TripAdvisor 2012 Annual Report Download - page 87

lived assets or asset groups, including property and equipment, to be used in operations whenever events or
changes in circumstances indicate that the carrying amount of the assets might not be recoverable.
Factors that would necessitate an impairment assessment include a significant adverse change in the extent
or manner in which an asset is used, a significant adverse change in legal factors or the business climate that
could affect the value of the asset, or a significant decline in the observable market value of an asset, among
others. If such facts indicate a potential impairment, we assess the recoverability of the asset by determining if
the carrying value of the asset exceeds the sum of the projected undiscounted cash flows expected to result from
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, 2012.
Income Taxes
We compute and account for our income taxes on a stand-alone basis. 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 all relevant 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 assessing available tax
planning strategies. 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 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.
Accordingly, we have recorded foreign exchange losses of $3.2 million, 1.0 million and $1.6 million for the
years ended December 31, 2012, 2011 and 2010, respectively, in Other, net.
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,
2012, 2011 and 2010, our advertising expense was $175.0 million, $135.6 million, and $86.3 million, respectively.
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