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SEC Filings

20-F
TRIVAGO N.V. filed this Form 20-F on 03/06/2018
Entire Document
 



Expense (benefit) for income taxes
 
Year ended December 31, 
 
% Change
(in millions)
2015
 
 
2016
 
 
2017
 
 
2016 vs 2015

 
2017 vs 2016

Expense (benefit) for income taxes
 
(11.3
)
 
 
6.7

 
 
(4.8
)
 
159.3
%
 
(171.6
)%
Effective tax rate
 
22.3
%
 
 
(14.9
)%
 
 
26.7
%
 
 
 
 
Our effective tax rate was 26.7% in 2017, (14.9)% in 2016 and 22.3% in 2015. This is mainly due to non-deductible share-based compensation of (pre-tax) €16.0 million in 2017, €53.7 million in 2016 and €14.1 million in 2015. Furthermore, corporate costs were pushed down from Expedia of (pre-tax) €0.5 million for 2017, €4.2 million for 2016 and €2.8 million for 2015, which are non-deductible for tax purposes. Other differences relate to one-off items during the year. In 2017, €3.2 million is related to the recognition of previously unrecognized net operating losses. In 2016, €1.9 million is related to tax losses of the current year for which no deferred tax asset was recognized (valuation allowance). In 2015, €0.5 million of the total €0.8 million was related to the non-tax deductible expense for the release of a contingent asset at the level of trivago GmbH.
Quantitative and qualitative disclosures about market risk
Market risk is the potential loss from adverse changes in interest rates, foreign exchange rates and market prices. Our exposure to market risk includes our credit facility, cash, accounts receivable, intercompany receivables, investments and accounts payable. We manage our exposure to these risks through established policies and procedures. Our objective is to mitigate potential income statement, cash flow and market exposures from changes in interest and foreign exchange rates.
Interest rate risk
Because the interest rate on our credit facility is tied to a market rate, we will be susceptible to fluctuations in interest rates if, consistent with our practice to date, we do not hedge the interest rate exposure arising from any advances under our credit facility. For the years ending December 31, 2017 and 2016, we had no amounts outstanding under our credit facility, and as of December 31, 2015, we had €20.0 million outstanding. Expedia currently guarantees our credit facility. If Expedia does not continue to guarantee our credit in the future, our borrowing costs could increase.
We did not experience any significant impact from changes in interest rates for the years ended December 31, 2015, 2016 or 2017.
Foreign exchange risk
We conduct business in many countries throughout the world. Because we operate in markets globally, we have exposure to different economic climates, political arenas, tax systems and regulations that could affect foreign exchange rates. Our primary exposure to foreign currency risk relates to transacting in foreign currency and recording the activity in euro. A large portion of our advertising expenses are incurred in the local currency of the particular geographic market in which we advertise, with a significant amount incurred in U.S. dollar. The vast majority of our revenue is denominated in euro. Changes in exchange rates between the functional currency of our consolidated entities and these other currencies will result in transaction gains or losses, which we recognize in our consolidated statements of operations. Our foreign exchange risk relates primarily to the exchange rate between the U.S. dollar and the euro.
Future net transaction gains and losses are inherently difficult to predict as they are reliant on how the multiple currencies in which we transact fluctuate in relation to the functional currency of our consolidated entities, the relative composition and denomination of current assets and liabilities for each period, and our effectiveness at forecasting and managing, through balance sheet netting, such exposures. As an example, if the foreign currencies in which we hold net asset balances were to depreciate by 10% against the euro and other currencies in which we hold net liability balances were to appreciate by 10% against the euro, we

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