Redeemable Noncontrolling Interests

9 Months Ended

Sep. 30, 2016

We have noncontrolling interests in majority owned entities, which are carried at fair value as the noncontrolling interests contain certain rights, whereby we may acquire and the minority shareholders may sell to us additional shares of the companies.

A reconciliation of redeemable noncontrolling interest is as follows, in thousands:



	Nine months ended September 30,
	2016
Balance, beginning of the period	$	658,478
Net loss attributable to noncontrolling interests	(26,069		)
Fair value adjustments	937,618
Currency translation adjustments	28,680
Other	(19,743		)
Balance, end of period	$	1,578,964

The fair value of the redeemable noncontrolling interest was determined based on a blended analysis of the present value of future discounted cash flows and market value approach (“Level 3” on the fair value hierarchy). Our significant estimates in the discounted cash flow model include our weighted average cost of capital as well as long-term growth and profitability of the business. Our significant estimates in the market value approach include identifying similar companies with comparable business factors and assessing comparable revenue and operating multiples in estimating the fair value of the business.

In connection with the acquisition of our majority ownership interest in trivago in 2013, we entered into a shareholders agreement with trivago’s founders that contains certain put/call rights whereby we may cause the founders to sell to us, and the founders may cause us to acquire from them, up to 50% and 100% of the trivago shares held by them at fair value during two windows. The first window would have closed during the first half of 2016. However, during the second quarter of 2016, we and the founders agreed not to exercise our respective put/call rights during that window and instead to postpone the window while the parties explore the feasibility of an initial public offering of trivago shares. Under the parties’ agreement, the first window will reopen on March 31, 2017 or early if the parties abandon an initial public offering before then. We do not presently anticipate that we would sell any of our trivago shares in any such initial public offering, should it occur, and there are no guarantees an initial public offering will be pursued or be successful. The redeemable noncontrolling interest balance also includes a nominal amount of vested stock options held by other employees of trivago which are puttable and callable to Expedia at fair value in 2018 and 2020 and are not expected to be redeemed for more than fair market value.

In addition to the redeemable noncontrolling interests, there were certain shares held by trivago employees which were originally awarded in the form of stock options pursuant to the trivago employee stock option plan and subsequently exercised by such employees. During the second quarter of 2016, we exercised our call right on these shares and elected to do so at a premium to fair value, which resulted in an incremental stock-based compensation charge of approximately $49 million in the second quarter of 2016 pursuant to liability award treatment. The acquisition of these employee minority interests increased Expedia’s ordinary ownership of trivago by a nominal amount.

Our redeemable noncontrolling interest balance related to trivago was $1.6 billion and $654 million as of September 30, 2016 and December 31, 2015, which represents our best estimate of fair value.