TripAdvisor 2015 Annual Report Download - page 68

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Seasonality
Theglobaltravelmarketislargeandtravelerexpenditurestendtofollowaseasonalpattern.Assuch,expendituresbytraveladvertiserstomarketto
potentialtravelers,and,therefore,ourfinancialperformance,tendtobeseasonalaswell.Asaresult,ourthirdquartertendstobeourseasonalhigh,asitisakey
periodfortravelresearchandtrip-taking,andourseasonallowgenerallyoccursinthefirstand/orfourthquarter.Significantshiftsinourbusinessmixoradverse
economicconditionscouldinfluencethetypicaltrendofourseasonalityinthefuture.
NOTE 2: SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
Theaccompanyingconsolidated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haveeliminatedsignificantintercompanytransactionsandaccounts.The
accompanyingconsolidatedfinancialstatementshavebeenpreparedinaccordancewithgenerallyacceptedaccountingprinciplesintheUnitedStates(“GAAP”).
WehaveanoperatingsubsidiaryinChinathathasvariableinterestsinanaffiliatedentity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thisChineseaffiliate,weconsolidateits
resultsaswearetheprimarybeneficiaryofthecashlossesorprofitsofthisvariableinterestaffiliateandhavethepowertodirecttheactivitiesofthisaffiliate.Our
variableinterestentityisnotmaterialforallperiodspresented.
Accounting Estimates
Weuseestimatesandassumptionsinthepreparationofourconsolidated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financialstatements.These
estimatesandassumptionsalsoaffectthereportedamountofnetincomeorlossduringanyperiod.Ouractualfinancialresultscoulddiffersignificantlyfromthese
estimates.Thesignificantestimatesunderlyingourconsolidatedfinancialstatementsinclude:(i)recoverabilityofintangibleassets,goodwillandotherlong-lived
assets;(ii)accountingforincometaxes;(iii)purchaseaccountingforbusinesscombinations;and(iv)stock-basedcompensation.
Reclassifications
Refertoourdiscussionin“RecentlyAdoptedAccountingPronouncements”belowforrequiredpriorperiodreclassificationsresultingfromtheearly
adoptionofnewaccountingguidance.Allotherreclassifications,madetoconformthepriorperiodtothecurrentpresentation,werenotmaterialandhadnonet
effectonourconsolidatedfinancialstatements.
Revenue Recognition
Werecognizerevenuefromour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.Deferredrevenue,whichprimarilyrelatestoour
subscription-basedandcommissionbasedarrangements,isrecordedwhenpaymentsarereceivedinadvanceofourperformanceasrequiredbytheunderlying
agreements.
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.
Instantbookingcommissionrevenueisalsoincludedinclick-basedadvertisingrevenueandisrecordedatthetimeatravelerbooksahoteltransactionon
oursitewherewedonotassumecancellationrisk,orthetransactionmodel.Intransactionsinwhichweassumecancellationrisk,werecordrevenueinthemonth
inwhichthetraveler’sstayatahoteloccurs,ortheconsumptionmodel.Wehavenopost-bookingserviceobligationsforinstantbookingtransactions.
Display-based Advertising .Werecognizedisplay-based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contractualperiodoverwhichserviceis
delivered.
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