TripAdvisor 2013 Annual Report Download - page 68

Contingencies
Legal Proceedings
In the ordinary course of business, we and our subsidiaries are parties to legal proceedings and claims
involving alleged infringement of third-party intellectual property rights, defamation, and other claims. Rules of
the SEC require the description of material pending legal proceedings, other than ordinary, routine litigation
incident to the registrant’s business, and advise that proceedings ordinarily need not be described if they
primarily involve damages claims for amounts (exclusive of interest and costs) not individually exceeding 10%
of the current assets of the registrant and its subsidiaries on a consolidated basis. In the judgment of management,
none of the pending litigation matters that the Company and its subsidiaries are defending involves or is likely to
involve amounts of that magnitude. There may be claims or actions pending or threatened against us of which we
are currently not aware and the ultimate disposition of which could have a material adverse effect on us.
Related Party Transactions
For information on our relationships with Expedia and Liberty Interactive Corporation refer to “Note 15—
Related Party Transactions” in the notes to our consolidated and combined financial statements.
Critical Accounting Policies and Estimates
Critical accounting policies and estimates are those that we believe are important in the preparation of our
consolidated and combined financial statements because they require that management use judgment and
estimates in applying those policies. We prepare our consolidated and combined financial statements and
accompanying notes in accordance with GAAP.
Preparation of the consolidated and combined financial statements and accompanying notes requires that
management make estimates and assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities as of the date of the consolidated and combined financial statements
as well as revenue and expenses during the periods reported. Management bases its estimates on historical
experience, where applicable, and other assumptions that it believes are reasonable under the circumstances.
Actual results may differ from estimates under different assumptions or conditions.
There are certain critical estimates that we believe require significant judgment in the preparation of the
consolidated and combined financial statements. We consider an accounting estimate to be critical if:
• It requires us to make an assumption because information was not available at the time or it included
matters that were highly uncertain at the time management was making the estimate; and/or
• Changes in the estimate or different estimates that management could have selected may have had a
material impact on our financial condition or results of operations.
Our significant accounting policies and estimates are more fully described in “Note 2—Significant
Accounting Policies” in the notes to our consolidated and combined financial statements. A discussion of
information about the nature and rationale for our critical accounting estimates is below.
Business Combination Valuations and Recoverability of Goodwill, Indefinite and Definite-Lived Intangible
Assets
Goodwill. We account for acquired businesses using the purchase method of accounting which requires that
the assets acquired and liabilities assumed be recorded at the date of acquisition at their respective fair
values. Any excess of the purchase price over the estimated fair values of the net assets acquired is recorded as
goodwill. We assess goodwill, which is not amortized, for impairment annually as of October 1, or more
frequently, if events and circumstances indicate impairment may have occurred. We test goodwill for impairment
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