TripAdvisor 2012 Annual Report Download - page 81

The financial statements and related financial information pertaining to the period preceding December 21,
2011 have been presented on a combined basis and reflect the results of TripAdvisor that were ultimately
transferred to us as part of the Spin-Off. The financial statements and related financial information pertaining to
the period from December 21, 2011 onward 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 were 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 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 29 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 20 other travel 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 from our Business Listings and Vacation Rental
products, transaction revenue from selling room nights on our transactional sites SniqueAway and Tingo, and
other revenue including licensing our content to third-parties. We have one reportable segment: TripAdvisor. The
segment is determined based on how our chief operating decision maker manages our business, makes operating
decisions and evaluates operating performance.
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
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