exercise of stock options and vesting of restricted stock units and performance share units	208			—				—			—				2				—				—				2
Repurchase of common stock	—			—				(3,100	)		(6,012		)		—				—				—				(6,012		)
Stock-based compensation and other stock-based payments	—			—				—			—				320				—				—				320
Conversion of debt	—			—				—			—				(773		)		—				—				(773		)
Common stock issued in an acquisition	52			—				—			—				110				—				—				110
Balance, December 31, 2018	62,949			$	—			(17,317	)		$	(14,711	)		$	5,445			$	18,367			$	(316	)		$	8,785

See Notes to Consolidated Financial Statements.

Booking Holdings Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

		Year Ended December 31,
		2018				2017				2016
OPERATING ACTIVITIES:
Net income		$	3,998			$	2,341			$	2,135
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		248				187				140
Amortization		178				176				169
Provision for uncollectible accounts		163				62				46
Deferred income tax benefit		(150		)		(32		)		(112		)
Net unrealized losses on marketable equity securities		367				—				—
Stock-based compensation expense and other stock-based payments		331				261				250
Amortization of debt issuance costs		7				9				8
Amortization of debt discount		52				70				69
Loss on early extinguishment of debt		—				2				—
Impairment of goodwill		—				—				941
Impairment of investments		—				8				63
Excess tax benefits on stock-based awards and other equity deductions		—				—				61
Contingent consideration fair value adjustment		19				—				—
Changes in assets and liabilities, net of effects of acquisitions:
Accounts receivable		(319		)		(270		)		(284		)
Prepaid expenses and other current assets		(201		)		(124		)		5
Accounts payable, accrued expenses and other current liabilities		635				687				514
Long-term U.S. transition tax liability		40				1,251				—
Other long-term assets and liabilities		(30		)		34				(21		)
Net cash provided by operating activities		5,338				4,662				3,984
INVESTING ACTIVITIES:
Purchase of investments		(2,686		)		(6,941		)		(6,748		)
Proceeds from sale of investments		5,616				3,580				3,684
Additions to property and equipment		(442		)		(288		)		(220		)
Acquisitions and other investments, net of cash acquired		(273		)		(553		)		(1		)
Acquisition of land-use rights		—				—				(48		)
Net cash provided by (used in) investing activities		2,215				(4,202		)		(3,333		)
FINANCING ACTIVITIES:
Proceeds from short-term borrowing		25				—				—
Proceeds from the issuance of long-term debt		—				2,045				995
Payments for conversion of senior notes		(1,487		)		(286		)		—
Repayment of debt		—				(15		)		—
Payments for repurchase of common stock		(5,971		)		(1,828		)		(1,012		)
Proceeds from exercise of stock options		2				5				16
Net cash used in financing activities		(7,431		)		(79		)		(1		)
Effect of exchange rate changes on cash, cash equivalents and restricted cash and cash equivalents		(40		)		100				(46		)
Net increase in cash, cash equivalents and restricted cash and cash equivalents		82				481				604
Total cash and cash equivalents and restricted cash and cash equivalents, beginning of period		2,563				2,082				1,478
Total cash and cash equivalents and restricted cash and cash equivalent, end of period		$	2,645			$	2,563			$	2,082
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for income taxes		$	1,169			$	702			$	637
Cash paid during the period for interest		$	219			$	155			$	126
Non-cash operating and financing activity for an acquisition (See Note 18)		$	51			$	—			$	—
Non-cash investing and financing activity for an acquisition (See Note 18)		$	59			$	—			$	—

See Notes to Consolidated Financial Statements.

Booking Holdings Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.	BUSINESS DESCRIPTION

Booking Holdings Inc. ("Booking Holdings" or the "Company") helps people experience the world by providing consumers, travel service providers and restaurants with leading travel and restaurant online reservation and related services. Through one or more of the Company's brands, consumers can: book a broad array of accommodations (including hotels, motels, resorts, homes, apartments, bed and breakfasts, hostels and other properties); make a car rental reservation or arrange for an airport taxi; make a dinner reservation; or book a cruise, flight, vacation package, tour or activity. Consumers can also use our meta-search services to easily compare travel reservation information, such as airline ticket, hotel reservation and rental car reservation information, from hundreds of online travel platforms at once. In addition, the Company offers various other services to consumers, such as certain insurance products and restaurant management services to restaurants.

2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation — The Company's Consolidated Financial Statements include the accounts of the Company and its wholly-owned subsidiaries, including acquired businesses from the dates of acquisition. All intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States ("U.S. GAAP") requires management to make estimates and assumptions that affect the amounts reported in the financial statements and footnotes thereto. Actual results may differ significantly from those estimates. The estimates underlying the Company's Consolidated Financial Statements relate to, among other things, the valuation of goodwill, long-lived assets and intangible assets, income taxes, stock-based compensation, the allowance for doubtful accounts and the accrual of obligations for loyalty programs.

Reclassifications — Certain amounts from prior periods have been reclassified to conform to the current year presentation.

Change in Presentation — In the first quarter of 2018, the Company changed the presentation of "Performance advertising", "Brand advertising", and "Sales and marketing" to "Performance marketing", "Brand marketing" and "Sales and other expenses" in the Consolidated Statements of Operations. The descriptions of these new lines are as follows:

"Performance marketing" expenses are marketing expenses generally measured by return on investment or an increase in bookings over a specified time period. These expenses consist primarily of the costs of: (1) search engine keyword purchases; (2) referrals from meta-search and travel research websites; (3) affiliate programs; and (4) other performance-based advertisements, including certain incentive programs.

"Brand marketing" expenses are marketing expenses to build brand awareness over a specified time period. These expenses consist primarily of television advertising, online video advertising (including the airing of our television advertising online) and online display advertising, as well as other marketing expenses such as public relations, trade shows and sponsorships.

"Sales and other expenses" are generally variable in nature and consist primarily of: (1) credit cards and other payment processing fees associated with merchant transactions; (2) fees paid to third parties that provide call center, website content translations and other services; (3) provisions for customer chargebacks associated with merchant transactions; (4) customer relations costs; (5) provisions for bad debt, primarily related to accommodation commission receivables; and (6) insurance claim costs.

In conjunction with the adoption of the current revenue recognition accounting standard ("the current revenue standard") effective January 1, 2018, the Company reclassified certain expenses from "Cost of revenues" to "Sales and other expenses" or "General and administrative" expenses in its Consolidated Statements of Operations for the years ended December 31, 2017 and 2016 to conform to the current period presentation.

The change in presentation and the reclassification for the years ended December 31, 2017 and 2016 had no impact on operating income or net income and are summarized below (in millions):

Previously Reported			2017				2016
	Cost of revenues		$	251			$	428
	Performance advertising		4,142				3,479
	Brand advertising		392				296
	Sales and marketing		562				435
	General and administrative		586				456
Current Presentation			2017				2016
	Cost of revenues		$	242			$	415
	Performance marketing		4,161				3,479
	Brand marketing		435				327
	Sales and other expenses		517				422
	General and administrative		576				452

Reclassification of Investments in Private Companies: In 2018, the Company changed the presentation of its equity investments in private companies to include them in "Long-term investments" instead of "Other assets" in the Consolidated Balance Sheets and in "Purchase of investments" instead of "Acquisitions and other investments, net of cash acquired" in the Consolidated Statements of Cash Flows. Therefore, the Company reclassified $451 million of investments in its Consolidated Balance Sheet at December 31, 2017 and cash payments of $450 million and $7 million in its Consolidated Statements of Cash Flows for the years ended December 31, 2017 and 2016, respectively, to conform to this current period presentations. See Note 4 for more detail.

Fair Value of Financial Instruments — The Company's financial instruments, including cash, restricted cash, accounts receivable, accounts payable, accrued expenses and deferred merchant bookings, are carried at cost which approximates their fair value because of the short-term nature of these financial instruments. See Notes 4, 5 and 10 for information on fair value for investments, derivatives, and the Company's outstanding Senior Notes.

Cash and Cash Equivalents — Cash and cash equivalents consists primarily of cash and highly liquid investment grade securities with an original maturity of three months or less. Cash equivalents are recognized based on settlement date.

Restricted Cash and Cash Equivalents — Restricted cash and cash equivalents are restricted through legal contracts, regulations or by the Company's intention to use the cash for a specific purpose. Restricted cash and cash equivalents at December 31, 2018 and 2017 principally relates to the minimum cash requirement for Rentalcars.com's insurance business established in 2017. Restricted cash at December 31, 2016 collateralizes office leases. The following table reconciles cash, cash equivalents and restricted cash and cash equivalents reported in the Consolidated Balance Sheets to the total amount shown in the Consolidated Statements of Cash Flows (in millions):

		December 31,
		2018				2017				2016
As included in the Consolidated Balance Sheets:
Cash and cash equivalents		$	2,624			$	2,542			$	2,081
Restricted cash and cash equivalents included in prepaid expenses and other current assets		21				21				1
Total cash and cash equivalents and restricted cash and cash equivalents as shown in the Consolidated Statements of Cash Flows		$	2,645			$	2,563			$	2,082

Investments — Investments held by the Company include debt and equity securities. Preferred stock that is either mandatorily redeemable or redeemable at the option of the investor is considered a debt security. Investments in debt or equity securities that include embedded features, such as conversion or redemption features, are analyzed by the Company to determine if these features are embedded derivatives that require separate accounting treatment.

•

Debt Securities. The Company has classified its investments in debt securities as available-for-sale securities. These securities are reported at estimated fair value with the aggregate unrealized gains and losses, net of taxes, reflected as a part of "Accumulated other comprehensive income (loss)" in the Consolidated Balance Sheets. Investments in debt securities are considered to be impaired when a decline in fair value is judged to be other than temporary because the Company either intends to sell or it is more-likely-than not that it will have to sell the impaired security before recovery. Once a decline in fair value is determined to be other than temporary, an impairment charge is recorded and a new cost basis in the investment is established. If the Company does not intend to sell the debt security, but it is probable that the Company will not collect all amounts due, then only the impairment due to the credit risk would be recognized in earnings and the remaining amount of the impairment would be recognized in accumulated other comprehensive income within stockholders' equity. The fair value of these investments is based on the specific quoted market price of the securities or comparable securities at the balance sheet dates. Unobservable inputs are also used when little or no market data is available. See Note 5 for information on fair value measurements.

The Company's investments in marketable debt securities are recognized based on trade date and reported as "Short-term investments in marketable securities" or "Long-term investments" in the Consolidated Balance Sheets based on the maturity date of the debt security. Investments of a strategic nature that have been made for the purpose of affiliation or potential business advantage are included in "Long-term investments" in the Consolidated Balance Sheets.

•	Equity Securities. Equity securities are reported as "Long-term investments" in the Consolidated Balance Sheets and include marketable equity securities and equity investments without readily determinable fair values.

For periods beginning after December 31, 2017, marketable equity securities are reported at estimated fair value with changes in fair value recognized in net income rather than accumulated other comprehensive income within stockholders' equity, pursuant to the adoption of the accounting update on financial instruments in 2018. As a result, the Company recognized $367 million, before tax, in "Net unrealized losses on marketable equity securities" in the Consolidated Statement of Operations for the year ended December 31, 2018. See "Recent Accounting Pronouncements Adopted" later in this footnote for further information on the impact of the adoption of this accounting update.

The Company holds investments in equity securities of private companies, over which the Company does not have the ability to exercise significant influence or control. Pursuant to the adoption of the accounting update on financial instruments in 2018 (see "Recent Accounting Pronouncements Adopted" later in this footnote), for periods beginning after December 31, 2017, the Company elected to measure these investments at cost less impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. Previously, these investments were carried at cost and adjusted to fair value only for other-than-temporary declines in fair value. See "Reclassification of Investments in Private Companies" in this footnote for the change in the presentation of these investments in 2018.

See Note 4 and 5 for further information on investments.

Property and Equipment — Property and equipment are stated at cost less accumulated depreciation. Depreciation is computed on a straight-line basis over the estimated useful lives of the assets or, when applicable, the life of the lease related to leasehold improvements, whichever is shorter.

Building Construction-in-progress — Building construction-in-progress is associated with the construction of an office building in the Netherlands and is included in “Property and equipment, net” in the Consolidated Balance Sheets. Depreciation of the building and its related components will commence once it is ready for the Company’s use.

Land-use rights — Land-use rights represent prepayments for the long-term lease of land where the Company is constructing an office building in the Netherlands. At December 31, 2018 and 2017, the Company had $47 million and $51 million, respectively, associated with land-use rights recorded in “Other assets” in the Consolidated Balance Sheets. The land-use rights are expensed on a straight-line basis over the lease period. This expense is recorded as rent expense in "General and administrative" expense in the Consolidated Statements of Operations. See Note 14 for further details.

Website and Internal-use Software Capitalization — Certain direct development costs associated with website and internal-use software are capitalized and include external direct costs of services and payroll costs for employees devoting time

to the software projects principally related to platform development, including support systems, software coding, designing system interfaces and installation and testing of the software. These costs are recorded as property and equipment and are generally amortized over a period of two to five years beginning when the asset is substantially ready for use. Costs incurred for enhancements that are expected to result in additional features or functionalities are capitalized and amortized over the estimated useful life of the enhancements. Costs incurred during the preliminary project stage, as well as maintenance and training costs, are expensed as incurred. Additions to capitalized costs during the years ended December 31, 2018, 2017 and 2016 were $97 million, $80 million and $54 million, respectively.

Goodwill — The Company accounts for acquired businesses using the acquisition method of accounting which requires that the assets acquired and liabilities assumed be recorded at the date of acquisition at their respective fair values. Any excess of the purchase price over the estimated fair values of the net assets acquired is recorded as goodwill. The Company's Consolidated Financial Statements reflect an acquired business starting at the date of the acquisition.

Goodwill is not subject to amortization and is reviewed at least annually for impairment, or earlier if an event occurs or circumstances change and there is an indication of impairment. The Company tests goodwill at a reporting unit level. The fair value of the reporting unit is compared to its carrying value, including goodwill. Fair values are determined using a combination of standard valuation techniques, including an income approach (discounted cash flows) and market approaches (EBITDA multiples of comparable publicly-traded companies and precedent transactions) and based on market participant assumptions. An impairment is recorded to the extent that the implied fair value of goodwill is less than the carrying value of goodwill. See Note 9 for further information.

Impairment of Long-Lived Assets and Intangible Assets — The Company reviews long-lived tangible assets and amortizable intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. The assessment of possible impairment is based upon the Company's ability to recover the carrying value of the assets from the estimated undiscounted future net cash flows, before interest and taxes, of the related operations. The amount of impairment loss, if any, is measured as the excess of the carrying value of the asset over the present value of estimated future cash flows, using a discount rate commensurate with the risks involved and based on assumptions representative of market participants.

Online travel reservation services — For periods beginning after December 31, 2017, the Company recognizes revenue for travel reservation services when the travel begins rather than when the travel is completed. Substantially all of the Company's revenues are generated by providing online travel reservation services, which principally allows travelers to book travel reservations with travel service providers through the Company’s platforms. While the Company generally refers to a consumer that books travel reservation services on the Company's platforms as its customer, for accounting purposes, the Company's customers are the travel service providers and, in certain merchant transactions, the travelers. The Company's contracts with travel service providers give them the ability to market their reservation availability without transferring responsibility to deliver the travel service to the Company, therefore, the Company's revenues are presented on a net basis in the Consolidated Statements of Operations. These contracts include payment terms and establish the consideration to which the Company is entitled, which includes either a commission or a margin on the travel transaction. Revenue is measured based on the expected consideration specified in the contract with the travel service provider, considering the effects of sales incentives, "no show" cancellations (where the traveler has not cancelled the reservation but does not arrive on the scheduled reservation date) and "late" cancellations (where the travel service provider accepts a cancellation after its cancellation cut-off date). Estimates for cancellations and sales incentives are based on historical experience and current trends. Coupons are recorded as a reduction of the transaction price at the time they are redeemed.

