TripAdvisor 2013 Annual Report Download - page 84

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
Basis of Presentation
The accompanying consolidated and combined financial statements include 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
our consolidated and combined financial statements to recognize the minority ownership interest in our
consolidated and combined subsidiaries. Noncontrolling interest in the earnings and losses of consolidated and
combined subsidiaries represent the share of net income or loss allocated to members or partners in our
consolidated and combined entities. We have eliminated significant intercompany transactions and accounts. The
accounting for income taxes was computed for TripAdvisor on a separate tax return basis (see “Note 9—Income
Taxes” for further information). The accompanying consolidated and combined financial statements have been
prepared in accordance with generally accepted accounting principles in the United States (“GAAP”).
Certain of our subsidiaries that operate in China, have variable interests in affiliated entities in China in
order to comply with Chinese laws and regulations, which restrict foreign investment in Internet content
provision businesses. Although we do not own the capital stock of some of our Chinese affiliates, we consolidate
their results as we are the primary beneficiary of the cash losses or profits of these variable interest affiliates and
have the power to direct the activities of these affiliates. Our variable interest entities are not material for all
periods presented.
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 shared 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.
Accounting Estimates
We use estimates and assumptions in the preparation of our consolidated and combined financial statements
in accordance with GAAP. Our estimates and assumptions affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities as of the date of our consolidated and combined financial
statements. These estimates and assumptions also affect the reported amount of net income or loss during any
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