TripAdvisor 2011 Annual Report Download - page 79

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Table of Contents
the period from December 21, 2011 through December 31, 2011 have been presented on a consolidated basis. Prior to the Spin-Off, certain
functions, including accounting, legal, tax, corporate development, treasury, employee benefits, financial reporting and real estate management,
were historically managed by the corporate division of Expedia on behalf of its subsidiaries. The assets, liabilities and expenses related to the
support of these centralized corporate functions have been allocated to us on a specific identification basis to the extent possible. Otherwise,
allocations related to these services, in the form of a related-party services fee, were primarily based upon an estimate of the proportion of
corporate amounts applicable to us. These allocations were determined on a basis that Expedia and we considered to be a reasonable reflection of
the cost of services provided or the benefit received by us. These expenses were allocated based on a number of factors including headcount,
estimated time spent and operating expenses. In the opinion of management, the assumptions and allocations have been made on a reasonable
basis. Management believes that amounts allocated to TripAdvisor reflect a reasonable representation of the types of costs that would have been
incurred if we had performed these functions as a stand-alone company. However, as estimation is inherent within the aforementioned allocation
process, these consolidated and combined financial statements do not include all of the actual amounts that would have been incurred had we
been a stand-alone entity during the periods presented and also do not necessarily reflect our future financial position, results of operations and
cash flows.
Description of Business
TripAdvisor is an online travel company, empowering users to plan and have the perfect trip. TripAdvisor’s travel research platform
aggregates reviews and opinions of members about destinations, accommodations (hotels, bed and breakfasts, specialty lodging and vacation
rentals), restaurants and activities throughout the world through our flagship TripAdvisor brand. TripAdvisor-branded websites include
tripadvisor.com in the United States and localized versions of the website in 30 countries, including in China under the brand daodao.com.
Beyond travel-related content, TripAdvisor websites also include links to the websites of our travel advertisers allowing travelers to directly
book their travel arrangements. In addition to the flagship TripAdvisor brand, we manage and operate websites under 18 other travel media
brands, connected by the common goal of providing comprehensive travel planning resources across the travel sector. We derive substantially all
of our revenue from advertising, primarily through click-based advertising and display-based advertising sales. In addition, we earn revenue
through a combination of subscription-based offerings, transaction revenue from our flash sale website, SniqueAway, and other revenue
including content licensing.
Seasonality
Expenditures by travel advertisers tend to be seasonal. Traditionally, our strongest quarter has been the third quarter, which is a key travel
research period, with the weakest quarter being the fourth quarter. However, adverse economic conditions or continued growth of our
international operations with differing holiday peaks may influence the typical trend of our seasonality in the future.
NOTE 2: SIGNIFICANT ACCOUNTING POLICIES
Consolidation
Our consolidated and combined financial statements include the accounts of TripAdvisor, our wholly owned subsidiaries, and entities we
control, or in which we have a variable interest and are the primary beneficiary of expected cash profits or losses. We record our investments in
entities that we do not control, but over which we have the ability to exercise significant influence, using the equity method. We record
noncontrolling interest in our consolidated and combined financial statements to recognize the minority ownership interest in our consolidated
subsidiaries. Noncontrolling interest in the earnings and losses of consolidated subsidiaries represent the share of net income or loss allocated to
members or partners in our consolidated entities. Significant intercompany transactions between the TripAdvisor consolidated entities and
accounts have been eliminated.
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