2.1 BASIS OF PREPARATION OF FINANCIAL STATEMENTS The financial statements have been prepared under the historical cost convention unless otherwise specified within these accounting policies and in accordance with Financial Reporting Standard 102, the Financial Reporting Standard applicable in the UK and the Republic of Ireland and the Companies Act 2006. The disclosure requirements of Section 1A of FRS 102 have been applied other than where additional disclosure is required to show a true and fair view. The preparation of financial statements in compliance with FRS 102 requires the use of certain critical accounting estimates. It also requires management to exercise judgment in applying the Company's accounting policies (see note 3). The Company is a qualifying entity as defined in FRS 102. The Company is included in the consolidated financial statements of its parent undertaking, which are publicly available. In these financial statements, the Company has applied the exemptions available under FRS 102 in respect of the following disclosures: - The requirement to present a statement of cash flows in accordance with Section 7 of FRS 102 and paragraph 3.17(d). - Certain disclosures required by Section 11 Basic Financial Instruments (paragraphs 11.39 to 11.48A) and Section 12 Other Financial Instruments Issues (paragraphs 12.26 to 12.29A). - The disclosure requirements of paragraph 33.7 of FRS 102 in relation to key management personnel compensation. - Section 33.1(a) of FRS102 with regard to transactions with group members. CarGurus, Inc. consolidated financial statements include the result of the Company, the group financial statements are available to the public at https://investors.cargurus.com/financial-information/annual-reports. The following principal accounting policies have been applied: 2.3 PENSIONS Defined Contribution Pension Plan The Company operates a defined contribution plan for its employees. A defined contribution plan is a pension plan under which the Company pays fixed contributions into a separate entity. Once the contributions have been paid the Company has no further payment obligations. The contributions are recognised as an expense in profit or loss when they fall due. Amounts not paid are shown in accruals as a liability in the Balance Sheet. The assets of the plan are held separately from the Company in independently administered funds. 2.4 INTEREST INCOME Interest income is recognised in profit or loss using the effective interest method. 2.5 TAXATION Tax is recognised in profit or loss except that a charge attributable to an item of income and expense recognised as other comprehensive income or to an item recognised directly in equity is also recognised in other comprehensive income or directly in equity respectively. The current income tax charge is calculated on the basis of tax rates and laws that have been enacted or substantively enacted by the balance sheet date in the countries where the Company operates and generates income. 2.6 DEBTORS Short-term debtors are measured at transaction price, less any impairment. There is no impairment in the current year or prior year financial statements. 2.7 CASH Cash is represented by cash in hand and deposits with financial institutions repayable without penalty on notice of not more than 24 hours. 2.8 CREDITORS Short-term creditors are measured at the transaction price. Other financial liabilities are measured initially at fair value, net of transaction costs, and are measured subsequently at amortised cost using the effective interest method. JUDGEMENTS IN APPLYING ACCOUNTING POLICIES AND KEY SOURCES OF ESTIMATION UNCERTAINTY The preparation of these financial statements requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. Judgements and estimates are continually evaluated and are based on historical experiences and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The Company makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below: a) Recoverability of debtors Estimates are made in respect of the recoverable value of trade and other debtors. When assessing the level of provisions required, factors including current trading experience, historical experience and the ageing profile of debtors are considered.