TripAdvisor 2012 Annual Report Download - page 89

we do not have sufficient historical exercise data on our common stock. Our expected dividend yield is zero, as
we have not paid any dividends on our common stock to date.
We amortize the fair value, net of estimated forfeitures, as stock-based compensation expense over the
vesting term on a straight-line basis, with the amount of compensation expense recognized at any date at least
equaling the portion of the grant-date fair value of the award that is vested at that date.
Restricted Stock Units. RSUs are stock awards that are granted to employees entitling the holder to shares
of our 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, with the amount
of compensation expense recognized at any date at least equaling the portion of the grant-date fair value of the
award that is vested at that date.
Performance-based stock options and RSUs vest upon achievement of certain company-based performance
conditions and a requisite service period. On the date of grant, the fair value of performance-based awards is
determined based on the fair value, which is calculated using the same method as our service based stock options
and RSUs described above. We then assess whether it is probable that the performance targets would be
achieved. If assessed as probable, compensation expense will be recorded for these awards over the estimated
performance period on a straight-line basis. 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.
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
original estimates of fair value. We have considered many factors when estimating expected forfeitures,
including our historical attrition rates, the employee class and historical experience. The estimate of stock awards
that will ultimately be forfeited requires significant judgment and, to the extent that actual results or updated
estimates differ from our current estimates, such amounts will be recorded as a cumulative adjustment in the
period such estimates are revised.
Certain Risks and Concentrations
Our business is subject to certain risks and concentrations including dependence on relationships with our
customers. We are highly dependent on our advertising and media relationship with Expedia, (see “Note 16—
Related Party Transactions”), which accounted for approximately 27%, 33% and 35% of our total revenue in
2012, 2011 and 2010, respectively. In addition, another customer accounted for approximately 21%, 16% and
11% of our revenue in 2012, 2011 and 2010, respectively. As of December 31, 2012 and 2011, there were no
customers that accounted for 10% or more of our trade receivables.
Contingent Liabilities
Periodically, we review the status of all significant outstanding matters to assess any potential financial
exposure. When (i) it is probable that an asset has been impaired or a liability has been incurred and (ii) the
amount of the loss can be reasonably estimated, we record the estimated loss in our consolidated and combined
statements of operations. We provide disclosure in the notes to the consolidated and combined financial
statements for loss contingencies that do not meet both these conditions if there is a reasonable possibility that a
79