ServiceMagic 2013 Annual Report Download - page 62

IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
interest, are accounted for using the equity method. Investments in the common stock or in-substance common stock of 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. Investments in companies that IAC does not control, that are not in the form of common stock or in-substance common
stock, are also accounted for using the cost method of accounting. 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, 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; the recoverability of 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 revenue reserves; the fair value of acquisition-related contingent consideration; 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.
Revenue Recognition
The Company recognizes revenue when persuasive evidence of an arrangement exists, services are rendered or merchandise is delivered to
customers, the fee or price charged is fixed or determinable and collectability is reasonably assured. Deferred revenue is recorded when
payments are received in advance of the Company's rendering of services or delivery of merchandise.
Search & Applications
The Search & Applications segment's revenue consists principally of advertising revenue, which is generated primarily through the display
of paid listings in response to search queries, as well as from advertisements appearing on its destination search websites and portals and certain
third party websites and the syndication of search results generated by Ask-branded destination search websites. The Company obtains the
substantial majority of its paid listings from third-party providers, primarily Google Inc. ("Google"). Paid listings are priced on a price per click
and when a user submits a search query and clicks on a Google paid listing displayed in response to the query, Google bills the advertiser that
purchased the paid listing directly and shares a portion of its related paid listing fee with the Company. The Company recognizes paid listing
revenue from Google when it delivers the user's click. In cases where the user's click is generated by a third party website, the Company
recognizes the amount due from Google as revenue and records the revenue share obligation to the third-party website as traffic acquisition
costs.
Match
Match's revenue is derived primarily from subscription fees for subscription-based online personals and related services. Subscription fee
revenue is recognized over the terms of the applicable subscriptions, which primarily range from one to six months. Deferred revenue at Match
is $116.5 million and $103.9 million at December 31, 2013 and 2012, respectively. Match also earns revenue from online advertising, which is
recognized when an ad is displayed, and the purchase of add-on or premium features.
Local
HomeAdvisor's lead acceptance revenue is generated and recognized when an in-network home service professional is delivered a