TripAdvisor 2015 Annual Report Download - page 75
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Performance-basedstockoptionsandRSUsvestuponachievementofcertaincompany-basedperformanceconditionsandarequisiteserviceperiod.Onthe
dateofgrant,thefairvalueofaperformance-basedawardiscalculatedusingthesamemethodasourservicebasedstockoptionsandRSUsdescribedabove.We
thenassesswhetheritisprobablethattheindividualperformancetargetswouldbeachieved.Ifassessedasprobable,compensationexpensewillberecordedfor
theseawardsovertheestimatedperformanceperiod.Ateachreportingperiod,wewillreassesstheprobabilityofachievingtheperformancetargetsandthe
performanceperiodrequiredtomeetthosetargets.Theestimationofwhethertheperformancetargetswillbeachievedandoftheperformanceperiodrequiredto
achievethetargetsrequiresjudgment,andtotheextentactualresultsorupdatedestimatesdifferfromourcurrentestimates,thecumulativeeffectoncurrentand
priorperiodsofthosechangeswillberecordedintheperiodestimatesarerevised,orthechangeinestimatewillbeappliedprospectivelydependingonwhetherthe
changeaffectstheestimateoftotalcompensationcosttoberecognizedormerelyaffectstheperiodoverwhichcompensationcostistoberecognized.Theultimate
numberofsharesissuedandtherelatedcompensationexpenserecognizedwillbebasedonacomparisonofthefinalperformancemetricstothespecifiedtargets.
Estimatesoffairvaluearenotintendedtopredictactualfutureeventsorthevalueultimatelyrealizedbyemployeeswhoreceivetheseawards,and
subsequenteventsarenotindicativeofthereasonablenessofouroriginalestimatesoffairvalue.Weusehistoricaldatatoestimatepre-vestingstockoptionand
RSUforfeituresandrecordshare-basedcompensationexpenseonlyforthoseawardsthatareexpectedtovest.Changesinestimatedforfeituresarerecognized
throughacumulativecatch-upadjustmentintheperiodofchangewhichalsoimpactstheamountofstockcompensationexpensetoberecognizedinfutureperiods.
Treasury Stock
Sharesofourcommonstockrepurchasedarerecordedatcostastreasurystockandresultinthereductionofstockholders'equityinourconsolidatedbalance
sheet.Wemayreissuethesetreasuryshares.Whentreasurysharesarereissued,weusetheaveragecostmethodfordeterminingthecostofreissuedshares.Ifthe
issuancepriceishigherthanthecost,theexcessoftheissuancepriceoverthecostiscreditedtoadditionalpaid-in-capital.Iftheissuancepriceislowerthanthe
cost,thedifferenceisfirstchargedagainstanycreditbalanceinadditionalpaid-in-capitalfromthepreviousissuancesoftreasurystockandtheremainingbalance
ischargedtoretainedearnings.
Deferred Merchant Payables
Wereceivecashfromtravelersatthetimeofbookingrelatedtoourvacationrental,attractionsandtransaction-basedbusinessesandwerecordthese
amounts,netofcommissions,onourconsolidatedbalancesheetsasdeferredmerchantpayables.Wepaythehotel,attractionproviderorvacationrentalowner
afterthetravelers’useandsubsequentbillingfromthehotel,attractionproviderorvacationrentalowner.Therefore,wereceivecashfromthetravelerpriorto
payingthehotel,attractionproviderorvacationrentalowner,andthisoperatingcyclerepresentsaworkingcapitalsourceoruseofcashtous.Aslongasthese
businessesgrow,weexpectthatchangesinworkingcapitalrelatedtothesetransactions,dependingontimingofpaymentsandseasonality,willcontinuetoimpact
operatingcashflows.Ourdeferredmerchantpayablesbalancewas$105millionand$93millionfortheyearsendedDecember31,2015and2014,respectively.
Credit Risk and Concentrations
Financialinstruments,whichpotentiallysubjectustoconcentrationofcreditrisk,consistprimarilyofcashandcashequivalents,corporatedebtsecurities,
foreignexchangecontracts,accountsreceivableandcustomerconcentrations.Wemaintainsomecashandcashequivalentsbalanceswithfinancialinstitutionsthat
areinexcessofFederalDepositInsuranceCorporationinsurancelimits.Ourcashandcashequivalentsareprimarilycomposedofprimeinstitutionalmoneymarket
fundsaswellasbankaccountbalancesprimarilydenominatedinU.S.dollars,Euros,Britishpoundsterling,Chineserenminbi,AustraliandollarsandSingapore
dollars.Weinvestinhighly-ratedcorporatedebtsecurities,andourinvestmentpolicylimitstheamountofcreditexposuretoanyoneissuer,industrygroupand
currency.Ourcreditriskrelatedtocorporatedebtsecuritiesisalsomitigatedbytherelativelyshortmaturityperiodrequiredbyourinvestmentpolicy.Foreign
exchangecontractsaretransactedwithvariousinternationalfinancialinstitutionswithhighcreditstanding.
Ourbusinessisalsosubjecttocertainrisksduetoconcentrationsrelatedtodependenceonourrelationshipswithourcustomers.Fortheyearsended
December31,2015,2014and2013ourtwomostsignificantadvertisingpartners,ExpediaandPriceline,eachaccountedformorethan10%ofourconsolidated
revenueandcombinedaccountedfor46%,46%and47%ofourconsolidatedrevenue,respectively.ThisconcentrationofrevenueisrecordedinourHotelsegment
forthesereportingperiods.AsofDecember31,2015and2014,Expediaaccountedfor11%and15%,respectively,ofourtotalaccountsreceivable.Ouroverall
creditriskrelatedtoaccountsreceivableisalsomitigatedbytherelativelyshortcollectionperiod.
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