TripAdvisor 2013 Annual Report Download - page 72

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.
Refer to “Note 4—Stock Based Awards and Other Equity Instruments” in the notes to our consolidated and
combined financial statements for further information on current year equity award activity.
Websites and Internal Use Software Development Costs
We capitalize certain costs incurred during the application development stage related to the development of
websites and internal use software when it is probable the project will be completed and the software will be used
as intended. Such costs are amortized on a straight-line basis over the estimated useful life of the related asset,
generally estimated to be three to five years. Capitalized costs include internal and external costs, if direct and
incremental, and deemed by management to be significant. We expense costs related to the planning and post-
implementation phases of software and website development as these costs are incurred. Maintenance and
enhancement costs (including those costs in the post-implementation stages) are typically expensed as incurred,
unless such costs relate to substantial upgrades and enhancements to the website or software resulting in added
functionality, in which case the costs are capitalized. To the extent that we change the manner in which we
develop and test new features and functionalities related to our websites and internal use software, assess the
ongoing value of capitalized assets or determine the estimated useful lives over which the costs are amortized,
the amount of website and internal use software development costs we capitalize and amortize could change in
future periods.
Refer to “Note 6—Fixed Assets” in the notes to our consolidated and combined financial statements for
further information on our development of websites and internal use software.
Recently Adopted Accounting Pronouncements
For a discussion of new accounting pronouncements, see “Note 2—Significant Accounting Policies” in the
notes to our consolidated and combined financial statements.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Market Risk Management
We are exposed to certain market risks, including changes in interest rates and foreign currency exchange
rates that could adversely affect our results of operations or financial condition. We manage our exposure to
these risks through established policies and procedures and by assessing the anticipated near-term and long-term
fluctuations in interest rates and foreign currency exchange rates. Our objective is to mitigate potential income
statement, cash flow and market exposures from changes in interest and foreign exchange rates.
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