Expedia 2015 Annual Report Download - page 103

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liability and we remeasure these instruments at fair value at the end of each reporting period. Upon settlement of
these awards, our total compensation expense recorded over the vesting period of the awards will equal the
settlement amount, which is based on our stock price on the settlement date. Performance-based RSUs vest upon
achievement of certain company-based performance conditions. On the date of grant, we determine the fair value
of the performance-based award based on the fair value of our common stock at that time and we assess whether
it is probable that the performance targets will be achieved. If assessed as probable, we record compensation
expense for these awards over the estimated performance period using the accelerated method. At each reporting
period, we reassess the probability of achieving the performance targets and the performance period required to
meet those targets. The estimation of whether the performance targets will be achieved and of the performance
period required to achieve the targets requires judgment, and to the extent actual results or updated estimates
differ from our current estimates, the cumulative effect on current and prior periods of those changes will be
recorded in the period estimates are revised, or the change in estimate will be applied prospectively depending on
whether the change affects the estimate of total compensation cost to be recognized or merely affects the period
over which compensation cost is to be recognized. The ultimate number of shares issued and the related
compensation expense recognized will be based on a comparison of the final performance metrics to the
specified targets.
Estimates of fair value are not intended to predict actual future events or the value ultimately realized by
employees who receive these awards, and subsequent events are not indicative of the reasonableness of our
original estimates of fair value. In determining the estimated forfeiture rates for stock-based awards, we
periodically conduct an assessment of the actual number of equity awards that have been forfeited to date as well
as those expected to be forfeited in the future. We consider many factors when estimating expected forfeitures,
including the type of award, the employee class and historical experience. The estimate of stock awards that will
ultimately be forfeited requires significant judgment and to the extent that actual results or updated estimates
differ from our current estimates, such amounts will be recorded as a cumulative adjustment in the period such
estimates are revised.
Earnings Per Share
We compute basic earnings per share by taking net income attributable to Expedia, Inc. available to
common stockholders divided by the weighted average number of common and Class B common shares
outstanding during the period excluding restricted stock and stock held in escrow. Diluted earnings per share
include the potential dilution that could occur from stock-based awards and other stock-based commitments
using the treasury stock or the as if converted methods, as applicable. For additional information on how we
compute earnings per share, see Note 14 — Earnings Per Share.
Fair Value Recognition, Measurement and Disclosure
The carrying amounts of cash and cash equivalents and restricted cash and cash equivalents reported on our
consolidated balance sheets approximate fair value as we maintain them with various high-quality financial
institutions. The accounts receivable are short-term in nature and are generally settled shortly after the sale.
We disclose the fair value of our financial instruments based on the fair value hierarchy using the following
three categories:
Level 1 — Valuations based on quoted prices for identical assets and liabilities in active markets.
Level 2 — Valuations based on observable inputs other than quoted prices included in Level 1, such as
quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets
and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by
observable market data.
Level 3 — Valuations based on unobservable inputs reflecting the Company’s own assumptions, consistent
with reasonably available assumptions made by other market participants. These valuations require
significant judgment.
F-18