Online travel reservation services are recorded at a point in time when the Company has completed its post-booking services and the travelers begin using the arranged travel services. These services are classified into two categories:

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Agency revenues are derived from travel-related transactions where the Company does not receive payments from travelers for the services provided. The Company invoices the travel service providers for its commissions in the month that travel is completed. Agency revenues consist almost entirely of travel reservation commissions, as well as certain global distribution system ("GDS") reservation booking fees and certain travel insurance fees. Substantially all of the Company's agency revenue is from Booking.com agency accommodation reservations.

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Merchant revenues are derived from travel-related transactions where the Company receives payments from travelers for the services provided, generally at the time of booking. The Company records cash collected from travelers, which includes the amounts owed to the travel service providers and the Company’s commission or margin and fees, as deferred merchant bookings until the arranged travel service begins. Merchant revenues include travel reservation commissions and transaction net revenues (i.e., the amount charged to travelers less the

amount owed to travel service providers) in connection with the Company's merchant reservations services; ancillary fees, including travel insurance-related revenues and certain GDS reservation booking fees; and credit card processing rebates and customer processing fees. Substantially all merchant revenues are for merchant services derived from transactions where travelers book accommodation reservations or rental car reservations from travel service providers.

Pursuant to the terms of the Company's merchant services, travel service providers are permitted to bill the Company for the underlying cost of the services during a specified period of time. If the Company is not billed by the travel service provider within the specified period of time, the Company increases its revenue by the unbilled amount.

Tax Recovery Charge, Occupancy Taxes and State and Local Taxes — For merchant transactions, the Company charges the traveler an amount intended to cover the taxes that the Company anticipates the travel service provider will remit to the local taxing authorities ("tax recovery charge"). Tax rate information for calculating the tax recovery charge is provided to the Company by the travel service providers.

In certain taxing jurisdictions, the Company is required by statute, regulation or court order to collect and remit certain local occupancy tax, general excise tax, value-added tax and/or sales tax ("travel transaction taxes") and/or service fees. In other taxing jurisdictions, the Company is required to collect from the traveler and remit directly to the taxing jurisdiction transaction-related taxes imposed on the full amount of the transaction, which includes taxes on the margin, service fees and the underlying rate provided by the travel service provider. The rate information for calculating these taxes is provided to the Company directly from the taxing jurisdictions. The taxes collected from travelers are reported on a net basis in revenues in the Consolidated Statements of Operations.

Advertising and Other Revenues — Advertising and other revenues are primarily recognized by KAYAK and OpenTable for advertising placements on their websites. KAYAK recognizes advertising revenue primarily by sending referrals to online travel companies ("OTCs") and travel service providers and from advertising placements on its platforms. Revenue related to referrals is recognized when a consumer clicks on a referral placement or upon completion of the travel. Revenue for advertising placements is recognized based upon when a consumer clicks on an advertisement or when KAYAK displays an advertisement. OpenTable recognizes revenues for reservation fees when diners are seated through its online restaurant reservation service and revenues for subscription fees for restaurant management services on a straight-line basis over the contractual period in accordance with how the service is provided.

Loyalty Programs — The Company provides various loyalty programs, where participating consumers are awarded loyalty incentives on current transactions that can be redeemed for future qualifying reservations booked through the applicable Company platform or, in the case of OpenTable, at participating restaurants. The estimated fair value of the incentives that are expected to be redeemed is recognized as a reduction of revenues at the time the incentives are granted. In the first quarter of 2018, OpenTable introduced a three-year time-based expiration for points earned by diners, which resulted in a reduction of its loyalty program liability by $27 million. At December 31, 2018 and 2017, liabilities of $73 million and $105 million, respectively, for loyalty program incentives were included in "Accrued expenses and other current liabilities" in the Consolidated Balance Sheets.

Deferred Revenue — Cash payments received from travelers in advance of the Company completing its service obligations are included in "Deferred merchant bookings" in the Company's Consolidated Balance Sheets and are comprised principally of amounts owed to the travel service providers as well as the Company's deferred revenue for its commission or margin and fees. At December 31, 2018 and 2017, deferred merchant bookings included deferred revenue of $149 million and $151 million, respectively. The Company expects to complete its service obligation within one year of booking. In the year ended December 31, 2018, the Company recognized revenue of $109 million and cancellations of $10 million related to the deferred revenue balance at December 31, 2017. In addition, the Company reduced the December 31, 2017 balance by $32 million for the impact of the adoption of the current revenue standard on January 1, 2018. The offsetting increase in the deferred revenue balance for the year ended December 31, 2018 is principally driven by payments received from travelers, net of amounts payable to travel service providers, in the current period for those online travel reservations that the Company receives cash payments in advance of completing its service obligations.

Advertising expense — Included in "Performance marketing" expenses in the Consolidated Statements of Operations are performance advertising expenses of $4.4 billion, $4.1 billion and $3.5 billion for the years ended December 31, 2018, 2017 and 2016, respectively. Included in "Brand marketing" expenses in the Consolidated Statements of Operations are brand advertising expenses of $457 million, $392 million and $296 million for the years ended December 31, 2018, 2017 and 2016, respectively. Included in "Accrued expenses and other current liabilities" in the Consolidated Balance Sheets are accrued

performance advertising liabilities of $313 million and $284 million at December 31, 2018 and 2017, respectively. See "Change in Presentation" above within this footnote for the description of "Performance marketing" and "Brand marketing."

Personnel — Personnel expenses consist of compensation to the Company's personnel, including salaries, stock-based compensation, bonuses, payroll taxes and employee health benefits. Included in "Accrued expenses and other current liabilities" in the Consolidated Balance Sheets are accrued compensation liabilities of $348 million and $288 million at December 31, 2018 and 2017, respectively.

Stock-Based Compensation — Stock-based compensation is recognized in the financial statements based upon fair value. The fair value of performance share units and restricted stock units is determined based on the number of units granted and the quoted price of the Company's common stock at the grant date or acquisition date. The Company records stock-based compensation expense for the performance-based awards based on its estimate of the probable outcome at the end of the performance period (i.e., the estimated performance against the performance targets). The Company periodically adjusts the cumulative stock-based compensation expense recorded when the probable outcome for these performance-based awards is updated based upon changes in actual and forecasted operating results. The fair value of employee stock options assumed in acquisitions was determined using the Black Scholes model and the market value of the Company's common stock at the respective acquisition dates. Fair value is recognized as expense on a straight-line basis over the requisite service period, and, beginning January 1, 2017, forfeitures are accounted for when they occur.

The benefits of tax deductions in excess of recognized compensation costs are recognized in the income statement as a discrete item in periods beginning on or after January 1, 2017 when an option exercise or a vesting and release of shares occurs. Excess tax benefits are presented as operating cash flows and cash payments for employee statutory tax withholding related to vested stock awards are presented as financing cash flows in the statements of cash flows. See Note 3 for further information on stock-based awards.

Information Technology — Information technology expenses consist primarily of: (1) software license and system maintenance fees; (2) data communications and other expenses associated with operating our services; (3) outsourced data center costs; and (4) payments to outside consultants.

Income Taxes — The Company accounts for income taxes under the asset and liability method. The Company records the estimated future tax effects of temporary differences between the tax bases of assets and liabilities and amounts reported in the Consolidated Balance Sheets, as well as operating loss and tax credit carryforwards. Deferred taxes are classified as noncurrent in the balance sheet.

The Company records deferred tax assets to the extent it believes these assets will more likely than not be realized. The Company regularly reviews its deferred tax assets for recoverability considering historical profitability, projected future taxable income, the expected timing of the reversals of existing temporary differences, the carryforward periods available for tax reporting purposes, and tax planning strategies. A valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized. The ultimate realization of deferred tax assets depends on the generation of future taxable income during the period in which related temporary differences become deductible. In determining the future tax consequences of events that have been recognized in the financial statements or tax returns, significant judgments, estimates, and interpretation of statutes are required.

Deferred taxes are measured using the enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date of such change.

The Company recognizes liabilities when it believes that uncertain positions may not be fully sustained upon audit by the tax authorities. Liabilities recognized for uncertain tax positions are based on a two-step approach for recognition and measurement. First, the Company evaluates the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not that the position will be sustained on audit based on its technical merits. Second, the Company measures the tax benefit as the largest amount that is more than 50% likely of being realized upon ultimate settlement. Interest and penalties attributable to uncertain tax positions, if any, are recognized as a component of income tax expense.

In 2018 the Company adopted an accounting policy to treat taxes on global intangible low-taxed income ("GILTI") introduced by the Tax Act as period costs. See Note 13 for further details on income taxes.

Segment Reporting — The Company determined that its primary brands constitute its operating segments. The Company's Booking.com brand represents a substantial majority of total revenues and operating income. Based on similar economic characteristics and other similar operating factors, the Company has aggregated the operating segments into one reportable segment. For geographic information, see Note 16.

Foreign Currency Translation — The functional currency of the Company's foreign subsidiaries is generally their respective local currency. Assets and liabilities are translated into U.S. Dollars at the rate of exchange existing at the balance sheet date. Income statement amounts are translated at monthly average exchange rates applicable for the period. Translation gains and losses are included as a component of "Accumulated other comprehensive income (loss)" in the Company's Consolidated Balance Sheets. Foreign currency transaction gains and losses are included in "Foreign currency transactions and other" in the Company's Consolidated Statements of Operations.

Derivative Financial Instruments — As a result of the Company's international operations, it is exposed to various market risks that may affect its consolidated results of operations, cash flows and financial position. These market risks include, but are not limited to, fluctuations in currency exchange rates. The Company's primary foreign currency exposures are in Euros and British Pounds Sterling, in which it conducts a significant portion of its business activities. As a result, the Company faces exposure to adverse movements in currency exchange rates as the financial results of its international operations are translated from local currencies into U.S. Dollars upon consolidation. Additionally, foreign exchange rate fluctuations on transactions denominated in currencies other than the functional currency of an entity result in gains and losses that are reflected in income.

The Company may enter into derivative instruments to hedge certain net exposures of nonfunctional currency denominated assets and liabilities and the volatility associated with translating earnings for its international businesses into U.S. Dollars, even though it does not elect to apply hedge accounting or hedge accounting does not apply. Gains and losses resulting from a change in fair value for these derivatives are reflected in income in the period in which the change occurs and are recognized in the Consolidated Statements of Operations in "Foreign currency transactions and other." Cash flows related to these contracts are classified within "Net cash provided by operating activities" on the cash flow statement.

The Company, from time to time in the past, has utilized derivative instruments to hedge the impact of changes in currency exchange rates on the net assets of its foreign subsidiaries. These instruments are designated as net investment hedges. Hedge ineffectiveness is assessed and measured based on changes in forward exchange rates. The Company records gains and losses on these derivative instruments as currency translation adjustments, which offset a portion of the translation adjustments related to the foreign subsidiaries' net assets. Gains and losses are recognized in the Consolidated Balance Sheet in "Accumulated other comprehensive income (loss)" and will be realized upon a partial sale or liquidation of the investment. The Company documents all derivatives designated as hedging instruments for accounting purposes, both at hedge inception and on an on-going basis.

The Company issued Senior Notes due March 10, 2022 for an aggregate principal amount of 1.0 billion Euros in 2017, Senior Notes due November 25, 2022 for an aggregate principal amount of 750 million Euros and Senior Notes due March 3, 2027 for an aggregate principal amount of 1.0 billion Euros both in 2015 and Senior Notes due September 23, 2024 for an aggregate principal amount of 1.0 billion Euros in 2014. The Company designated the carrying value, plus accrued interest, of these Euro-denominated Senior Notes as a hedge of the Company's net investment in Euro functional currency subsidiaries. The foreign currency transaction gains or losses on these liabilities and the foreign currency translation gains or losses from translating the Euro-denominated net assets of these subsidiaries into U.S. Dollars are included as a component of "Accumulated other comprehensive income (loss)" in the Company's Consolidated Balance Sheets (see Notes 10 and 12).

The Company does not use derivative instruments for trading or speculative purposes. The Company recognizes all derivative instruments on the balance sheet at fair value and its derivative instruments are generally short-term in duration. The derivative instruments do not contain leverage features.

The Company is exposed to the risk that counterparties to derivative instruments may fail to meet their contractual obligations. The Company regularly reviews its credit exposure as well as assessing the creditworthiness of its counterparties. See Note 5 for further detail on derivatives.

Recent Accounting Pronouncements Adopted

Premium Amortization on Purchased Callable Debt Securities

In March 2017, the Financial Accounting Standards Board (“FASB”) issued a new accounting update to shorten the premium amortization period of purchased callable debt securities with non-contingent call features that are callable at fixed prices and on preset dates from their contractual maturity to the earliest call date. For public business entities, this update is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption allowed. The Company early adopted this new standard in the third quarter of 2018. The adoption of this update did not have an impact to the Consolidated Financial Statements.

Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement

In August 2018, the FASB issued a new accounting update to make targeted improvement to the disclosure requirement for fair value measurements as part of its disclosure framework project. This update eliminates, adds and modifies certain disclosure requirements primarily related to Level 3 fair value measurements. For public business entities, this update is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, with early adoption allowed. The Company early adopted this new standard in the third quarter of 2018. The adoption of this update did not have a material impact to the Consolidated Financial Statements.

Improvements to Non-employee Share-Based Payment Accounting

In June 2018, the FASB issued a new accounting update which amends the guidance on share-based payments granted to non-employees for goods and services to align it with the guidance for share-based payments to employees. Under this new guidance, share-based awards to non-employees will be generally measured at fair value on the grant date of the awards and entities will need to assess the probability of satisfying performance conditions, if any are present, to determine the amount of expense to be recognized.

This update is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption allowed. The Company early adopted this new standard in the second quarter of 2018 and applied this update as of January 1, 2018. The adoption of this update did not have a material impact to the Consolidated Financial Statements.

Recognition and Measurement of Financial Instruments

In January 2016, the FASB issued a new accounting update which amends the guidance on the recognition and measurement of financial instruments. The update (1) requires an entity to measure equity investments (except those accounted for under the equity method or those that result in consolidation of the investee) at fair value with changes in fair value recognized in net income rather than accumulated other comprehensive income, (2) allows an entity to elect to measure those equity investments that do not have a readily determinable fair value at cost less impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer, (3) simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment, and (4) clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s evaluation of its other deferred tax assets.

This update is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company adopted this update in the first quarter of 2018. The Company recorded an increase of $241 million to retained earnings for the net unrealized gain, net of tax, related to its investment in Ctrip.com International Ltd. ("Ctrip") equity securities, with an offsetting adjustment to accumulated other comprehensive income as of January 1, 2018. Changes in fair value of the Company's investments in marketable equity securities subsequent to January 1, 2018 are recognized in net income. In addition, the Company elected to measure equity investments without readily determinable fair value at cost less impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer.

Revenue from Contracts with Customers

In May 2014, the FASB issued a new accounting standard on the recognition of revenue from contracts with customers that was designed to create greater comparability for financial statement users across industries. The core principle

of this new standard is that an "entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services." This new standard also requires enhanced disclosures on the nature, amount, timing and uncertainty of revenue from contracts with customers.

On January 1, 2018, the Company adopted ASC 606, Revenue from Contracts with Customers, using a modified retrospective method applied to all contracts as of January 1, 2018. Therefore, for reporting periods beginning after December 31, 2017, the financial statements are prepared in accordance with the current revenue standard and the financial statements for all periods prior to January 1, 2018 are presented under the previous revenue recognition accounting standard ("the previous revenue standard").

For periods beginning after December 31, 2017, the Company recognizes revenue for travel reservation services when the travel begins rather than when the travel is completed. For example, revenues for accommodation reservation services, which were principally recognized at check-out under the previous revenue standard, are now recognized at check-in under the current revenue standard. This timing change did not have a significant impact to the Company's annual revenues and net income.

