ServiceMagic 2011 Annual Report Download - page 50

IAC'S PRINCIPLES OF FINANCIAL REPORTING
IAC reports Operating Income Before Amortization as a supplemental measure to generally accepted accounting principles ("GAAP"). This
measure is one of the primary metrics by which we evaluate the performance of our businesses, on which our internal budgets are based and by
which management is compensated. We believe that investors should have access to, and we are obligated to provide, the same set of tools that
we use in analyzing our results. This non-GAAP measure should be considered in addition to results prepared in accordance with GAAP, but
should not be considered a substitute for or superior to GAAP results. IAC endeavors to compensate for the limitations of the non-GAAP
measure presented by providing the comparable GAAP measure with equal or greater prominence, financial statements prepared in accordance
with GAAP, and descriptions of the reconciling items, including quantifying such items, to derive the non-GAAP measure. We encourage
investors to examine the reconciling adjustments between the GAAP and non-GAAP measure, which we discuss below.
Definition of IAC's Non-GAAP Measure
Operating Income Before Amortization is defined as operating income excluding, if applicable: (1) non-cash compensation expense,
(2) amortization of non-cash marketing, (3) amortization and impairment of intangibles, (4) goodwill impairment, and (5) one-time items. We
believe this measure is useful to investors because it represents the consolidated operating results from IAC's segments, taking into account
depreciation, which we believe is an ongoing cost of doing business, but excluding the effects of any other non-
cash expenses. Operating Income
Before Amortization has certain limitations in that it does not take into account the impact to IAC's statement of operations of certain expenses,
including non-cash compensation, non-cash marketing, and acquisition-related accounting.
One-Time Items
Operating Income Before Amortization is presented before one-time items, if applicable. These items are truly one-time in nature and non-
recurring, infrequent or unusual, and have not occurred in the past two years or are not expected to recur in the next two years, in accordance
with the Securities and Exchange Commission rules. GAAP results include one-time items. For the periods presented in this report, there are no
one-time items.
Non-Cash Expenses That Are Excluded From IAC's Non-GAAP Measure
Non-cash compensation expense consists principally of expense associated with the grants, including unvested grants assumed in
acquisitions, of stock options, restricted stock units ("RSUs") and performance-
based RSUs. These expenses are not paid in cash, and we include
the related shares in our fully diluted shares outstanding which, for stock options and RSUs, are included on a treasury method basis, and for
performance-based RSUs are included on a treasury method basis once the performance conditions are met. Upon the exercise of certain stock
options and vesting of RSUs and performance-
based RSUs, the awards are settled, at the Company's discretion, on a net basis, with the Company
remitting the required tax withholding amount from its current funds.
Amortization of non-cash marketing consists of non-cash advertising credits secured from Universal Television as part of the transaction
pursuant to which VUE was created, and the subsequent transaction by which IAC sold its partnership interests in VUE (collectively referred to
as "NBC Universal Advertising"). The NBC Universal Advertising was available for television advertising on various NBC Universal network
and cable channels without any cash cost. There are no NBC Universal Advertising credits available as all credits were used prior to
December 31, 2009.
The NBC Universal Advertising is excluded from Operating Income Before Amortization because it is non-cash and generally is
incremental to the advertising the Company otherwise secures as a result
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