TripAdvisor 2011 Annual Report Download - page 67

Table of Contents
whether it was probable that the performance targets would be achieved. If assessed as probable, compensation expense was recorded for these
awards over the estimated performance period using the accelerated method. At each reporting period, we will reassess the probability of
achieving the performance targets and the performance period required to meet those targets. The estimation of whether the performance targets
will be achieved and of the performance period required to achieve the targets requires judgment, and to the extent actual results or updated
estimates differ from our current estimates, the cumulative effect on current and prior periods of those changes will be recorded in the period
estimates are revised, or the change in estimate will be applied prospectively depending on whether the change affects the estimate of total
compensation cost to be recognized or merely affects the period over which compensation cost is to be recognized. The ultimate number of
shares issued and the related compensation expense recognized will be based on a comparison of the final performance metrics to the specified
targets.
TripAdvisor Equity Grants Awards Issued Subsequent to Spin-Off
Prior to the completion of the Spin-Off, we adopted the TripAdvisor, Inc. 2011 Stock and Annual Incentive Plan, or the 2011 Incentive
Plan. We now participate in the 2011 Incentive Plan as of December 21, 2011, under which we may grant restricted stock, restricted stock
awards, RSUs, stock options and other stock-based awards to our directors, officers, employees and consultants. Refer to “Note 7— Stock Based
Awards and Other Equity Instruments
” below for further information on the 2011 Incentive Plan.
We have issued 32,526 RSUs from the 2011 Incentive Plan, to our non-employee members of the Board of Directors the fair value of
which we measured based on the quoted price of our Common Stock at the date of grant (which was December 21, 2011). We will amortize the
fair value, net of estimated forfeitures, as stock-based compensation expense over the vesting term of three years on a straight-line basis.
Restricted Stock Units . RSUs are stock awards that are granted to employees entitling the holder to shares of Common Stock as the award
vests. RSUs are measured at fair value based on the number of shares granted and the quoted price of our Common Stock at the date of grant.
We amortize the fair value, net of estimated forfeitures, as stock-based compensation expense over the vesting term on a straight-line basis.
Estimates of fair value are not intended to predict actual future events or the value ultimately realized by employees who receive these
awards, and subsequent events are not indicative of the reasonableness of our original estimates of fair value. In determining the estimated
forfeiture rates for stock-based awards, we have periodically conducted an assessment of the actual number of equity awards that have been
forfeited to date as well as those expected to be forfeited in the future. We consider many factors when estimating expected forfeitures, including
our attrition rates, the employee class and historical experience. The estimate of stock awards that will ultimately be forfeited requires significant
judgment and, to the extent that actual results or updated estimates differ from our current estimates, such amounts will be recorded as a
cumulative adjustment in the period such estimates are revised.
Refer to “Note 7— Stock Based Awards and Other Equity Instruments ”
in the notes to our consolidated and combined financial statements
for further discussion of stock based compensation and material modification charges related to the Spin-Off.
Recently Issued Accounting Pronouncements
In September 2011, the FASB issued ASU 2011-08, Testing Goodwill for Impairment, or ASU 2011-08. ASU 2011-08 was issued to
amend FASB Accounting Standards Codification, or ASC, (Topic 350) Intangibles—Goodwill and Other. The guidance in ASU 2011-08 is
intended to reduce complexity and costs by allowing an entity the option to first make a qualitative evaluation about the likelihood of goodwill
impairment to determine whether it should calculate the fair value of a reporting unit. If entities determine, on the basis of qualitative factors, it is
more likely than not that the fair value of a reporting unit is less than the carrying amount, the two-step impairment test would be required.
Otherwise, further testing would not be needed. The
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