In addition, revenues from priceline's Name Your Own Price® transactions were previously presented on a gross basis with the amount remitted to the travel service providers reported as cost of revenues. Under the current revenue standard, Name Your Own Price® revenues are reported on a net basis with the amount remitted to the travel service providers recorded as an offset in merchant revenues. Therefore, for periods beginning after December 31, 2017, the Company no longer presents "Cost of revenues" or "Gross profit" in its Consolidated Statements of Operations. Total revenues reported in 2018 are comparable to gross profit reported in previous years.

Billing and cash collections remain unchanged and, therefore, "Net cash provided by operating activities" as presented in the Consolidated Statements of Cash Flows is not impacted.

The Company recorded a net increase to its retained earnings of $189 million, net of tax, as of January 1, 2018, due to the cumulative impact of adopting the current revenue standard, with substantially all of the impact related to the Company’s travel reservation services. In addition, since the Company is using the modified retrospective method of adopting the current revenue standard, the Company is required to disclose the financial impacts to its Consolidated Balance Sheets and Consolidated Statements of Operations for all 2018 reporting periods (refer to the disclosures below for this additional information).

The cumulative effects of adopting the current revenue standard on the Company's Consolidated Balance Sheet as of January 1, 2018 were as follows (in millions):

		Balance at December 31, 2017				Adjustments				Balance at January 1, 2018
ASSETS
Current assets:
Accounts receivable, net		$	1,218			$	205			$	1,423
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable		$	668			$	172			$	840
Accrued expenses and other current liabilities		1,139				44				1,183
Deferred merchant bookings		980				(202		)		778
Deferred income taxes		481				2				483
Stockholders' equity:
Retained earnings		13,939				189				14,128

The following tables summarize the impacts of adopting the current revenue standard (in millions, except per share data):

Consolidated Balance Sheet at December 31, 2018:

		As reported (current revenue standard)				Adjustments				As adjusted (previous revenue standard)
ASSETS
Current assets:
Accounts receivable, net		$	1,523			$	(216	)		$	1,307
Prepaid expenses and other current assets		600				10				610
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable		$	1,134			$	(234	)		$	900
Accrued expenses and other current liabilities		1,399				(47		)		1,352
Deferred merchant bookings		1,022				280				1,302
Deferred income taxes		370				(3		)		367
Stockholders' equity:
Retained earnings		18,367				(205		)		18,162
Accumulated other comprehensive income (loss)		(316		)		3				(313		)

Consolidated Statement of Operations for the Year Ended December 31, 2018:

		As reported (current revenue standard)				Current year adjustments				As adjusted (previous revenue standard)
Agency revenues		$	10,480			$	(10	)		$	10,470
Merchant revenues		2,987				157				3,144
Cost of revenues		—				170				170
Operating expenses:
Performance marketing		4,447				(2		)		4,445
Foreign currency transactions and other		(57		)		2				(55		)
Income tax expense		837				(3		)		834
Net income		3,998				(16		)	(1)	3,982
Net income applicable to common stockholders per basic common share		$	84.26			$	(0.34	)		$	83.92
Net income applicable to common stockholders per diluted common share		$	83.26			$	(0.34	)		$	82.92

(1) The current year adjustment represents the net income recorded directly to retained earnings on January 1, 2018 of $189 million that would have been recognized in the first quarter of 2018 under the previous revenue standard, partially offset by $205 million that would have been recognized in the first quarter of 2019 under the previous revenue standard.

Other Recent Accounting Pronouncements

Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract

In August 2018, the FASB issued a new accounting update to address a customer's accounting for implementation costs incurred in a cloud computing arrangement that is a service contract and also adds certain disclosure requirements related to implementation costs incurred for internal-use software and cloud computing arrangements. The amendment aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). For public business entities, this update is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, with early adoption permitted. The Company adopted this update on January 1, 2019 and will apply it on a prospective basis. The Company does not expect a material impact to the Consolidated Financial Statements as a result of the adoption.

Simplifying the Test for Goodwill Impairment

In January 2017, the FASB issued a new accounting update to simplify the test for goodwill impairment by eliminating Step 2, which measures a goodwill impairment loss by comparing the implied fair value of a reporting unit's goodwill, which requires a hypothetical purchase price allocation, with the carrying amount of that reporting unit's goodwill. Under this update, an entity would perform its quantitative annual or interim goodwill impairment test using the current Step 1 test and recognize an impairment charge for the excess of the carrying value of a reporting unit over its fair value.

For public business entities, this update is effective for their annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests occurring after January 1, 2017. The update will be applied prospectively. The Company has not early adopted this update. In the third quarter of 2018, the Company performed its annual quantitative goodwill impairment test (see Note 9).

Measurement of Credit Losses on Financial Instruments

In June 2016, the FASB issued a new accounting update on the measurement of credit losses for financial assets measured at amortized cost, which includes accounts receivable and available-for-sale debt securities. For financial assets measured at amortized cost, this update requires an entity to (1) estimate its lifetime expected credit losses upon recognition of the financial assets and establish an allowance to present the net amount expected to be collected, (2) recognize this allowance and changes in the allowance during subsequent periods through net income and (3) consider relevant information about past events, current conditions and reasonable and supportable forecasts in assessing the lifetime expected credit losses. For available-for-sale debt securities, this update made several targeted amendments to the existing other-than-temporary impairment model, including (1) requiring disclosure of the allowance for credit losses, (2) allowing reversals of the previously recognized credit losses until the entity has the intent to sell, is more-likely-than-not required to sell the securities or the maturity of the securities, (3) limiting impairment to the difference between the amortized cost basis and fair value and (4) not allowing entities to consider the length of time that fair value has been less than amortized cost as a factor in evaluating whether a credit loss exists.

This update is effective for public business entities for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Entities are required to apply this update on a modified retrospective basis with a cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption. The Company is currently evaluating the impact to its Consolidated Financial Statements of adopting this update and does not expect to have a material impact.

Leases

In February 2016, the FASB issued a new accounting standard intended to improve the financial reporting of lease transactions. The new accounting standard requires lessees to recognize an asset and a liability on the balance sheet for the rights and obligations created by entering into a lease transaction. The new standard retains the dual-model concept by requiring entities to determine if a lease is an operating or financing lease. The lessor accounting model remains largely unchanged. The new standard also expands qualitative and quantitative disclosures for lessees.

The standard is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018 using a modified retrospective approach applied to the earliest comparative period in the financial statements. In July 2018, the FASB approved a new transition method ("new transition method") that would permit issuers to apply the standard as of January 1, 2019 and not restate comparable periods. Early adoption is permitted.

In preparation for adoption of the standard, the Company has implemented internal controls and a software solution to manage and account for its leases. The Company elected the new transition method and other options, which allow the Company to use its previous evaluations regarding if an arrangement contains a lease, if a lease is an operating or financing lease and what costs are capitalized as initial direct costs prior to adoption, as permitted under this standard. The Company also elected to combine lease and non-lease components. The associated lease payments will be recognized in the Consolidated Statement of Operations on a straight-line basis over the lease period. The Company expects to recognize right-of-use assets of approximately $640 million and lease liabilities of approximately $650 million in the Consolidated Balance Sheet based on leases which have commenced before January 1, 2019. The difference between the right-of-use asset and lease liability primarily relates to the classification of land-use rights (refer to Land-use rights above) and the impact of the timing differences between the recognition of rent expense and when rent payments are made and incentives are received on existing leases. There is no impact to retained earnings. The Company does not expect a material impact to its Consolidated Statement of Operations and Statement of Cash Flows resulting from the adoption.

3.	STOCK-BASED COMPENSATION

The Company's 1999 Omnibus Plan, as amended and restated effective June 7, 2018, (the "1999 Plan") is the primary stock compensation plan from which broad-based employee, non-employee director and consultant equity awards may be made. At December 31, 2018, there were 2,001,849 shares of common stock available for future grant under the 1999 Plan. In addition, under plans assumed in connection with various acquisitions, there were 93,726 shares of common stock available for future grant at December 31, 2018.

Stock-based compensation issued under the plans generally consists of restricted stock units, performance share units and, to a far lesser extent and only in the context of assuming grants in connection with acquisitions, stock options. Restricted stock units and performance share units generally vest over periods from 1 to 3 years. Assumed stock options generally have a term of 10 years. The Company issues shares of common stock upon the vesting of restricted stock units and performance share units and the exercise of stock options. See Note 2 for the Company's accounting policy on stock-based compensation.

Stock-based compensation included in personnel expenses in the Consolidated Statements of Operations was $317 million, $261 million and $250 million for the years ended December 31, 2018, 2017 and 2016, respectively. Stock-based compensation for the years ended December 31, 2018, 2017 and 2016 includes charges amounting to $48 million, $11 million and $21 million, respectively, representing the impact of adjusting the estimated probable outcome at the end of the performance period for outstanding unvested performance share units. The related tax benefit for stock-based compensation is $36 million, $46 million and $45 million for the years ended December 31, 2018, 2017 and 2016, respectively.

Stock-based compensation from grants to non-employee directors and consultants was $6 million, $3 million and $3 million for the years ended December 31, 2018, 2017 and 2016, respectively. See Note 2 for the change in the accounting of stock-based awards granted to non-employee consultants.

Restricted Stock Units and Performance Share Units

The following table summarizes the activity of restricted stock units and performance share units ("share-based awards") for employees and non-employee directors during the years ended December 31, 2016, 2017 and 2018:

Share-Based Awards		Shares		Weighted-Average Grant Date Fair Value
Unvested at December 31, 2015		637,257			$	1,070.10
Granted		202,740			$	1,314.93
Vested		(298,753	)		$	858.23
Performance Shares Adjustment		52,224			$	1,294.84
Forfeited/Canceled		(77,862	)		$	1,278.06
Unvested at December 31, 2016		515,606			$	1,287.88
Granted		174,507			$	1,740.78
Vested		(143,771	)		$	1,316.26
Performance Shares Adjustment		19,357			$	1,501.48
Forfeited/Canceled		(41,003	)		$	1,416.09
Unvested at December 31, 2017		524,696			$	1,431.88
Granted		166,304			$	2,027.43
Vested		(204,242	)		$	1,297.21
Performance Shares Adjustment		66,245			$	1,872.06
Forfeited/Canceled		(41,441	)		$	1,713.45
Unvested at December 31, 2018		511,562			$	1,713.44

Share-based awards granted by the Company during the years ended December 31, 2018, 2017 and 2016 had aggregate grant-date fair values of $337 million, $304 million and $267 million, respectively. Share-based awards that vested during the years ended December 31, 2018, 2017, and 2016 had grant-date fair values of $265 million, $189 million and $256 million, respectively.

At December 31, 2018, there was $420 million of total future compensation cost related to unvested share-based awards to be recognized over a weighted-average period of 1.9 years.

During the year ended December 31, 2018, the Company made broad-based grants of 116,583 restricted stock units that generally vest over a three-year period, subject to certain exceptions for terminations other than for "cause," for "good reason" or on account of death or disability. These share-based awards had a total grant-date fair value of $236 million based on a weighted-average grant-date fair value per share of $2,024.71.

Performance share units are payable in shares of the Company's common stock upon vesting. Subject to certain exceptions for terminations other than for "cause," for "good reason" or on account of death or disability, recipients of these performance share units generally must continue their service through the requisite service period in order to receive any shares. Stock-based compensation related to performance share units reflects the estimated probable outcome at the end of the performance period.

2018 Performance Share Units

During the year ended December 31, 2018, the Company granted 49,721 performance share units to executives and certain other employees. The performance share units had a total grant-date fair value of $101 million based upon a grant-date fair value per share of $2,033.79. The actual number of shares to be issued on the vesting date will be determined upon completion of the performance period which generally ends December 31, 2020, assuming there is no accelerated vesting for, among other things, a termination of employment under certain circumstances. At December 31, 2018, the estimated number of probable shares to be issued is a total of 86,438 shares, net of performance share units that were forfeited or vested since the

grant date, including 34,509 shares that are not subject to the achievement of minimum performance thresholds. If the maximum performance thresholds are met at the end of the performance period, a maximum number of 91,638 total shares could be issued.

2017 Performance Share Units

During the year ended December 31, 2017, the Company granted 73,893 performance share units with a grant-date fair value of $128 million, based on a grant-date fair value per share of $1,735.10. The actual number of shares to be issued will be determined based upon completion of the performance period which generally ends December 31, 2019, assuming there is no accelerated vesting for, among other things, a termination of employment under certain circumstances.

At December 31, 2018, there were 60,963 unvested 2017 performance share units outstanding, net of performance share units that were forfeited or vested since the grant date. At December 31, 2018, the number of shares estimated to be issued pursuant to these performance share units at the end of the performance period is a total of 90,151 shares, including 47,706 shares that are not subject to the achievement of minimum performance thresholds. If the maximum thresholds are met at the end of the performance period, a maximum of 121,926 total shares could be issued pursuant to these performance share units.

2016 Performance Share Units

During the year ended December 31, 2016, the Company granted 85,735 performance share units with a grant-date fair value of $112 million, based on a weighted-average grant-date fair value per share of $1,302.25. At December 31, 2018, there were 63,230 unvested 2016 performance share units outstanding, net of performance share units that were forfeited or vested since the grant date. At December 31, 2018, the number of shares estimated to be issued pursuant to these performance share units in 2019 is 103,076 shares.

Stock Options

All outstanding employee stock options were assumed in acquisitions. The following table summarizes the activity for stock options during the years ended December 31, 2016, 2017 and 2018:

Employee Stock Options			Number of Shares			Weighted-Average Exercise Price					Aggregate Intrinsic Value (in millions)					Weighted-Average Remaining Contractual Term (in years)
Balance, December 31, 2015			89,104				$	383.03				$	79			5.4
Exercised			(38,150	)			$	404.40
Forfeited			(1,971	)			$	241.65
Balance, December 31, 2016			48,983				$	372.07				$	54			4.4
Exercised			(17,359	)			$	294.45
Forfeited			(949	)			$	837.09
Balance, December 31, 2017			30,675				$	401.61				$	41			3.9
Exercised			(3,318	)			$	494.66
Forfeited			(94	)			$	450.84
Balance, December 31, 2018			27,263				$	386.97				$	36			2.8
Vested and exercisable at December 31, 2018			27,190				$	398.69				$	36			2.8
Vested and exercisable at December 31, 2018 and expected to vest thereafter			27,263				$	386.97				$	36			2.8

The aggregate intrinsic value of employee stock options exercised during the years ended December 31, 2018, 2017 and 2016 was $5 million, $26 million and $35 million, respectively. During the years ended December 31, 2018, 2017 and 2016, stock options vested for 98, 1,515 and 12,180 shares, respectively.

4.	INVESTMENTS

Short-term and Long-term Investments in Marketable Securities

See Note 2 for the Company's accounting policy related to its investments in marketable debt and equity securities. The following table summarizes, by major security type, the Company's investments in marketable securities at December 31, 2018 (in millions):

	Cost				Gross Unrealized Gains				Gross Unrealized Losses				Fair Value
Short-term investments in marketable securities:
Debt securities:
International government securities	$	314			$	—			$	—			$	314
U.S. government securities	658				—				(2		)		656
Corporate debt securities	2,693				—				(12		)		2,681
U.S. government agency securities	1				—				—				1
Commercial paper	7				—				—				7
Certificate of deposit	1				—				—				1
Total	$	3,674			$	—			$	(14	)		$	3,660
Long-term investments in marketable securities:
Debt securities:
International government securities	$	797			$	3			$	—			$	800
U.S. government securities	299				—				(6		)		293
Corporate debt securities	4,445				4				(48		)		4,401
Investments in Ctrip:
Convertible debt securities	1,275				—				(98		)		1,177
Equity securities	655				2				(72		)		585
Meituan Dianping equity securities	450				1				—				451
Total	$	7,921			$	10			$	(224	)		$	7,707

The Company's investment policy seeks to preserve capital and maintain sufficient liquidity to meet operational and other needs of the business. At December 31, 2018, the weighted-average life of the Company’s fixed income investment portfolio, excluding the Company's investment in Ctrip convertible debt securities, was approximately 1.2 years with an average credit quality of A+/A1/A+.

