TripAdvisor 2013 Annual Report Download - page 85

period. Our actual financial results could differ significantly from these estimates. The significant estimates
underlying our consolidated and combined financial statements include recoverability of long-lived assets and
investments, recoverability of intangible assets and goodwill; income taxes; useful lives of property and
equipment; purchase accounting and stock-based compensation.
Reclassifications
Certain reclassifications have been made to conform the prior period to the current presentation. These
reclassifications had no net effect on our consolidated and combined financial statements and were not material.
Revenue Recognition
We recognize revenue from the advertising services rendered when the following four revenue recognition
criteria are met: persuasive evidence of an arrangement exists, services have been rendered, the price is fixed or
determinable, and collectability is reasonably assured.
Click-based Advertising. Revenue is derived primarily from click-through fees charged to our travel partners
for traveler leads sent to the travel partners’ website. We record revenue from click-through fees after the traveler
makes the click-through to the travel partners’ websites.
Display and Other Advertising. We recognize display advertising revenue ratably over the advertising
period or upon delivery of advertising impressions, depending on the terms of the advertising contract.
Subscription-based revenue is recognized ratably over the related subscription period. We recognize revenue
from all other sources either upon delivery or when we provide the service.
Deferred revenue, which primarily relates to our subscription-based programs, is recorded when payments
are received in advance of our performance as required by the underlying agreements.
Cost of Revenue
Cost of revenue consists of expenses that are closely correlated or directly related to revenue generation,
including ad serving fees, flight search fees, credit card fees and data center costs.
Selling and Marketing
Sales and marketing expenses primarily consist of direct costs, including search engine marketing, or SEM,
other traffic acquisition costs, syndication costs and affiliate program commissions, brand advertising and public
relations. In addition, our indirect sales and marketing expense consists of personnel and overhead expenses,
including salaries, commissions, benefits, stock-based compensation expense and bonuses for sales, sales
support, customer support and marketing employees.
Technology and Content
Technology and content expenses consist of personnel and overhead expenses, including salaries and
benefits, stock-based compensation expense and bonuses for salaried employees and contractors engaged in the
design, development, testing, content support, and maintenance of our websites. Other costs include licensing and
maintenance expense.
General and Administrative
General and administrative expenses consist primarily of personnel and related overhead costs, including
executive leadership, finance, legal and human resource functions and stock-based compensation as well as
professional service fees and other fees including audit, legal, tax and accounting, and other costs including bad
debt expense and our charitable foundation costs.
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