EFTA01378070.pdf

Table of Contenta the settlement of these intercompany transactions rs reflected in the combined statement of cash flows as a financing activity and in the combined balance sheet as "Invested capital." The notes payable due to IAC subsidiaries are included in 'Long-term debt—related party" in the accompanying combined balance sheet. In the opinion of Match Group, Inc.'s management, the assumptions undertying the historical combined financial statements of Match Group. Inc., including the basis on which the expenses have been allocated from IAC, are reasonable. However, the allocations may not reflect the expenses that we may have incurred as an independent, stand-alone company for the periods presented. The accompanying unaudited combined financial statements have been prepared in accordance with GAAP for interim financial information and with the rules and regulations of the SEC. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management. the accompanying unaudited combined financial statements include all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation. Interim results are not necessanly indicative of the results that may be expected for the full year. The accompanying unaudited combined financial statements should be read in conjunction with the combined annual financial statements and notes thereto for the year ended December 31, 2014. Accounting estimates The preparation of combined financial statements in accordance with GAAP requires management to make certain estimates. judgments and assumptions that impact the reported amounts of assets. liabilities, revenue and expenses and the related disclosure of contingent assets and liabilities. Actual results could differ from these estimates. On an ongoing basis. the Company evaluates its estimates and judgments including those related to: the recoverability of goodwill and indefinite-lived intangible assets: the useful lives and recoverability of definite-lived intangible assets and property and equipment; the fair value of long-term investments: 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 liabilities for uncertain tax positions; 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. Recent accounting pronouncement In May 2014. the Financial Accounting Standards Board rFASB") issued Accounting Standards Update ("ASV' No. 201409. Revenue from Contracts with Customers, which clarifies the principles for recognizing revenue and develops a common standard for all industries. In July 2015, the FASB decided to defer the effective date for annual reporting periods beginning alter December 15, 2017. Early adoption is permitted beginning on the original effective date of December 15, 2016. Upon adoption, ASU No. 2014-09 may either be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of initial application. The Company is currently evaluating the new guidance and has not yet determined whether the adoption of the new standard will have a material impact on its combined financial statements or the method and timing of adoption. Note 2—Income taxes Match Group, Inc. is a member of IAC's consolidated federal and state income tax returns. In all periods presented, current and deferred income taxes have been computed for Match Group. Inc. on an as if stand-alone, separate retum basis. Match Group, Inc.'s payments to IAC for its share of IAC's consolidated F-8 Table of Contents federal and state income lax return liabilities have been reflected within cash flows from operating activities in the accompanying combined statements of cash flows. At the end of each interim period. the Company makes its best estimate of the annual expected effective income tax rate and applies that rate to its ordinary year-to-date earnings or loss. The income tax provision or benefit related to significant, unusual, or extraordinary items, if applicable, that will be separately reported or reported net of their related tax effects are individually computed and recognized in the interim period in which they occur. In addition, the effect of changes in enacted tax laws or rates, tax status, judgment on the realizability of a beginning-of-the-year deferred tax asset in future years or income tax contingencies is recognized in the interim period in which the change occurs. The computation of the annual expected effective income tax rate at each interim period requires certain estimates and assumptions including, but not limited to. the expected pre-tax income (or loss) for the year, projections of the proportion of income (andbr loss) earned and taxed in foreign jurisdictions, permanent and temporary differences, and the likelihood of the realizability of deferred tax assets generated in the current year. The accounting estimates used to compute the provision or benefit for income taxes may change as new events occur, more experience is acquired, additional information is obtained or our tax environment changes. To the extent that the expected annual effective income tax rate changes during a quarter, the effect of the change on prior quarters is included in income tax provision in the quarter in which the change occurs. For the nine months ended September 30. 20t4, the Company recorded an income tax provision of $46.4 million, which represents effective income tax rates of 32%. For the nine months ended September 30. 2015. the Company recorded an income tax provision of $42.6 million. which represents effective income tax rates of 33%. The effective rates for the nine months ended September 30, 2014 and 2015 are lower than the statutory rate of 35% due primarily to the non-taxable gain on contingent consideration fair value adjustments, partially offset by state taxes. The Company recognizes interest and, if applicable, penalties related to unrecognized tax benefits in the income tax provision. At both December 31, 2014 and September 30. 2015, the Company has accrued $1.2 million for the payment of interest. At December 31. 2014 and September 30, 2015, the Company http:Pmv. ttec.gov Attlivett"edgm'clatz1575189,00010474691500643112226458^-lahttniI U92013911:17 AIM CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0075230 CONFIDENTIAL SONY GM_00221414 EFTA01378070