The Company invests in international government securities with high credit quality. At December 31, 2018, investments in international government securities principally included debt securities issued by the governments of the Netherlands, France, Belgium, Austria, Germany and Finland. At December 31, 2018, the Company does not consider any of its investments in marketable debt securities to be other-than-temporarily impaired.

The following table summarizes, by major security type, the Company's investments in marketable securities at December 31, 2017 (in millions):

	Cost				Gross Unrealized Gains				Gross Unrealized Losses				Fair Value
Short-term investments in marketable securities:
Debt securities:
International government securities	$	725			$	—			$	—			$	725
U.S. government securities	996				—				(2		)		994
Corporate debt securities	3,068				1				(5		)		3,064
U.S. government agency securities	4				—				—				4
Commercial paper	73				—				—				73
Total	$	4,866			$	1			$	(7	)		$	4,860
Long-term investments in marketable securities:
Debt securities:
International government securities	$	607			$	2			$	(1	)		$	608
U.S. government securities	845				—				(10		)		835
Corporate debt securities	6,690				8				(42		)		6,656
Investments in Ctrip:
Convertible debt securities	1,275				103				(9		)		1,369
Equity securities	655				300				(1		)		954
Total	$	10,072			$	413			$	(63	)		$	10,422

Investments in Ctrip

In May 2015 and August 2014, the Company invested $250 million and $500 million, respectively, in five-year senior convertible notes issued at par value by Ctrip. In December 2015, the Company invested $500 million in a Ctrip ten-year senior convertible note issued at par value, which included a put option allowing the Company, at its option, to require a prepayment in cash from Ctrip at the end of the sixth year of the note. In September 2016, the Company invested $25 million in a Ctrip six-year senior convertible note issued at par value, which included a put option allowing the Company, at its option, to require prepayment in cash from Ctrip at the end of the third year of the note. The Company determined that the economic characteristics and risks of the put option are clearly and closely related to the note, and therefore did not meet the requirement for separate accounting as embedded derivatives. The Company evaluated the conversion features for all Ctrip senior convertible notes and only the conversion feature associated with the September 2016 investment met the definition of an embedded derivative (see Note 5). The Company monitors the conversion features of these notes to determine whether they meet the definition of an embedded derivative during each reporting period. The Ctrip convertible notes have been marked-to-market in accordance with the accounting guidance for available-for-sale securities. At December 31, 2018, the Company had also invested $655 million in Ctrip American Depositary Shares ("ADSs"). At December 31, 2018, the Company did not have significant influence over Ctrip.

Investment in Meituan Dianping

In October 2017, the Company invested $450 million in preferred shares of Meituan Dianping, the leading e-commerce platform for local services in China. As a result of Meituan Dianping's initial public offering in September 2018, the Company classified its investment as a marketable equity security (see the table above that summarizes the Company's investments in marketable securities at December 31, 2018) and recognized an unrealized gain of $1 million for the year ended December 31, 2018, which was included in "Net unrealized losses on marketable equity securities" in the Consolidated Statement of Operations. At December 31, 2018, the Company did not have significant influence over Meituan Dianping.

Long-term Investments without Readily Determinable Fair Value

The Company held investments in equity securities of private companies, which are typically at an early stage of development, of $501 million and $451 million at December 31, 2018 and 2017, respectively. The investments of $451 million

at December 31, 2017 principally related to the Company's investment in Meituan Dianping prior to its initial public offering in September 2018. In July 2018, the Company invested $500 million in preferred shares of Didi Chuxing, the leading mobile transportation and ride-hailing platform in China. These investments are measured at cost less impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer and are included in "Long-term investments" in the Company's Consolidated Balance Sheets. The Company determined that no changes were required to the carrying value of these investments at December 31, 2018. For the years ended December 31, 2017 and 2016, the Company recognized an impairment of $8 million and $63 million, respectively, to write off its investments in certain private companies.

Other Long-term Investments

The Company held an investment of $200 million in preferred shares of Grab, a leading on-demand transportation and mobile service platform in Southeast Asia, which is included in "Long-term investments" in the Company's Consolidated Balance Sheet at December 31, 2018. The preferred shares are convertible to ordinary shares at the Company’s option and are mandatorily convertible upon an initial public offering. The preferred shares also contain a redemption feature that can be exercised by the Company after June 2023. These features have been evaluated as embedded derivatives, however, they do not meet the requirements to be accounted for separately. The investment is classified as a debt security for accounting purposes and categorized as available-for-sale. The investment is reported at estimated fair value with the aggregate unrealized gains and losses, net of taxes, reflected as a part of "Accumulated other comprehensive income (loss)" in the Consolidated Balance Sheet.

5. FAIR VALUE MEASUREMENTS

Financial assets carried at fair value at December 31, 2018 are classified in the categories described in the tables below (in millions):

		Level 1				Level 2				Level 3				Total
ASSETS:
Cash and restricted cash equivalents:
Money market funds		$	2,061			$	—			$	—			$	2,061
International government securities		—				21				—				21
U.S. government securities		—				1				—				1
Commercial paper		—				2				—				2
Time deposits		25				—				—				25
Short-term investments in marketable securities:
International government securities		—				314				—				314
U.S. government securities		—				656				—				656
Corporate debt securities		—				2,681				—				2,681
U.S. government agency securities		—				1				—				1
Commercial paper		—				7				—				7
Certificate of deposit		1				—				—				1
Long-term investments in marketable securities:
International government securities		—				800				—				800
U.S. government securities		—				293				—				293
Corporate debt securities		—				4,401				—				4,401
Ctrip convertible debt securities		—				1,177				—				1,177
Ctrip equity securities		585				—				—				585
Meituan Dianping equity securities		451				—				—				451
Other long-term investment		—				—				200				200
Derivatives:
Currency exchange derivatives		—				4				—				4
Total assets at fair value		$	3,123			$	10,358			$	200			$	13,681

Financial assets carried at fair value at December 31, 2017 are classified in the categories described in the tables below (in millions):

		Level 1				Level 2				Total
ASSETS:
Cash and restricted cash equivalents:
Money market funds		$	1,895			$	—			$	1,895
U.S. government securities		—				22				22
Corporate debt securities		—				7				7
Commercial paper		—				96				96
Time deposits		18				—				18
Short-term investments in marketable securities:
International government securities		—				725				725
U.S. government securities		—				994				994
Corporate debt securities		—				3,064				3,064
U.S. government agency securities		—				4				4
Commercial paper		—				73				73
Long-term investments in marketable securities:
International government securities		—				608				608
U.S. government securities		—				835				835
Corporate debt securities		—				6,656				6,656
Ctrip convertible debt securities		—				1,369				1,369
Ctrip equity securities		954				—				954
Derivatives:
Currency exchange derivatives		—				2				2
Total assets at fair value		$	2,867			$	14,455			$	17,322

There are three levels of inputs to measure fair value. The definition of each input is described below:

Level 1:	Quoted prices in active markets that are accessible by the Company at the measurement date for identical assets and liabilities.

Level 2:	Inputs that are observable, either directly or indirectly. Such prices may be based upon quoted prices for identical or comparable securities in active markets or inputs not quoted on active markets, but corroborated by market data.

Level 3:	Unobservable inputs are used when little or no market data is available.

Investments in corporate debt securities, U.S. and international government securities, commercial paper, government agency securities and certain convertible debt securities are considered "Level 2" valuations because the Company has access to quoted prices, but does not have visibility into the volume and frequency of trading for all of these investments. For the Company's investments, a market approach is used for recurring fair value measurements and the valuation techniques use inputs that are observable, or can be corroborated by observable data, in an active marketplace. See Note 4 for information on the carrying value of the Company's investments in marketable securities.

The investment in Grab, reported at a fair value of $200 million at December 31, 2018, is considered a "Level 3" valuation and measured using management's estimates that incorporate current market participant expectations of future cash flows considered alongside other relevant information.

The Company's derivative instruments are valued using pricing models. Pricing models take into account the contract terms as well as multiple inputs where applicable, such as interest rate yield curves, option volatility and currency rates. Derivatives are considered "Level 2" fair value measurements. The Company's derivative instruments are typically short-term in nature.

At December 31, 2018 and 2017, the Company's cash consisted of bank deposits. Other financial assets and liabilities, including restricted cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and deferred merchant bookings, are carried at cost which approximates their fair value because of the short-term nature of these items. See Note 10 for the estimated fair value of the Company's outstanding Senior Notes and Note 18 for the Company's contingent liability associated with a business acquisition.

In the normal course of business, the Company is exposed to the impact of foreign currency fluctuations. The Company mitigates these risks by following established risk management policies and procedures, including the use of derivatives. See Note 2 for the Company's accounting policy on derivative financial instruments.

Derivatives Not Designated as Hedging Instruments — The Company is exposed to adverse movements in currency exchange rates as the operating results of its international operations are translated from local currency into U.S. Dollars upon consolidation. The Company enters into average-rate derivative contracts to hedge translation risks from short-term currency exchange rate fluctuations for the Euro, British Pound Sterling and certain other currencies versus the U.S. Dollar. At December 31, 2018 and 2017, there were no outstanding derivative contracts related to foreign currency translation risks.

The Company also enters into foreign currency forward contracts to hedge its exposure to the impact of movements in currency exchange rates on its transactional balances denominated in currencies other than the functional currency. Derivative

assets are included in "Prepaid expenses and other current assets" and derivative liabilities are included in "Accrued expenses

and other current liabilities" in the Consolidated Balance Sheets. Derivatives associated with these transaction risks resulted in foreign currency losses of $44 million, foreign currency gains of $45 million and foreign currency losses of $16 million for the years ended December 31, 2018, 2017 and 2016, respectively. These mark-to-market adjustments on the derivative contracts, offset by the effect of changes in currency exchange rates on transactions denominated in currencies other than the functional currency, resulted in net losses of $47 million, $27 million and $14 million for the years ended December 31, 2018, 2017 and 2016, respectively. The net impacts related to these derivatives are reported in "Foreign currency transactions and other" in the Consolidated Statements of Operations.

The settlement of derivative contracts not designated as hedging instruments resulted in net cash outflow of $56 million for the year ended December 31, 2018 and net cash inflows of $41 million and $5 million for the years ended December 31, 2017 and 2016, respectively, and are reported within "Net cash provided by operating activities" in the Consolidated Statements of Cash Flows.

Embedded Derivative — In September 2016, the Company invested $25 million in a Ctrip convertible note (see Note 4). The Company determined that the conversion option for this note met the definition of an embedded derivative that required separate accounting. At December 31, 2018 and 2017, the embedded derivative had an estimated fair value of $0.1 million and $2 million, respectively, and is reported in the Consolidated Balance Sheets with its host contract in "Long-term investments." The embedded derivative is bifurcated for fair value measurement purposes only. The mark-to-market adjustments are included in "Foreign currency transactions and other" in the Company's Consolidated Statements of Operations.

6.	ACCOUNTS RECEIVABLE RESERVES

The Company records a provision for uncollectible commissions and chargebacks related to disputed credit card payments. Changes in accounts receivable reserves consisted of the following (in millions):

	For the Year Ended December 31,
	2018				2017				2016
Balance, beginning of year	$	39			$	26			$	15
Provision charged to expense	163				62				46
Charge-offs and adjustments	(139		)		(52		)		(35		)
Currency translation adjustments	(2		)		3				—
Balance, end of year	$	61			$	39			$	26

7.	NET INCOME PER SHARE

The Company computes basic net income per share by dividing net income applicable to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted net income per share is based upon the weighted-average number of common and common equivalent shares outstanding during the period.

Common equivalent shares related to stock options, restricted stock units, and performance share units are calculated using the treasury stock method. Performance share units are included in the weighted-average common equivalent shares based on the number of shares that would be issued if the end of the reporting period were the end of the performance period, if the result would be dilutive.

The Company's convertible notes have net share settlement features requiring the Company upon conversion to settle the principal amount of the debt for cash and the conversion premium for cash or shares of the Company's common stock, at the Company's option. The convertible notes are included in the calculation of diluted net income per share if their inclusion is dilutive under the treasury stock method.

A reconciliation of the weighted-average number of shares outstanding used in calculating diluted earnings per share is as follows (in thousands):

	For the Year Ended December 31,
	2018			2017			2016
Weighted-average number of basic common shares outstanding	47,446			48,994			49,491
Weighted-average dilutive stock options, restricted stock units and performance share units	236			295			238
Assumed conversion of Convertible Senior Notes	335			665			334
Weighted-average number of diluted common and common equivalent shares outstanding	48,017			49,954			50,063
Anti-dilutive potential common shares	1,411			1,864			2,443

Anti-dilutive potential common shares for the years ended December 31, 2018, 2017 and 2016 include approximately 1 million shares, 1 million shares and 2 million shares, respectively, that could be issued under the Company's outstanding convertible notes. Under the treasury stock method, the convertible notes will generally have an anti-dilutive impact on net income per share if the conversion prices for the convertible notes exceed the Company's average stock price.

8.	PROPERTY AND EQUIPMENT

Property and equipment at December 31, 2018 and 2017 consisted of the following (in millions):

	2018				2017				Estimated Useful Lives (years)
Computer equipment and software	$	964			$	769			2 to 5 years
Leasehold improvements	242				199				1 to 13 years
Office equipment, furniture and fixtures	55				47				2 to 7 years
Building construction-in-progress	88				8
Total	1,349				1,023
Less: accumulated depreciation	(693		)		(543		)
Property and equipment, net	$	656			$	480

Depreciation expense was $248 million, $187 million and $140 million for the years ended December 31, 2018, 2017 and 2016, respectively.

9.	INTANGIBLE ASSETS AND GOODWILL

The Company's intangible assets at December 31, 2018 and 2017 consisted of the following (in millions):

	December 31, 2018												December 31, 2017
	Gross Carrying Amount				Accumulated Amortization				Net Carrying Amount				Gross Carrying Amount				Accumulated Amortization				Net Carrying Amount				Amortization Period
Supply and distribution agreements	$	1,099			$	(408	)		$	691			$	1,057			$	(355	)		$	702			3 - 20 years
Technology	173				(121		)		52				137				(104		)		33				1 - 7 years
Patents	2				(2		)		—				2				(2		)		—				15 years
Internet domain names	41				(30		)		11				42				(29		)		13				5 - 20 years
Trade names	1,810				(439		)		1,371				1,779				(350		)		1,429				4 - 20 years
Non-compete agreements	1				(1		)		—				22				(22		)		—				4 years
Total intangible assets	$	3,126			$	(1,001	)		$	2,125			$	3,039			$	(862	)		$	2,177

Intangible assets are amortized on a straight-line basis. Amortization expense was $178 million, $176 million and $169 million for the years ended December 31, 2018, 2017 and 2016, respectively.

The annual estimated amortization expense for intangible assets for the next five years and thereafter is expected to be as follows (in millions):

2019	$	174
2020	166
2021	158
2022	156
2023	154
Thereafter	1,317
	$	2,125

A roll-forward of goodwill for the years ended December 31, 2018 and 2017 consisted of the following (in millions):

	2018				2017
Balance, beginning of year	$	2,738			$	2,397
Acquisitions	212				294
Currency translation adjustments	(40		)		47
Balance, end of year	$	2,910			$	2,738

A substantial portion of the Company's intangibles and goodwill relates to the acquisition of OpenTable in July 2014 and KAYAK in May 2013. At September 30, 2018, the Company performed its annual goodwill impairment testing and concluded that there was no impairment of goodwill. Since the annual impairment test, there have been no events or changes in circumstances to indicate a potential impairment to the Company's goodwill. In addition, the Company did not identify an impairment indicator for the Company's other long-lived assets and intangible assets at December 31, 2018.

For the year ended December 31, 2016, the Company recognized a non-cash impairment charge for goodwill related to OpenTable of $941 million, which was not tax deductible.

