ServiceMagic 2011 Annual Report Download - page 66

IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 1—ORGANIZATION (Continued)
reported in IAC's Search segment through December 31, 2009 and IAC's Media & Other segment for the year ended December 31, 2010.
NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Consolidation and Accounting for Investments
The consolidated financial statements include the accounts of the Company, all entities that are wholly-owned by the Company and all
entities in which the Company has a controlling financial interest, whether through voting interests or variable interests. The Company's
consolidated financial statements include one variable interest entity, in which the Company has a controlling financial interest through voting
rights and is also the primary beneficiary. Intercompany transactions and accounts have been eliminated.
Investments in entities in which the Company has the ability to exercise significant influence over the operating and financial matters of the
investee, but does not have a controlling financial interest, are accounted for using the equity method. Investments in entities in which the
Company does not have the ability to exercise significant influence over the operating and financial matters of the investee are accounted for
using the cost method. The Company evaluates each cost and equity method investment for impairment on a quarterly basis and recognizes an
impairment loss if a decline in value is determined to be other-than-temporary. Such impairment evaluations include, but are not limited to: the
current business environment, including competition; going concern considerations such as financial condition and the rate at which the investee
company utilizes cash and the investee company's ability to obtain additional financing to achieve its business plan; the need for changes to the
investee company's existing business model due to changing business environments and its ability to successfully implement necessary changes;
and comparable valuations. If the Company has not identified events or changes in circumstances that may have a significant adverse effect on
the fair value of a cost method investment, then the fair value of such cost method investment is not estimated, as it is impracticable to do so.
Accounting Estimates
Management of the Company is required to make certain estimates, judgments and assumptions during the preparation of its consolidated
financial statements in accordance with U.S. generally accepted accounting principles ("U.S. GAAP"). These estimates, judgments and
assumptions impact the reported amounts of assets, liabilities, revenue and expenses and the related disclosure of contingent assets and
liabilities. Actual results could differ from those estimates.
On an ongoing basis, the Company evaluates its estimates and judgments including those related to the fair values of marketable securities
and other investments, goodwill and indefinite-lived intangible assets, the useful lives and recovery of definite-lived intangible assets and
property and equipment, the carrying value of accounts receivable, including the determination of the allowance for doubtful accounts and other
revenue related reserves, the reserves for income tax contingencies, the valuation allowance for deferred income tax assets and the fair value of
and forfeiture rates for stock-based awards, among others. The Company bases its estimates and judgments on historical experience, its forecasts
and budgets and other factors that the Company considers relevant.
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