LinkedIn 2015 Annual Report Download - page 97

BESP. When the Company is unable to establish selling prices using VSOE or TPE, the
Company uses BESP in its allocation of arrangement consideration. BESP is generally used to allocate
the selling price to deliverables in the Company’s multiple element arrangements. The Company
determines BESP for deliverables by considering multiple factors including, but not limited to, its pricing
practices, prices it charges for similar offerings, sales volume, geographies, market conditions, and the
competitive landscape.
Advertising Costs
Advertising costs are expensed when incurred and are included in sales and marketing expense in
the consolidated statements of operations. The Company incurred advertising costs of $20.0 million,
$5.7 million and $3.9 million for the years ended December 31, 2015, 2014 and 2013, respectively.
Stock-Based Compensation
Stock-based compensation expense is measured at the grant date based on the fair value of the
award and is recognized on a straight-line basis over the requisite service period of the award, which is
generally four years. See Note 13, Stockholders’ Equity, for additional information.
Leases and Asset Retirement Obligations
The Company leases its office facilities and data centers under operating lease agreements. Office
facilities subject to an operating lease and the related lease payments are not recorded on the
Company’s balance sheet. The terms of certain lease agreements provide for increasing rental
payments; however, the Company recognizes rent expense on a straight-line basis over the term of the
lease. Any lease incentives are recognized as reductions of rent expense on a straight-line basis over
the term of the lease. The lease term begins on the date of the initial possession of the leased property
for purposes of recognizing rent expense.
The Company establishes assets and liabilities for the contractual obligation to retire long-lived
assets at the termination or expiration of a lease based on the present value of estimated future costs
related to such obligations. Such assets are depreciated over the shorter of the lease period, or the life
of the asset, and the recorded liabilities are accreted to the future value of the estimated retirement
costs, both of which are included in operating expenses in the consolidated statements of operations.
Rent expense, principally for leased office space and data centers under operating lease
commitments, was $117.5 million, $94.2 million and $54.9 million for the years ended December 31,
2015, 2014 and 2013, respectively.
Income Taxes
The Company records income taxes using the asset and liability method which requires the
recognition of deferred tax assets and liabilities for the expected future tax consequences of events that
have been recognized in the Company’s consolidated financial statements or tax returns. In estimating
future tax consequences, generally all expected future events other than enactments or changes in the
tax law or rates are considered. Valuation allowances are provided when necessary to reduce deferred
tax assets to the amount expected to be realized.
Recently Adopted Accounting Guidance
Derivatives and Hedging
In November 2014, the Financial Accounting Standards Board (‘‘FASB’’) issued new authoritative
accounting guidance on determining whether the host contract in a hybrid financial instrument issued in
the form of a share is more akin to debt or to equity. The guidance applies to hybrid financial
instruments that include embedded derivative features, which must be evaluated to determine whether
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