10.	DEBT

Short-term Borrowing

On December 31, 2018, the Company had a bank overdraft of $25 million which was reported in "Accrued expenses and other current liabilities" in the Consolidated Balance Sheet at December 31, 2018 and was repaid in January 2019.

Revolving Credit Facility

In June 2015, the Company entered into a $2.0 billion five-year unsecured revolving credit facility with a group of lenders. Borrowings under the revolving credit facility will bear interest, at the Company’s option, at a rate per annum equal to either (i) the adjusted London Inter-bank Offered Rate ("LIBOR") for the interest period in effect for such borrowing plus an applicable margin ranging from 0.875% to 1.50%; or (ii) the greatest of (a) Bank of America, N.A.'s prime lending rate, (b) the federal funds rate plus 0.50%, and (c) an adjusted LIBOR for an interest period of one month plus 1.00%, plus an applicable margin ranging from 0.00% to 0.50%. Undrawn balances available under the revolving credit facility are subject to commitment fees at the applicable rate ranging from 0.085% to 0.20%.

The revolving credit facility provides for the issuance of up to $70 million of letters of credit as well as borrowings of up to $50 million on same-day notice, referred to as swingline loans. Borrowings under the revolving credit facility may be made in U.S. Dollars, Euros, British Pounds Sterling and any other foreign currency agreed to by the lenders. The proceeds of loans made under the facility would be used for working capital and general corporate purposes, which could include acquisitions, share repurchases or debt repayments. There were no borrowings outstanding and $5 million and $4 million of letters of credit issued under the facility, respectively, at December 31, 2018 and December 31, 2017. In January 2019, the Company borrowed $100 million, which is due on March 29, 2019 with an interest rate of 3.5%, under this revolving credit facility.

Outstanding Debt

Outstanding debt at December 31, 2018 consisted of the following (in millions):

December 31, 2018		Outstanding Principal Amount				Unamortized Debt Discount and Debt Issuance Cost				Carrying Value
Long-term debt:
0.35% Convertible Senior Notes due June 2020		$	1,000			$	(39	)		$	961
0.9% Convertible Senior Notes due September 2021		1,000				(61		)		939
0.8% (€1 Billion) Senior Notes due March 2022		1,143				(5		)		1,138
2.15% (€750 Million) Senior Notes due November 2022		858				(4		)		854
2.75% Senior Notes due March 2023		500				(3		)		497
2.375% (€1 Billion) Senior Notes due September 2024		1,143				(10		)		1,133
3.65% Senior Notes due March 2025		500				(3		)		497
3.6% Senior Notes due June 2026		1,000				(6		)		994
1.8% (€1 Billion) Senior Notes due March 2027		1,143				(4		)		1,139
3.55% Senior Notes due March 2028		500				(3		)		497
Total long-term debt		$	8,787			$	(138	)		$	8,649

Outstanding debt at December 31, 2017 consisted of the following (in millions):

December 31, 2017		Outstanding Principal Amount				Unamortized Debt Discount and Debt Issuance Cost				Carrying Value
Short-term debt:
1.0% Convertible Senior Notes due March 2018		$	714			$	(3	)		$	711
Long-term debt:
0.35% Convertible Senior Notes due June 2020		$	1,000			$	(65	)		$	935
0.9% Convertible Senior Notes due September 2021		1,000				(83		)		917
0.8% (€1 Billion) Senior Notes due March 2022		1,201				(6		)		1,195
2.15% (€750 Million) Senior Notes due November 2022		900				(5		)		895
2.75% Senior Notes due March 2023		500				(3		)		497
2.375% (€1 Billion) Senior Notes due September 2024		1,201				(12		)		1,189
3.65% Senior Notes due March 2025		500				(3		)		497
3.6% Senior Notes due June 2026		1,000				(7		)		993
1.8% (€1 Billion) Senior Notes due March 2027		1,201				(5		)		1,196
3.55% Senior Notes due March 2028		500				(4		)		496
Total long-term debt		$	9,003			$	(193	)		$	8,810

Based on the closing price of the Company's common stock for the prescribed measurement periods for the three months ended December 31, 2018 and 2017, the contingent conversion thresholds on the 2020 Notes (as defined below) and 2021 Notes (as defined below) were not exceeded; therefore, these notes were not convertible at the option of the holder and were reported as non-current liabilities in the Consolidated Balance Sheets.

The 2018 Notes (as defined below) became convertible on December 15, 2017, at the option of the holders, and remained convertible until the scheduled trading day immediately preceding the maturity date of March 15, 2018. Therefore, at December 31, 2017, the Company reported the carrying value of the 2018 Notes as a current liability and reclassified the unamortized debt discount for the 2018 Notes in the amount of $3 million before tax from additional paid-in-capital to convertible debt in the mezzanine section in the Consolidated Balance Sheet at that date.

Fair Value of Debt

At December 31, 2018 and 2017, the estimated fair value of the outstanding Senior Notes was approximately $9.3 billion and $11.1 billion, respectively, and was considered a "Level 2" fair value measurement (see Note 5). Fair value was estimated based upon actual trades at the end of the reporting period or the most recent trade available as well as the Company's stock price at the end of the reporting period. A substantial portion of the market value of the Company's debt in excess of the outstanding principal amount relates to the conversion premium on the Convertible Senior Notes.

Convertible Debt

If the note holders exercise their option to convert, the Company delivers cash to repay the principal amount of the notes and delivers shares of common stock or cash, at its option, to satisfy the conversion value in excess of the principal amount. If the Company's convertible debt is redeemed or converted prior to maturity, a gain or loss on extinguishment is recognized. The gain or loss is the difference between the fair value of the debt component immediately prior to extinguishment and its carrying value. To estimate the fair value of the debt at the conversion date, the Company estimated its straight debt borrowing rate, considering its credit rating and straight debt of comparable corporate issuers.

Description of Convertible Senior Notes

In August 2014, the Company issued in a private placement $1.0 billion aggregate principal amount of Convertible Senior Notes due September 15, 2021, with an interest rate of 0.9% (the "2021 Notes"). The Company paid $11 million in debt issuance costs during the year ended December 31, 2014, related to this offering. The 2021 Notes are convertible, subject to certain conditions, into the Company's common stock at a conversion price of $2,055.50 per share. The 2021 Notes are convertible, at the option of the holder, prior to September 15, 2021, upon the occurrence of specific events, including but not

limited to a change in control, or if the closing sales price of the Company's common stock for at least 20 trading days in the period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is more than 150% of the conversion price in effect for the notes on the last trading day of the immediately preceding quarter. In the event that all or substantially all of the Company's common stock is acquired on or prior to the maturity of the 2021 Notes in a transaction in which the consideration paid to holders of the Company's common stock consists of all or substantially all cash, the Company would be required to make additional payments in the form of additional shares of common stock to the holders of the 2021 Notes in an aggregate value ranging from $0 to $375 million depending upon the date of the transaction and the then current stock price of the Company. At June 15, 2021, holders will have the right to convert all or any portion of the 2021 Notes, regardless of the Company's stock price. The 2021 Notes may not be redeemed by the Company prior to maturity. The holders may require the Company to repurchase the 2021 Notes for cash in certain circumstances. Interest on the 2021 Notes is payable on March 15 and September 15 of each year.

In May 2013, the Company issued in a private placement $1.0 billion aggregate principal amount of Convertible Senior Notes due June 15, 2020, with an interest rate of 0.35% (the "2020 Notes"). The 2020 Notes were issued with an initial discount of $20 million. The Company paid $1 million in debt issuance costs during the year ended December 31, 2013, related to this offering. The 2020 Notes are convertible, subject to certain conditions, into the Company's common stock at a conversion price of $1,315.10 per share. The 2020 Notes are convertible, at the option of the holder, prior to June 15, 2020, upon the occurrence of specific events, including but not limited to a change in control, or if the closing sales price of the Company's common stock for at least 20 trading days in the period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is more than 150% of the conversion price in effect for the notes on the last trading day of the immediately preceding quarter. In the event that all or substantially all of the Company's common stock is acquired on or prior to the maturity of the 2020 Notes in a transaction in which the consideration paid to holders of the Company's common stock consists of all or substantially all cash, the Company would be required to make additional payments in the form of additional shares of common stock to the holders of the 2020 Notes in an aggregate value ranging from $0 to $397 million depending upon the date of the transaction and the then current stock price of the Company. At March 15, 2020, holders will have the right to convert all or any portion of the 2020 Notes, regardless of the Company's stock price. The 2020 Notes may not be redeemed by the Company prior to maturity. The holders may require the Company to repurchase the 2020 Notes for cash in certain circumstances. Interest on the 2020 Notes is payable on June 15 and December 15 of each year.

In March 2012, the Company issued in a private placement $1.0 billion aggregate principal amount of Convertible Senior Notes due March 15, 2018, with an interest rate of 1.0% (the "2018 Notes"). The 2018 Notes were convertible, subject to certain conditions, into the Company's common stock at a conversion price of $944.61 per share. In March 2018, in connection with the maturity of the remaining outstanding 2018 Notes, the Company paid $714 million to satisfy the aggregate principal amount due and paid an additional $773 million in satisfaction of the conversion value in excess of the principal amount.

Cash-settled convertible debt, such as the Company's Convertible Senior Notes, is separated into debt and equity components at issuance and each component is assigned a value. The value assigned to the debt component is the estimated fair value, at the issuance date, of a similar bond without the conversion feature. The difference between the bond cash proceeds and this estimated fair value, representing the value assigned to the equity component, is recorded as a debt discount. Debt discount is amortized using the effective interest rate method over the period from the origination date through the stated maturity date. The Company estimated the straight debt borrowing rates at debt origination to be 3.18% for the 2021 Notes, 3.13% for the 2020 Notes and 3.50% for the 2018 Notes. The yield to maturity was estimated at an at-market coupon priced at par.

Debt discount after tax of $83 million ($143 million before tax) related to the 2021 Notes, $92 million ($154 million before tax) related to the 2020 Notes and $81 million ($135 million before tax) related to the 2018 Notes less financing costs associated with the equity component of the respective convertible notes was recorded in additional paid-in capital in the Consolidated Balance Sheets at debt origination.

For the years ended December 31, 2018, 2017 and 2016, the Company recognized interest expense of $66 million, $94 million and $95 million, respectively, related to convertible notes, which was comprised of $14 million, $21 million and $22 million, respectively, related to the contractual coupon interest, $50 million, $68 million and $68 million, respectively, related to the amortization of debt discount and $2 million, $5 million and $5 million, respectively, related to the amortization of debt issuance costs. For the years ended December 31, 2018, 2017 and 2016, included in the amortization of debt discount mentioned above was $3 million of original issuance discount related to the 2020 Notes for each period. The remaining period for amortization of debt discount and debt issuance costs is the period until the stated maturity date for the respective debt. The weighted-average effective interest rates for the years ended December 31, 2018, 2017 and 2016 are 3.2%, 3.4% and 3.4%, respectively.

Other Long-term Debt

In August 2017, the Company issued Senior Notes due March 15, 2023, with an interest rate of 2.75% (the "2023 Notes") for an aggregate principal amount of $500 million. The 2023 Notes were issued with an initial discount of $1 million. In addition, the Company paid $3 million in debt issuance costs during the year ended December 31, 2017. Interest on the 2023 Notes is payable semi-annually on March 15 and September 15.

In August 2017, the Company issued Senior Notes due March 15, 2028, with an interest rate of 3.55% (the "2028 Notes") for an aggregate principal amount of $500 million. The 2028 Notes were issued with an initial discount of $0.4 million. In addition, the Company paid $3 million in debt issuance costs during the year ended December 31, 2017. Interest on the 2028 Notes is payable semi-annually on March 15 and September 15.

In March 2017, the Company issued Senior Notes due March 10, 2022, with an interest rate of 0.8% (the "March 2022 Notes") for an aggregate principal amount of 1.0 billion Euros. The March 2022 Notes were issued with an initial discount of 2 million Euros. In addition, the Company paid $5 million in debt issuance costs during the year ended December 31, 2017. Interest on the March 2022 Notes is payable annually on March 10. Subject to certain limited exceptions, all payments of interest and principal for the March 2022 Notes will be made in Euros.

In May 2016, the Company issued Senior Notes due June 1, 2026, with an interest rate of 3.6% (the "2026 Notes") for an aggregate principal amount of $1.0 billion. The 2026 Notes were issued with an initial discount of $2 million. In addition, the Company paid $6 million in debt issuance costs during the year ended December 31, 2016. Interest on the 2026 Notes is payable semi-annually on June 1 and December 1.

In November 2015, the Company issued Senior Notes due November 25, 2022, with an interest rate of 2.15% (the "November 2022 Notes") for an aggregate principal amount of 750 million Euros. The November 2022 Notes were issued with an initial discount of 2 million Euros. In addition, the Company paid $4 million in debt issuance costs during the year ended December 31, 2015. Interest on the November 2022 Notes is payable annually on November 25. Subject to certain limited exceptions, all payments of interest and principal, including payments made upon any redemption of the November 2022 Notes will be made in Euros.

In March 2015, the Company issued Senior Notes due March 15, 2025, with an interest rate of 3.65% (the "2025 Notes") for an aggregate principal amount of $500 million. The 2025 Notes were issued with an initial discount of $1 million. In addition, the Company paid $3 million in debt issuance costs during the year ended December 31, 2015. Interest on the 2025 Notes is payable semi-annually on March 15 and September 15.

In March 2015, the Company issued Senior Notes due March 3, 2027, with an interest rate of 1.8% (the "2027 Notes") for an aggregate principal amount of 1.0 billion Euros. The 2027 Notes were issued with an initial discount of 0.3 million Euros. In addition, the Company paid $6 million in debt issuance costs during the year ended December 31, 2015. Interest on the 2027 Notes is payable annually on March 3. Subject to certain limited exceptions, all payments of interest and principal for the 2027 Notes will be made in Euros.

In September 2014, the Company issued Senior Notes due September 23, 2024, with an interest rate of 2.375% (the "2024 Notes") for an aggregate principal amount of 1.0 billion Euros. The 2024 Notes were issued with an initial discount of 9 million Euros. In addition, the Company paid $7 million in debt issuance costs during the year ended December 31, 2014. Interest on the 2024 Notes is payable annually on September 23. Subject to certain limited exceptions, all payments of interest and principal, including payments made upon any redemption of the 2024 Notes, will be made in Euros.

The aggregate principal value of the March 2022 Notes, November 2022 Notes, 2024 Notes and 2027 Notes and accrued interest thereon are designated as a hedge of the Company's net investment in certain Euro functional currency subsidiaries. The foreign currency transaction gains or losses on these liabilities are measured based upon changes in spot rates and are recorded in "Accumulated other comprehensive income (loss)" in the Consolidated Balance Sheets. The Euro-denominated net assets of these subsidiaries are translated into U.S. Dollars at each balance sheet date, with the effects of foreign currency changes also reported in "Accumulated other comprehensive income (loss)" in the Consolidated Balance Sheets. Since the notional amount of Euro-denominated debt and related interest are not greater than the notional amount of the Company's net investment, the Company does not expect to incur any ineffectiveness on this hedge.

Debt discount is amortized using the effective interest rate method over the period from the origination date through the stated maturity date. The Company estimated the effective interest rates at debt origination to be 2.78% for the 2023 Notes, 3.56% for the 2028 Notes, 0.84% for the March 2022 Notes, 3.62% for the 2026 Notes, 2.20% for the November 2022 Notes, 3.68% for the 2025 Notes, 1.80% for the 2027 Notes and 2.48% for the 2024 Notes.

For the years ended December 31, 2018, 2017 and 2016, the Company recognized interest expense of $170 million, $145 million and $108 million, respectively, related to other long-term debt, which was almost entirely comprised of $163 million, $139 million and $104 million, respectively, related to the contractual coupon interest. The remaining interest expense relates to the amortization of debt discount and debt issuance costs. The remaining period for amortization of debt discount and debt issuance costs is the period until the stated maturity dates for the respective debt.

