TripAdvisor 2011 Annual Report Download - page 83

Table of Contents
the use and eventual disposition of the asset over the remaining economic life of the asset. If the recoverability test indicates that the carrying
value of the asset is not recoverable, we will estimate the fair value of the asset using appropriate valuation methodologies which would typically
include an estimate of discounted cash flows. Any impairment would be measured as the difference between the asset’s carrying amount and its
estimated fair value. We have not identified any circumstances that would warrant an impairment assessment as of December 31, 2011.
Income Taxes
We compute and account for our income taxes on a stand-alone basis; however, we are included in the consolidated income tax returns
filed by Expedia through the Spin-Off date. We record income taxes under the liability method. Deferred tax assets and liabilities reflect our
estimation of the future tax consequences of temporary differences between the carrying amounts of assets and liabilities for book and tax
purposes. We determine deferred income taxes based on the differences in accounting methods and timing between financial statement and
income tax reporting. Accordingly, we determine the deferred tax asset or liability for each temporary difference based on the enacted tax rates
expected to be in effect when we realize the underlying items of income and expense. We consider many factors when assessing the likelihood
of future realization of our deferred tax assets, including our recent earnings experience by jurisdiction, expectations of future taxable income,
and the carryforward periods available to us for tax reporting purposes, as well as other relevant factors. We may establish a valuation allowance
to reduce deferred tax assets to the amount we believe is more likely than not to be realized. Due to inherent complexities arising from the nature
of our businesses, future changes in income tax law, tax sharing agreements or variances between our actual and anticipated operating results, we
make certain judgments and estimates. Therefore, actual income taxes could materially vary from these estimates.
We recognize in our consolidated and combined financial statements the impact of a tax position, if that position is more likely than not to
be sustained upon an examination, based on the technical merits of the position.
Foreign Currency Translation and Transaction Gains and Losses
Certain of our operations outside of the United States use the related local currency as their functional currency. We translate revenue and
expense at average rates of exchange during the period. We translate assets and liabilities at the rates of exchange as of the consolidated and
combined balance sheet dates and include foreign currency translation gains and losses as a component of accumulated other comprehensive
income. Due to the nature of our operations and our corporate structure, we also have subsidiaries that have transactions in foreign currencies
other than their functional currency. We record transaction gains and losses in our consolidated and combined statements of operations related to
the recurring re-measurement and settlement of such transactions. These gains and losses were not material to any period reported.
Advertising Expense
We incur advertising expense consisting of traffic generation costs from search engines and Internet portals, other online and offline
advertising expense, promotions and public relations to promote our brands. We expense the costs associated with advertisements in the period
in which the advertisement takes place. For the years ended December 31, 2011, 2010 and 2009, our advertising expense was $136 million, $86
million, and $66 million, respectively.
Stock
-Based Compensation
TripAdvisor Equity Grants Assumed at Spin-Off
All stock-based compensation included in our consolidated and combined financial statements prior to Spin-Off relates to Expedia
common stock options and restricted stock units (“RSUs”) held by TripAdvisor
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