TripAdvisor 2014 Annual Report Download - page 59

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excess of the carrying value of the reporting unit’s goodwill over its implied fair value should such a circumstance arise.
In determining the estimated fair value of assets acquired and liabilities assumed in business combinations and for
determining implied fair values of reporting units in a quantitative goodwill impairment test, we use one of the following recognized
valuation methods: the income approach (including discounted cash flows), the market approach or the cost approach. Our significant
estimates in those fair value measurements include identifying business factors such as size, growth, profitability, risk and return on
investment and assessing comparable revenue and operating income multiples. Further, when measuring fair value based on
discounted cash flows, we make assumptions about risk-adjusted discount rates, future price levels, rates of increase in revenue, cost
of revenue, and operating expenses, weighted average cost of capital, rates of long-term growth, and income tax rates. Valuations are
performed by management or third party valuation specialists under management's supervision, where appropriate. We believe that the
fair values assigned to the assets acquired and liabilities assumed in business combinations and impairment tests are based on
reasonable assumptions that marketplace participants would use. However, such assumptions are inherently uncertain and actual
results could differ from those estimates.
As part of our qualitative assessment for our 2014 goodwill impairment analysis on October 1, the factors that we considered
included, but were not limited to: (a) changes in macroeconomic conditions in the overall economy and the specific markets in which
we operate, (b) our ability to access capital, (c) changes in the online travel industry, (d) changes in the level of competition,
(e) comparison of our current financial performance to historical and budgeted results, and (f) changes in excess market capitalization
over book value based on our current common stock price and latest unaudited consolidated balance sheet. After considering these
factors and the impact that changes in such factors would have on the inputs used in our previous quantitative assessment, we
determined that it was more likely than not that goodwill was not impaired.
Subsequent to the annual impairment test on October 1, 2014, as discussed in “Note 16—Segment and Geographic
Information," the composition of our operating segments, and our reporting units, has been revised. As a result of this revision, we
performed an updated goodwill impairment analysis as of December 31, 2014, for each of our four reporting units which we have
identified: Hotels, Vacation Rentals, Restaurants and Attractions. As part of our qualitative assessment for our Hotel reporting unit,
we considered the same factors used above in our October 1 qualitative assessment. As part of our process for our Vacation Rentals,
Restaurants and Attractions reporting units, we began our qualitative analysis leveraging quantitative valuations for recent acquisitions
in these reporting units, prepared by third party appraisers or management, which were used by management for initial purchase
accounting required under GAAP. We then considered many of the same qualitative factors used in our October 1, 2014 qualitative
assessment and the impact that changes in such factors would have on the inputs previously used in those recent quantitative
valuations. After considering this information, we determined that, regarding all reporting units, it was more likely than not that these
assets were not impaired at December 31, 2014.
Indefinite-Lived Intangible Assets. Intangible assets that have indefinite lives are not amortized and are tested for impairment
annually on October 1, or whenever events or changes in circumstances indicate that the carrying value may not be
recoverable. Similar to the qualitative assessment for goodwill, we may assess qualitative factors to determine if it is more likely than
not that the implied fair value of the indefinite-lived intangible asset is less than its carrying amount. If we determine that it is not
more likely than not that the implied fair value of the indefinite-lived intangible asset is less than its carrying amount, no further
testing is necessary. If, however, we determine that it is more likely than not that the implied fair value of the indefinite-lived
intangible asset is less than its carrying amount, we compare the implied fair value of the indefinite-lived asset with its carrying
amount. If the carrying value of an individual indefinite-lived intangible asset exceeds its implied fair value, the individual asset is
written down by an amount equal to such excess. The assessment of qualitative factors is optional and at our discretion. We may
bypass the qualitative assessment for any indefinite-lived intangible asset in any period and resume performing the qualitative
assessment in any subsequent period.
As part of our qualitative assessment for our 2014 impairment analysis on October 1, the factors that we considered for our
indefinite-lived intangible assets included, but were not limited to: (a) changes in macroeconomic conditions in the overall economy
and the specific markets in which we operate, (b) our ability to access capital, (c) changes in the online travel industry, (d) changes in
the level of competition, (e) comparison of our current financial performance to historical and budgeted results, (f) changes in excess
market capitalization over book value based on our current common stock price and latest unaudited consolidated balance sheet, and
(g) comparison of the excess of the fair value of our trade names and trademarks to the carrying value of those same assets, using the
results of our most recent quantitative assessment. After considering these factors and the impact that changes in such factors would
have on the inputs used in our previous quantitative assessment, we determined that it was more likely than not that these assets were
not impaired.
Since the annual impairment test on October 1, 2014, there have been no events or changes in circumstances to indicate any
potential impairment to our indefinite lived intangible assets. In the event that future circumstances indicate that our indefinite-lived
intangibles are impaired, an impairment charge would be recorded.