On July 24, 2017, the Company assumed third-party senior debt of $15 million associated with the acquisition of the Momondo Group. The debt was repaid by the Company in July 2017.

11.	TREASURY STOCK

At December 31, 2017, the Company had a total remaining authorization of $2.4 billion to repurchase its common stock related to programs authorized by the Company's Board of Directors in 2016 and 2017 for $3.0 billion and $2.0 billion, respectively. In the first quarter of 2018, the Company's Board of Directors authorized an additional program to repurchase up to $8.0 billion of the Company's common stock. At December 31, 2018, the Company had a remaining authorization of $4.5 billion to repurchase its common stock. In 2019, the Company has continued to make repurchases of its common stock and the Company may continue to make repurchases of shares under its stock repurchase programs, depending on prevailing market conditions, alternate uses of capital and other factors. Whether and when to initiate and/or complete any repurchase of common stock and the amount of common stock repurchased will be determined at the Company's discretion. Additionally, the Board of Directors has given the Company the general authorization to repurchase shares of its common stock withheld to satisfy employee withholding tax obligations related to stock-based compensation.

The following table summarizes the Company's stock repurchase activities during the years ended December 31, 2018, 2017 and 2016, respectively (in millions, except for shares):

		2018							2017							2016
		Shares			Amount				Shares			Amount				Shares			Amount
Authorized stock repurchase programs		3,020,561			$	5,850			968,521			$	1,744			635,877			$	861
General authorization for shares withheld on stock award vesting		79,746			162				57,369			100				127,107			167
Total		3,100,307			$	6,012			1,025,890			$	1,844			762,984			$	1,028
Shares repurchased in December and settled in following January		42,939			$	74			18,217			$	32			10,215			$	15

For the years ended December 31, 2018, 2017 and 2016, the Company remitted $163 million, $101 million and $166 million of employee withholding taxes, respectively, to the tax authorities, which is different from the aggregate cost of the shares withheld for taxes for each year due to the timing in remitting the taxes. The cash remitted to the tax authorities is included in financing activities in the Consolidated Statements of Cash Flows.

At December 31, 2018, there were 17,317,126 shares of the Company's common stock held in treasury.

12.	ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The table below provides the balances for each classification of accumulated other comprehensive income (loss) at December 31, 2018 and 2017 (in millions):

	December 31, 2018				December 31, 2017
Foreign currency translation adjustments, net of tax (1)	$	(129	)		$	(15	)
Net unrealized gains on marketable securities, net of tax:
Net unrealized gains on marketable equity securities, net of tax (2)	—				241
Net unrealized (losses) gains on marketable debt securities, net of tax (3)	(187		)		12
Accumulated other comprehensive income (loss)	$	(316	)		$	238

(1) Foreign currency translation adjustments, net of tax, at December 31, 2018 and 2017, include accumulated net losses from fair value adjustments of $35 million after tax ($53 million before tax) associated with previously settled derivatives that were designated as net investment hedges.

Foreign currency translation adjustments, net of tax, include foreign currency transaction losses of $26 million after tax ($20 million before tax) and $190 million after tax ($237 million before tax) at December 31, 2018 and 2017, respectively, associated with the Company's Euro-denominated debt. The Company's Euro-denominated debt is designated as a hedge against the impact of currency fluctuations on its Euro-denominated net assets (see Note 10).

The remaining balance in foreign currency translation adjustments relates to the cumulative impacts of currency fluctuations on the Company's non-U.S. Dollar denominated net assets. During the year ended December 31, 2018, the Company recorded a tax benefit of $41 million related to its one-time deemed repatriation tax liability recorded at December 31, 2017 and current year foreign earnings subject to U.S. federal and state income tax, resulting from the introduction of the Tax Act. Prior to January 1, 2018, foreign currency translation adjustments excluded U.S. federal and state income taxes as a result of the Company's intention to indefinitely reinvest the earnings of its international subsidiaries outside of the United States.

(2) Net unrealized gains on marketable equity securities, net of tax, at December 31, 2017 related to changes in the fair value of the Company's investment in Ctrip equity securities (see Note 4). Net unrealized gains before tax on equity securities at December 31, 2017 were $299 million, of which unrealized gains of $320 million were not subject to income tax in the Netherlands. Unrealized losses of $21 million were taxable at a 25% tax rate in the Netherlands, which resulted in a tax benefit of $5 million at December 31, 2017. The Company also recorded U.S. tax charges of $63 million at December 31, 2017 related to these investments.

The Company reclassified the net unrealized gains, net of tax, on its investment in Ctrip equity securities at December 31, 2017 from accumulated other comprehensive income to retained earnings upon the adoption of the accounting update on financial instruments as of January 1, 2018. Changes in fair value subsequent to January 1, 2018 are recognized in net income (see Note 2).

(3) Net unrealized losses before tax on marketable debt securities of $276 million and $86 million at December 31, 2018 and 2017, respectively, were not subject to income tax in the Netherlands. Unrealized gains before tax of $123 million and $130 million at December 31, 2018 and 2017, respectively, were taxable at a 25% tax rate in the Netherlands, resulting in tax charges of $30 million and $32 million at December 31, 2018 and 2017, respectively. The remaining net unrealized losses on marketable securities and related tax benefits at December 31, 2018 were associated with marketable debt securities held by a U.S. subsidiary.

13.	INCOME TAXES

International pre-tax income was $4.8 billion, $4.5 billion and $3.7 billion for the years ended December 31, 2018, 2017 and 2016, respectively. U.S. pre-tax income was $47 million for the year ended December 31, 2018, and U.S. pre-tax losses were $122 million and $983 million for the years ended December 31, 2017 and 2016, respectively.

Provision for Income Taxes

The income tax expense (benefit) for the year ended December 31, 2018 is as follows (in millions):

	Current				Deferred				Total
International	$	887			$	(3	)		$	884
U.S. Federal	45				(107		)		(62		)
U.S. State	55				(40		)		15
Total	$	987			$	(150	)		$	837

The income tax expense (benefit) for the year ended December 31, 2017 is as follows (in millions):

	Current				Deferred				Total
International	$	756			$	(10	)		$	746
U.S. Federal	1,327				(57		)		1,270
U.S. State	7				35				42
Total	$	2,090			$	(32	)		$	2,058

The income tax expense (benefit) for the year ended December 31, 2016 is as follows (in millions):

	Current				Deferred				Total
International	$	627			$	(14	)		$	613
U.S. Federal	64				(33		)		31
U.S. State	(1		)		(65		)		(66		)
Total	$	690			$	(112	)		$	578

The U.S. pre-tax loss is lower for the year ended December 31, 2017 compared to the year ended December 31, 2016 primarily due to the impairment charge for goodwill related to OpenTable of $941 million (see Note 9) recognized in 2016. Income tax expense on the Company's U.S. pre-tax loss for the year ended December 31, 2017 includes the impact of the Tax Act as disclosed below.

U.S. Tax Reform

In December 2017, the Tax Act was enacted into law in the United States. The Tax Act made significant changes to U.S. federal tax law, including a reduction in the U.S. federal statutory tax rate from 35% to 21%, effective January 1, 2018. The Tax Act imposed a one-time deemed repatriation tax on accumulated unremitted international earnings, to be paid over eight years. The Company recorded provisional income tax expense of approximately $1.6 billion during the year ended December 31, 2017 in accordance with Staff Accounting Bulletin No. 118 ("SAB 118"), which included U.S. state income taxes and international withholding taxes, related to the mandatory deemed repatriation of estimated accumulated international earnings of approximately $16.5 billion. The Company also recorded a provisional net income tax benefit of $217 million during the year ended December 31, 2017 related to the remeasurement of the Company’s U.S. deferred tax assets and liabilities due to the reduction of the U.S. federal statutory rate from 35% to 21%. The Company expected to use approximately $204 million of deferred tax assets related to federal net operating loss carryforwards ("NOLs") and approximately $46 million of other tax credit carryforwards, and accordingly, reduced the transition tax liability to

approximately $1.3 billion, which is presented as "Long-term U.S. transition tax liability" in the Consolidated Balance Sheet as of December 31, 2017.

In 2018, the Company completed its accounting for the income tax effects of the Tax Act. The Company recorded an income tax benefit of $46 million to adjust its provisional income tax expense that was recorded during the year ended December 31, 2017 relating to the federal one-time deemed repatriation liability, as well as U.S. state income taxes and international withholding taxes associated with the mandatory deemed repatriation. In addition, the Company recorded an income tax benefit of $2 million in 2018 to adjust the remeasurement of its U.S. deferred tax assets and liabilities due to the reduction of the U.S. federal statutory tax rate that resulted from the Tax Act. The Company utilized $133 million of deferred tax assets related to federal NOLs and $23 million of other tax credit carryforwards to reduce its transition tax liability.

Under the Tax Act, the Company's international cash and investments as of December 31, 2017, amounting to $16.2 billion, as well as future cash generated by our international operations, generally can be repatriated without further U.S. federal income tax, but will be subject to U.S. state income taxes and international withholding taxes, which have been accrued by the Company.

The Tax Act also introduced in 2018 a tax on 50% of GILTI, which is income determined to be in excess of a specified routine rate of return, and a base erosion and anti-abuse tax (“BEAT”) aimed at preventing the erosion of the U.S. tax base. The Company has adopted an accounting policy to treat taxes on GILTI as period costs.

Deferred Income Taxes

The Company utilized $379 million of its U.S. NOLs available at December 31, 2016 to reduce its federal tax liability for the deemed repatriation tax. After utilization of available NOLs, at December 31, 2018, the Company had U.S. federal NOLs of $136 million, which are subject to an annual limitation and mainly expire from December 31, 2020 to December 31, 2021, and U.S. state NOLs of $484 million, which mainly expire between December 31, 2020 and December 31, 2034. In addition, at December 31, 2018, the Company has $132 million of non-U.S. NOLs, of which $50 million expires between December 31, 2020 and December 31, 2024, and $51 million of U.S. research tax credit and alternative minimum tax carryforwards available to reduce future tax liabilities, the majority of which do not have an expiration date.

The utilization of these NOLs, allowances and credits is dependent upon the Company's ability to generate sufficient future taxable income and the tax laws in the jurisdictions where the losses were generated. The Company periodically evaluates the likelihood of the realization of deferred tax assets, and reduces the carrying amount of these deferred tax assets by a valuation allowance to the extent it believes a portion will not be realized. The Company considers many factors when assessing the likelihood of future realization of the deferred tax assets, including its recent cumulative earnings experience by taxing jurisdiction, expectations of future income, tax planning strategies, the carryforward periods available for tax reporting purposes, and other relevant factors.

The tax effects of temporary differences that give rise to significant portions of deferred tax assets and liabilities at December 31, 2018 and 2017 are as follows (in millions):

	2018				2017
Deferred tax assets/(liabilities):
Net operating loss carryforward — U.S.	$	59			$	71
Net operating loss carryforward — International	20				28
Accrued expenses	50				57
Stock-based compensation and other stock based payments	51				48
Currency translation adjustment	27				—
Tax credits	46				15
Euro-denominated debt	5				58
Property and equipment	6				9
Subtotal - deferred tax assets	264				286
Discount on convertible notes	(22		)		(33		)
Intangible assets and other	(482		)		(517		)
State income tax on accumulated unremitted international earnings	(25		)		(37		)
Unrealized gain on investments	(2		)		(70		)
Other	(15		)		(25		)
Subtotal - deferred tax liabilities	(546		)		(682		)
Valuation allowance on deferred tax assets	(36		)		(44		)
Net deferred tax liabilities (1)	$	(318	)		$	(440	)

(1) Includes deferred tax assets of $51 million and $41 million at December 31, 2018 and 2017, respectively, reported in "Other assets" in the Consolidated Balance Sheets.

The valuation allowance on deferred tax assets of $36 million at December 31, 2018 includes $20 million related to international operations and $16 million related to U.S. research credits, capital loss carryforwards and Connecticut NOLs. The valuation allowance on deferred tax assets of $44 million at December 31, 2017 includes $27 million related to international operations and $17 million related to U.S. research credits, capital loss carryforwards and Connecticut NOLs.

Pursuant to the adoption of an accounting update on January 1, 2017 related to share-based compensation, the Company recorded a deferred tax asset of $301 million related to previously unrecognized U.S. equity tax deductions, with an offsetting cumulative-effect adjustment to retained earnings, the majority of which was utilized during the year ended December 31, 2017.

The Company does not intend to indefinitely reinvest its international earnings that were subject to U.S. taxation pursuant to the mandatory deemed repatriation or subject to U.S. taxation as GILTI.

Reconciliation of U.S. Federal Statutory Income Tax Rate to Effective Income Tax Rate

A significant portion of the Company's taxable earnings are generated in the Netherlands. According to Dutch corporate income tax law, income generated from qualifying innovative activities is taxed at a rate of 7% ("Innovation Box Tax") for periods beginning on or after January 1, 2018 rather than the Dutch statutory rate of 25%. Previously, the Innovation Box Tax rate had been 5%. A portion of Booking.com's earnings during the years ended December 31, 2018, 2017 and 2016 qualifies for Innovation Box Tax treatment, which had a significant beneficial impact on the Company's effective tax rate for those years.

The effective income tax rate of the Company is different from the amount computed using the expected U.S. statutory federal rate of 21% in 2018 and 35% in 2017 and 2016 as a result of the following items (in millions):

	2018				2017				2016
Income tax expense at federal statutory rate	$	1,015			$	1,539			$	950
Adjustment due to:
Foreign rate differential	210				(458		)		(378		)
Innovation Box Tax benefit	(435		)		(397		)		(325		)
Impairment of goodwill and cost-method investment	—				—				344
Tax Act - Remeasurement of deferred tax balances	(2		)		(217		)		—
Tax Act - U.S. transition tax and other transition impacts	(46		)		1,563				—
Other	95				28				(13		)
Income tax expense	$	837			$	2,058			$	578

Uncertain Tax Positions

See Note 2 for the Company's accounting policy on uncertain tax positions. The following is a reconciliation of the total beginning and ending amount of unrecognized tax benefits (in millions):

	2018				2017				2016
Unrecognized tax benefit — January 1	$	32			$	33			$	43
Gross increases — tax positions in current period	1				5				2
Gross increases — tax positions in prior periods	19				5				1
Gross decreases — tax positions in prior periods	(3		)		(9		)		—
Reduction due to lapse in statute of limitations	(2		)		(1		)		(9		)
Reduction due to settlements during the current period	(2		)		(1		)		(4		)
Unrecognized tax benefit — December 31	$	45			$	32			$	33

The unrecognized tax benefits are included in "Other long-term liabilities" and "Deferred income taxes" in the Consolidated Balance Sheets for the years ended December 31, 2018 and 2017. The Company does not expect further significant changes in the amount of unrecognized tax benefits during the next twelve months.

The Company's major taxing jurisdictions include: Netherlands, U.S. federal, Connecticut, California, New York, Massachusetts, Singapore and U.K. The statute of limitations that remain open related to these major tax jurisdictions are: the Company's Netherlands returns from 2014 and forward; the Company's Singapore returns from 2015 and forward; the Company's U.S. federal returns for 2012, 2013, 2015 and forward; the Company's Connecticut returns from 2011 to 2013 and from 2015 and forward; the Company's California returns for 2011 and forward; the Company's New York returns for 2011 to 2013 and from 2015 and forward; the Company's Massachusetts returns from 2012 to 2013, and from 2015 and forward and the Company's U.K. returns for the tax years 2015 and 2016. No income tax waivers have been executed that would extend the period subject to examination beyond the period prescribed by statute or for the periods just stated above in the major taxing jurisdictions in which the Company is a taxpayer. The Company’s 2015 U.S. federal income tax return is currently under audit by the Internal Revenue Service. See Note 14 for more information regarding tax contingencies.

