TripAdvisor 2011 Annual Report Download - page 84

Table of Contents
employees prior to the Spin-Off. The following methods were used to measure the fair value of these awards and we will continue to amortize
the fair value thereof as follows for all pre-Spin-Off equity grants:
Stock Options. The value of stock options issued or modified, including unvested options assumed in acquisitions, on the grant date (or
modification or acquisition dates, if applicable) were measured at fair value, using the Black-Scholes option valuation model. The Black-
Scholes
model incorporates various assumptions including expected volatility, expected term, dividend yield and risk-free interest rates. The expected
volatility was based on historical volatility of Expedia’
s common stock and other relevant factors. The expected term assumptions were based on
historical experience and on the terms and conditions of the stock awards granted to employees. We will continue to amortize the fair value, net
of estimated forfeitures, over the remaining vesting term on a straight-line basis. The majority of these stock options vest over four years.
Restricted Stock Units. RSUs are stock awards that were granted to employees entitling the holder to shares of Common Stock as the
award vests, typically over a five-year period. RSUs were measured at fair value based on the number of shares granted and the quoted price of
Expedia’s common stock at the date of grant. We will continue to amortize the fair value of these awards, net of estimated forfeitures, as stock-
based compensation expense over the vesting term on a straight-line basis.
Performance-based RSUs that were granted by Expedia vest upon achievement of certain company-based performance conditions and a
requisite service period. On the date of grant, the fair value of the performance-based award was determined based on the fair value of Expedia
common stock at that time and it was assessed 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 the Spin-Off
Prior to the completion of the Spin-Off, we adopted the TripAdvisor, Inc. 2011 Stock and Annual Incentive Plan (the “2011 Incentive
Plan”).
As of December 21, 2011, we participate in the 2011 Incentive Plan, under which we may grant restricted stock, RSUs, stock options and
other stock-based awards to our 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. Fair value was
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
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