14.	COMMITMENTS AND CONTINGENCIES

Competition Reviews

At times, the online travel industry is the subject of investigations or inquiries by various national competition authorities ("NCAs"). The Company is or has been involved in investigations related to whether Booking.com's contractual price parity arrangements with accommodation providers, sometimes also referred to as "most favored nation" or "MFN" provisions, are anti-competitive because they require accommodation providers to provide Booking.com with room rates that are at least as low as those offered to other OTCs or through the accommodation provider's website. Some investigations or inquiries relate to other issues such as commission payments. For instance, on September 8, 2017 the Swiss Price Surveillance Office opened an investigation into the level of commissions of Booking.com in Switzerland.

To resolve and close certain of the parity investigations, particularly in Europe, Booking.com made commitments to several NCAs in which it replaced its price parity agreements with accommodation providers with "narrow" price parity agreements. Under a narrow price parity agreement, subject to certain exceptions, an accommodation provider is still required to offer the same or better rates on Booking.com as it offers to a consumer directly online, but it is no longer required to offer the same or better rates on Booking.com as it offers to other OTCs. The commitments also allow an accommodation provider to, among other things, offer different terms and conditions (e.g., free WiFi) and availability to consumers that book with OTCs that offer lower rates of commission or other benefits, offer lower rates to consumers that book through offline channels and continue to discount through, among other things, accommodation loyalty programs, as long as those rates are not published or marketed online.

A working group of 10 European NCAs (France, Germany, Belgium, Hungary, Ireland, Italy, the Netherlands, Czech Republic, the United Kingdom and Sweden) was established by the European Commission to monitor the effects of the narrow price parity clause in Europe. This working group (the "ECN Working Group") has decided to keep the sector under review and re-assess the competitive situation in due course. The Company is unable to predict whether further action in Europe will be taken as a result of the ECN Working Group's ongoing review. In addition, other NCAs, including other NCAs in Europe, also monitor these issues, including Booking.com's compliance with its commitments. In some jurisdictions, third parties have filed formal complaints with authorities that Booking.com is not complying with its commitments. While the Company believes Booking.com is complying with its commitments, the Company cannot predict whether authorities will take any action in response to these complaints.

A number of European countries have made any form of price parity agreements illegal, whether through court or administrative action or through legislation. For example, in August 2015, French legislation known as the "Macron Law" became effective, which, among other things, makes price parity agreements illegal, including narrow price parity agreements.

Competition-related investigations, legislation or issues could also give rise to private litigation. For example, Booking.com is involved in private litigation in Sweden related to its narrow price parity provisions, which resulted in the court determining that the narrow price parity clause had to be removed from Booking.com's agreements with hotels in Sweden. Booking.com has appealed the court's decision.

The Company is unable to predict how any current or future parity-related investigations or litigation may be resolved or the long-term impact of parity-related investigations, commitments, legislation or litigation on its business. More immediate results could include the imposition of fines or a requirement to remove parity clauses from the Company's contracts in certain jurisdictions.

NCAs or other governmental authorities are continuing to review the activities of online platforms, including through the use of consumer protection powers. A number of authorities are investigating or conducting information-gathering exercises in respect of compliance by OTCs with consumer protection laws. Other authorities are reviewing the online hotel booking sector more widely through market inquiries. For example, in October 2017 the United Kingdom's NCA (the Competition and Markets Authority, or CMA) launched a consumer protection law investigation into the clarity, accuracy and presentation of information on hotel booking sites with a specific focus on the display of search results (e.g., ranking), claims regarding discounts, methods of "pressure selling" (such as creating false impressions regarding room availability) and failure to disclose hidden charges. In connection with this investigation, in June 2018, the CMA announced that it would proceed with enforcement action against a number of hotel booking sites. In January 2019, Booking.com, agoda and KAYAK, along with a number of other OTCs, voluntarily signed commitments with the CMA addressing its concerns in resolution of this investigation. Among other things, the commitments provided to the CMA include showing prices inclusive of all mandatory taxes and charges, providing information about the effect of commissions on search results on or before the search results page and making certain adjustments to how discounts and popularity or availability are shown to consumers. The CMA has stated that it expects all market participants to adhere to the same standards, regardless of whether they formally signed the commitments. Similarly, in October 2017, the consumer protection department of the German NCA opened an inquiry into online price comparison sites in various sectors, including travel and hotels, to better understand the common practices towards consumers of online price comparison websites. Further, in March 2018, the Danish NCA began a review of the competitive conditions of the online hotel booking market. Outside Europe, in April 2018, the Singaporean NCA launched a market review into the online travel sector, with a focus on agreements between booking platforms and flight and hotel service providers. The Company is cooperating with regulators where applicable, but is unable to predict what, if any, effect such actions or any resolutions thereof, including the commitments made to the CMA, will have on its business, industry practices or online commerce more generally.

To the extent that regulatory authorities impose fines on the Company or require changes to its business practices or to those currently common to the industry, the Company's business, competitive position and results of operations could be materially and adversely affected. Negative publicity regarding competition investigations could adversely affect the Company's brands and therefore its market share and results of operations.

In addition, as its business grows, the Company may increasingly become the target of competition or consumer protection law investigations, litigation or be limited by competition laws. For example, the Company's size and market share may negatively affect its ability to obtain regulatory approval of proposed acquisitions, its ability to expand into complementary businesses or its latitude in dealing with travel service providers (such as by limiting its ability to provide discounts, rebates or incentives or to exercise contractual rights), any of which could adversely affect the its business, results of operations or ability to grow and compete.

Tax Matters

French tax authorities conducted an audit of Booking.com of the years 2003 through 2012. They are asserting that Booking.com has a permanent establishment in France and are seeking to recover what they claim are unpaid income taxes and value-added taxes. In December 2015, the French tax authorities issued Booking.com assessments related to those tax years for approximately 356 million Euros, the majority of which would represent penalties and interest. The Company believes that Booking.com has been, and continues to be, in compliance with French tax law, and the Company is contesting the assessments. The Company has not recorded a liability in connection with these assessments. In December 2018, the French tax authorities issued a formal demand for payment of the amounts assessed. As a result, in January 2019, the Company paid the amount assessed in order to preserve its right to contest the assessments in court. Such payment does not constitute an admission that the Company owes the taxes and will be refunded (with interest) to the Company to the extent the Company prevails. If the Company is unable to resolve the matter with the French tax authorities, the Company plans to challenge the assessments in the French courts. The French tax authorities have begun a similar audit of the tax years 2013 through 2015, which could result in additional assessments.

Italian authorities are reviewing Booking.com's activities for the years 2011 through 2015. They are reviewing whether Booking.com has a permanent establishment in Italy and Booking.com's transfer pricing practices in Italy. The Company believes that Booking.com has been, and continues to be, in compliance with Italian tax law. The Company is cooperating with the investigation but intends to contest any allegation that Booking.com has a permanent establishment in Italy or that its transfer pricing policies are inappropriate. In December 2018, the Italian tax authorities issued an assessment on the Italian Booking.com subsidiary for approximately 48 million Euros for the 2013 tax year, asserting that its transfer pricing policies were inadequate. The Company has not recorded a liability in connection with this assessment. It is unclear what further actions, if any, the Italian authorities will take. Such actions could include closing the investigation, assessing Booking.com additional taxes, as well as the imposition of interest, fines and penalties, or even bringing criminal charges.

In addition, Turkish tax authorities have asserted that Booking.com has a permanent establishment in Turkey and have issued tax assessments for the years 2012 through 2017 for approximately 71 million Euros, including interest and penalties. The Company believes that Booking.com has been, and continues to be, in compliance with Turkish tax law, and the Company is contesting these assessments. The Company has not recorded a liability in connection with these assessments.

As a result of an internal review of tax policies and positions at one of the Company's smaller subsidiaries, the Company identified two issues related to the application of certain non-income-based tax laws to that subsidiary's business. In the year ended December 31, 2018, the Company accrued related travel transaction taxes of approximately $46 million, based on the Company's current estimate of the probable travel transaction tax owed for the prior periods, including interest and penalties, as applicable. This expense is included in "General and administrative" expense in the Consolidated Statement of Operations for the year ended December 31, 2018. The Company currently estimates that the reasonably possible loss related to these matters in excess of the amount accrued is approximately $20 million. The Company's internal review is ongoing, and, to the extent the Company determines that the probable taxes owed related to these matters exceed what has already been accrued or new issues are identified during this review, the Company may need to accrue additional amounts, which could adversely affect the Company’s business, results of operations, financial condition and cash flows.

From time to time, the Company is involved in other tax-related audits, investigations or proceedings, which could relate to income taxes, value-added taxes, sales taxes, employment taxes, etc. For example, the Company is subject to legal proceedings in the United States related to travel transaction taxes (e.g., hotel occupancy taxes, sales taxes, etc.).

Any taxes or other assessments in excess of our current tax provisions, whether in connection with the foregoing or otherwise (including the resolution of any tax proceedings), could have a material adverse effect on our business, effective tax rate, results of operations and financial condition.

Turkish Matter

From time to time the Company has been subject to legal proceedings and claims regarding whether it is subject to local registration requirements, such as requirements to register as a travel agent. In March 2017, in connection with a lawsuit begun in 2015 by the Association of Turkish Travel Agencies claiming that Booking.com is required to meet certain registration requirements in Turkey, a Turkish court ordered Booking.com to suspend offering Turkish hotels and accommodations to Turkish residents. Although Booking.com is appealing the order and believes it to be without basis, this order has had a negative impact on the Company's growth and results of operations, and is expected to continue to negatively impact the Company's results of operations.

Other Matters

The Company accrues for certain legal contingencies where it is probable that a loss has been incurred and the amount can be reasonably estimated. Such accrued amounts are not material to the Company's balance sheets and provisions recorded have not been material to the Company's results of operations or cash flows. An estimate of a reasonably possible loss or range of loss cannot be reasonably made.

From time to time, the Company has been, and expects to continue to be, subject to legal proceedings and claims in the ordinary course of business, including claims of alleged infringement of third-party intellectual property rights. Such claims, even if not meritorious, could result in the expenditure of significant financial and managerial resources, divert management's attention from the Company's business objectives and adversely affect the Company's business, results of operations, financial condition and cash flows.

Building Construction

In September 2016, the Company signed a turnkey agreement to construct an office building for Booking.com’s headquarters in the Netherlands for 270 million Euros. Upon signing this agreement, the Company paid 48 million Euros to the developer, which included 43 million Euros for the acquired land-use rights and 5 million Euros for the building construction. The land-use rights are included in "Other assets" and the building construction-in-progress is included in "Property and equipment, net" in the Consolidated Balance Sheets. The remaining 222 million Euro obligation related to the turnkey agreement principally relates to the building construction cost. During the year ended December 31, 2018, the Company paid 66 million Euros related to its obligation under the turnkey agreement and has a 156 million Euro obligation remaining at December 31, 2018, which will be paid between 2019 and 2021 when the Company anticipates construction will be complete.

In addition to the turnkey agreement, the Company has a remaining obligation at December 31, 2018 to pay approximately 75 million Euros over the remaining term of the acquired land lease, which expires in 2065. Amounts attributable to the land-use rights and land lease are recognized as rent expense on a straight-line basis over the lease term and are recognized in "General and administrative" expense in the Consolidated Statements of Operations.

In addition to the turnkey agreement and land lease, the Company will also make additional capital expenditures to fit out and furnish the office space.

Operating Leases

The Company leases certain facilities and equipment through operating leases. Rental expense for leased office space was $115 million, $96 million and $77 million for the years ended December 31, 2018, 2017 and 2016, respectively. Rental expense for data center space was $34 million, $24 million and $22 million for the years ended December 31, 2018, 2017 and 2016, respectively.

The Company leases office space facilities for its corporate headquarters in Norwalk, Connecticut, United States of America. The Company leases additional space, including office space and data center facilities in various locations around the world, to support its operations, the largest being the headquarters of its Booking.com business in Amsterdam, Netherlands. Other than the office building for the future headquarters of the Booking.com business that is currently under construction in the Netherlands and the associated land-use rights (see the section "Land-use rights" within Note 2), the Company does not own any real estate at December 31, 2018.

Minimum payments for operating leases having initial or remaining non-cancellable terms in excess of one year and the land lease associated with an office buildings in the Netherlands discussed above have been translated into U.S. Dollars at the December 31, 2018 spot exchange rates, as applicable, and are as follows (in millions):

		2019				2020				2021				2022				2023				After 2023				Total
Operating lease obligations		$	163			$	140			$	108			$	64			$	50			$	118			$	643
Land lease obligation		1				2				2				2				2				72				81

Other Contractual Obligations

In 2018, the Company signed an agreement for a lease related to approximately 222,000 square feet of office space in the city of Manchester in the United Kingdom for the headquarters of Rentalcars.com. Rentalcars.com's obligation to execute the lease is conditional upon the developer completing certain activities, which are expected to be completed in 2020. If these activities are completed, the lease will commence for a term of approximately 13 years and the Company will have a lease obligation of approximately 65 million British Pounds Sterling, excluding lease incentives. Rentalcars.com will also make capital expenditures to fit out and furnish the office space.

Contingent Consideration for Business Acquisition (see Note 18)

15.	BENEFIT PLANS

The Company maintains a defined contribution 401(k) savings plan (the "Plan") covering certain U.S. employees. In connection with acquisitions, effective at the date of such acquisitions, the Company assumed defined contribution plans covering the U.S. employees of the acquired companies. The Company also maintains certain other defined contribution plans outside of the United States for which it provides contributions for participating employees. The Company's matching contributions during the years ended December 31, 2018, 2017 and 2016 were $22 million, $15 million and $10 million, respectively.

16.	GEOGRAPHIC AND DISAGGREGATED REVENUE INFORMATION

Geographic Information

The Company's international information consists of the results of Booking.com, agoda and Rentalcars.com and the results of the international businesses of KAYAK and OpenTable. This classification is independent of where the consumer resides, where the consumer is physically located while using the Company's services or the location of the travel service provider or restaurant. For example, a reservation made through Booking.com at a hotel in New York by a consumer in the United States is part of the Company's international results. The Company's geographic information is as follows (in millions):

	United States				International								Total Company
		The Netherlands				Other
2018
Total Revenues(1)	$	1,626		(2)	$	11,094			$	1,807			$	14,527		(2)
Intangible assets, net	1,747				30				348				2,125
Goodwill	1,938				246				726				2,910
Other long-lived assets	159				365				260				784
2017
Total Revenues	$	1,620		(3)	$	9,540			$	1,521			$	12,681		(3)
Intangible assets, net	1,790				44				343				2,177
Goodwill	1,807				254				677				2,738
Other long-lived assets	124				254				208				586
2016
Total Revenues	$	1,680		(3)	$	7,783			$	1,280			$	10,743		(3)
Intangible assets, net	1,918				51				25				1,994
Goodwill	1,802				229				366				2,397
Other long-lived assets	102				196				124				422

(1) Approximately 87% of the Company's revenues for the years ended December 31, 2018 relates to online accommodation reservation services. Revenues from all other sources of online travel reservation services or advertising and other revenues each represents less than 10% of the Company's total revenues.

(2) Total revenues are reported on a net basis for Name Your Own Price® transactions, which have been reduced for cost of revenues of $170 million (see Note 2).

(3) Total revenues are reported on a gross basis for Name Your Own Price® transactions, which were not reduced for cost of revenues of $242 million and $415 million in 2017 and 2016, respectively.

17. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

	First Quarter				Second Quarter				Third Quarter				Fourth Quarter
	(In millions, except per share data)
2018
Total revenues(1)	$	2,928			$	3,537			$	4,849			$	3,213
Net income(2)	607				977				1,768				646
Net income applicable to common stockholders per basic common share	$	12.56			$	20.34			$	37.39			$	14.00
Net income applicable to common stockholders per diluted common share	$	12.34			$	20.13			$	37.02			$	13.86

	First Quarter				Second Quarter				Third Quarter				Fourth Quarter
	(In millions, except per share data)
2017
Total revenues(1)	$	2,419			$	3,025			$	4,434			$	2,803
Gross profit(1)	2,339				2,957				4,380				2,763
Net income (loss)(2)	456				720				1,720				(555		)
Net income (loss) applicable to common stockholders per basic common share(2)	$	9.26			$	14.66			$	35.12			$	(11.41	)
Net income (loss) applicable to common stockholders per diluted common share(2)	$	9.11			$	14.39			$	34.43			$	(11.41	)

(1) For periods beginning after December 31, 2017, the Company reports revenues in accordance with the current revenue standard and no longer presents "Cost of revenues" or "Gross profit" in its Consolidated Statement of Operations. For all periods prior to January 1, 2018, the Company reported under the previous revenue standard. See Note 2 for further information.

(2) Includes, for the fourth quarter of 2018, an income tax benefit of $46 million to adjust the 2017 provisional tax expense related to a one-time transitional tax on mandatory deemed repatriation of accumulated unremitted international earnings as a result of the Tax Act. The income tax provision for the fourth quarter of 2017 includes a provisional tax expense of approximately $1.6 billion related to the transition tax mentioned above and a provisional tax benefit of $217 million related to the remeasurement of the Company’s U.S. deferred tax assets and liabilities as a result of the Tax Act.

18. ACQUISITIONS

Acquisition activities in 2018

In April 2018, the Company paid $139 million, net of cash acquired, and issued shares of the Company's common stock in the amount of $110 million in connection with the acquisition of FareHarbor, a leading provider of business-to-

business activities distribution services. In respect to the shares issued, as shown in the supplemental disclosure in the Consolidated Statement of Cash Flows, $59 million relates to purchase price consideration and $51 million relates to shares restricted for trading purposes until the required post-acquisition services are completed by certain employees. At December 31, 2018, the Company's Consolidated Balance Sheet includes $17 million in "Prepaid expenses and other current assets" and $23 million in "Other assets" related to this deferred compensation charge associated with these restricted shares. The purchase price allocation was completed at September 30, 2018.

In November 2018, the Company paid $134 million, net of cash acquired, to complete the acquisition of HotelsCombined, a hotel meta-search company. The purchase price allocation has not been completed at December 31, 2018.

The Company's Consolidated Financial Statements include the accounts of these businesses starting at their respective acquisition dates. Revenues and earnings of these businesses since their respective acquisition dates and pro forma results of operations have not been presented separately as such financial information is not material to the Company's results of operations.

Acquisition activity in 2017

In July 2017, the Company completed the acquisition of the Momondo Group, which operates the travel meta-search websites Momondo and Cheapflights, for $556 million, and which is managed as part of the Company's KAYAK business.

The purchase price allocations were completed at December 31, 2017. The aggregate purchase price was allocated to the assets acquired and liabilities assumed as follows (in millions):

Current assets (1)		$	50
Identifiable intangible assets (2)		333
Goodwill (3)		288
Property and equipment		1
Total liabilities (4)		(116		)
Total consideration		$	556

(1) Includes cash acquired of $15 million.

(2) Acquired definite-lived intangible assets, consisted of distribution agreements of $214 million with a weighted-average useful life of 15 years, trade names of $104 million with a weighted-average useful life of 13 years and technology of $15 million with a weighted-average life of 4 years.

(3) Goodwill is not tax deductible.

(4) Includes deferred tax liabilities of $70 million and third-party senior debt of $15 million.

The Company's Consolidated Financial Statements include the accounts of the Momondo Group beginning July 24, 2017. Revenues and earnings of this business since the acquisition date and pro forma results of operations have not been presented separately as such financial information is not material to the Company's results of operations. The Company incurred $5 million of professional fees for the year ended December 31, 2017 related to this acquisition. The acquisition-related expenses were included in general and administrative expenses in the Company's Consolidated Statement of Operations.

Contingent Consideration for Business Acquisition

At December 31, 2018 and December 31, 2017, the Company's Consolidated Balance Sheets included a liability of $28 million and $9 million, respectively, for estimated contingent payments for a business acquired in 2015. At December 31, 2018, based on current forecasts, the estimated fair value of the liability increased by $19 million and the associated expense was included in "General and administrative" expense in the Company's Consolidated Statement of Operations for the year ended December 31, 2018. The fair value of the liability, which is considered a "Level 3" fair value measurement (see Note 5), was based upon probability-weighted average payments for specific performance factors from the acquisition date through the performance period which ends on March 31, 2019. The range of undiscounted outcomes for the estimated contingent payments is $0 million to $90 million.

INDEX TO EXHIBITS

In reviewing the agreements included as exhibits to this Annual Report on Form 10-K, please remember they are included to provide you with information regarding their terms and are not intended to provide any other factual or disclosure information about the Company or the other parties to the agreements. Some agreements contain representations and warranties by each of the parties to the applicable agreement. These representations and warranties have been made solely for the benefit of the other parties to the applicable agreement and:

•	should not be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate;

•	may have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement;

•	may apply standards of materiality in a way that is different from what may be viewed as material to you or other investors; and

•	were made only at the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments.

Accordingly, these representations and warranties may not describe the actual state of affairs at the date they were made or at any other time. Additional information about the Company may be found elsewhere in this Annual Report on Form 10‑K and the Company's other public filings, which are available without charge through the SEC's website at http://www.sec.gov.

Exhibit Number	Description
3.1(a)	Restated Certificate of Incorporation of the Registrant.
3.2(a)	Amended and Restated By-Laws of the Registrant.
4.1	Reference is hereby made to Exhibits 3.1 and 3.2.
4.2(b)	Specimen Certificate for Registrant's Common Stock.
4.3(c)	Indenture, dated as of June 4, 2013, between the Registrant and American Stock Transfer & Trust Company, LLC as Trustee.
4.4(d)	Indenture, dated as of August 20, 2014, between the Registrant and American Stock Transfer & Trust Company, LLC as Trustee.
4.5(e)	Indenture for the 2.375% Senior Notes due 2024, 1.800% Senior Notes due 2027, 3.650% Senior Notes due 2025, 2.15% Senior Notes due 2022 and 3.600% Senior Notes due 2026, between the Registrant and Deutsche Bank Trust Company Americas, as Trustee.
4.6(f)	Indenture, dated as of August 8, 2017, between the Company and U.S. Bank National Association, as trustee.
4.7(g)	Form of 2.375% Senior Note due 2024.
4.8(h)	Officers' Certificate, dated September 23, 2014, for the 2.375% Senior Notes due 2024.
4.9(i)	Form of 1.800% Senior Note due 2027.
4.10(j)	Officers' Certificate, dated March 3, 2015, for the 1.800% Senior Notes due 2027.
4.11(k)	Form of 3.650% Senior Note due 2025.
4.12(l)	Officers' Certificate, dated March 13, 2015, for the 3.650% Senior Notes due 2025.
4.13(e)	Form of 2.15% Senior Note due 2022.
4.14(e)	Officers' Certificate, dated November 25, 2015, for the 2.15% Senior Notes due 2022.
4.15(m)	Form of 3.600% Senior Note due 2026.
4.16(m)	Officers' Certificate, dated May 23, 2016, for the 3.600% Senior Notes due 2026.
4.17(n)	Form of 0.800% Senior Note due 2022.
4.18(n)	Officers' Certificate, dated March 10, 2017, for the 0.800% Senior Notes due 2022.
4.19(o)	Form of 2.750% Senior Note due 2023.
4.20(o)	Officers' Certificate, dated August 15, 2017, with respect to the 2.750% Senior Notes due 2023.
4.21(o)	Form of 3.550% Senior Note due 2028.
4.22(o)	Officers' Certificate, dated August 15, 2017, with respect to the 3.550% Senior Notes due 2028.
10.1(p)+	Booking Holdings Inc. 1999 Omnibus Plan (As Amended and Restated Effective June 7, 2018).

10.2(q)+	Form of Restricted Stock Unit Award Agreement for Employees in the Netherlands under the 1999 Omnibus Plan.
10.3(r)+	Form of Restricted Stock Unit Agreement for awards under the 1999 Omnibus Plan to non-employee directors.
10.4(s)+	Form of Restricted Stock Unit Agreement for awards under the 1999 Omnibus Plan.
10.5(t)+	2016 Form of Performance Share Unit Agreement under the 1999 Omnibus Plan.
10.6(u)+	2017 Form of Performance Share Unit Agreement under the 1999 Omnibus Plan.
10.7(s)+	2018 Form of Performance Share Unit Agreement under the 1999 Omnibus Plan.
10.8(u)+	Amended and Restated KAYAK Software Corporation 2012 Equity Incentive Plan.
10.9(u)+	OpenTable, Inc. Amended and Restated 2009 Equity Incentive Award Plan.
10.10(v)+	Buuteeq, Inc. Amended and Restated 2010 Stock Plan.
10.11(w)+	Amended and Restated Rocket Travel, Inc. 2012 Stock Incentive Plan.
10.12(w)+	Amended and Restated Annual Bonus Plan.
10.13(x)+	Form of Non-Competition and Non-Solicitation Agreement.
10.14(y)+	Transition Agreement dated November 7, 2013 by and between the Registrant and Jeffery H. Boyd.
10.15(z)+	Letter agreement, dated October 19, 2005 by and between the Registrant and Daniel J. Finnegan.
10.16(aa)+	Letter amendment, dated December 16, 2008, to letter agreement, dated October 19, 2005 by and between the Registrant and Daniel J. Finnegan.
10.17(bb)+	Second Amended and Restated Employment Agreement, dated April 21, 2015 by and between the Registrant and Peter J. Millones.
10.18(cc)+	Amended and Restated Employment contract, dated May 19, 2016 by and between Booking.com Holding B.V. and Gillian Tans.
10.19(dd)+	Employment Agreement, dated December 15, 2016 by and between the Registrant and Glenn D. Fogel.
10.20(dd)+	Non-Competition and Non-Solicitation Agreement, dated December 15, 2016 by and between the Registrant and Glenn D. Fogel.
10.21(dd)+	Employee Confidentiality and Assignment Agreement, dated December 15, 2016 by and between the Registrant and Glenn D. Fogel.
10.22(dd)+	Letter Agreement, dated December 15, 2016 by and between the Registrant and Jeffery H. Boyd.
10.23(ee)+	Letter Agreement, dated May 11, 2017, between the Registrant and Daniel J. Finnegan.
10.24(ff)+	Letter amendment, dated March 1, 2018, to letter agreement, dated May 11, 2017, between the Registrant and Daniel J. Finnegan.
10.25(gg)+	Employment Agreement, dated January 19, 2018, between the Registrant and David I. Goulden.
10.26(gg)+	Non-Competition and Non-Solicitation Agreement, dated March 1, 2018, between the Registrant and David I. Goulden.
10.27(gg)+	Employee Confidentiality and Assignment Agreement, dated January 19, 2018, between the Registrant and David I. Goulden.
10.28(hh)	Credit Agreement, dated as of June 19, 2015, among the Registrant, the lenders from time to time party thereto, and Bank of America, N.A. as Administrative Agent.
21	List of Subsidiaries.
23.1	Consent of Deloitte & Touche LLP.
24.1	Power of Attorney (included in the Signature Page).
31.1	Certification of Glenn D. Fogel, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of David I. Goulden, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1(ii)	Certification of Glenn D. Fogel, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code).
32.2(ii)	Certification of David I. Goulden, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code).
101	The following financial statements from the Company's Annual Report on Form 10‑K for the year ended December 31, 2018 formatted in XBRL: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Statements of Changes in Stockholders' Equity, (v) Consolidated Statements of Cash Flows, and (vi) Notes to Consolidated Financial Statements.

---

+	Indicates a management contract or compensatory plan or arrangement.

(a)	Previously filed as an exhibit to the Current Report on Form 8-K filed on February 21, 2018 (File No. 1-36691).
(b)	Previously filed as an exhibit to Amendment No. 2 to Registration Statement on Form S-1 filed on March 18, 1999 (File No. 333-69657).
(c)	Previously filed as an exhibit to the Current Report on Form 8-K filed on June 4, 2013 (File No. 0-25581).
(d)	Previously filed as an exhibit to the Current Report on Form 8-K filed on August 20, 2014 (File No. 0-25581).
(e)	Previously filed as an exhibit to the Current Report on Form 8-K filed on November 25, 2015 (File No. 1-36691).
(f)	Previously filed as an exhibit to the Registration Statement on Form S-3 filed on August 8, 2017 (File No. 333-219800).
(g)	Previously filed as an exhibit to the Current Report on Form 8-K filed on September 22, 2014 (File No. 0-25581).
(h)	Previously filed as an exhibit to the Current Report on Form 8-K filed on September 26, 2014 (File No. 0-25581).
(i)	Previously filed as an exhibit to the Current Report on Form 8-K filed on March 2, 2015 (File No. 1-36691).
(j)	Previously filed as an exhibit to the Current Report on Form 8-K filed on March 4, 2015 (File No. 1-36691).
(k)	Previously filed as an exhibit to the Current Report on Form 8-K filed on March 12, 2015 (File No. 1-36691).
(l)	Previously filed as an exhibit to the Current Report on Form 8-K filed on March 13, 2015 (File No. 1-36691).
(m)	Previously filed as an exhibit to the Current Report on Form 8-K filed on May 23, 2016 (File No. 1-36691).
(n)	Previously filed as an exhibit to the Current Report on Form 8‑K filed on March 10, 2017 (File No. 1-36691).
(o)	Previously filed as an exhibit to our Current Report on Form 8-K filed on August 15, 2017 (File No. 1-36691).
(p)	Previously filed as an exhibit to our Current Report on Form 8-K filed on June 8, 2018 (File No. 1-36691).
(q)	Previously filed as an exhibit to the Current Report on Form 8‑K filed on November 8, 2005 (File No. 0-25581).
(r)	Previously filed as an exhibit to the Current Report on Form 8‑K filed on March 9, 2011 (File No. 0-25581).
(s)	Previously filed as an exhibit to the Current Report on Form 8-K filed on March 2, 2018 (File No. 1-36691).
(t)	Previously filed as an exhibit to the Current Report on Form 8-K filed on March 10, 2016 (File No. 1-36691).
(u)	Previously filed as an exhibit to the Current Report on Form 8‑K filed on March 3, 2017 (File No. 1-36691).
(v)	Previously filed as an exhibit to the Registration Statement on Form S-8 filed on June 13, 2014 (File No. 333-196756).
(w)	Previously filed as an exhibit to the Annual Report on Form 10-K filed for the year ended December 31, 2015 (File No. 1-36691).
(x)	Previously filed as an exhibit to the Current Report on Form 8-K filed on March 4, 2013 (File No. 0-25581).
(y)	Previously filed as an exhibit to the Current Report on Form 8-K filed on November 8, 2013 (File No. 0-25581).
(z)	Previously filed as an exhibit to the Current Report on Form 8-K filed on October 21, 2005 (File No. 0-25581).
(aa)	Previously filed as an exhibit to the Annual Report on Form 10-K filed for the year ended December 31, 2008 (File No. 0-25581).
(bb)	Previously filed as an exhibit to our Current Report on Form 8-K filed on April 24, 2015 (File No. 1-36691).
(cc)	Previously filed as an exhibit to the Current Report on Form 8-K filed on May 20, 2016 (File No. 1-36691).
(dd)	Previously filed as an exhibit to the Current Report on Form 8-K filed on December 16, 2016 (File No. 1-36691).
(ee)	Previously filed as an exhibit to the Current Report on Form 8-K filed on May 12, 2017 (File No. 1-36691).
(ff)	Previously filed as an exhibit to the Quarterly Report on Form 10-Q filed on May 9, 2018 (File No. 1-36691).
(gg)	Previously filed as an exhibit to the Current Report on Form 8-K filed on January 22, 2018 (File No. 1-36691).
(hh)	Previously filed as an exhibit to our Current Report on Form 8-K filed on June 24, 2015 (File No. 1-36691).
(ii)	This document is being furnished in accordance with SEC Release Nos. 33‑8212 and 34‑47551.