Hasbro 2009 Annual Report Download - page 47

decrease estimated discounted cash flows and could increase or decrease the related impairment charge.
Intangible assets covered under this policy were $478,829 at December 27, 2009. During 2009, the Company
wrote down certain intangible assets by approximately $6,700 to reflect revised expectations for the related
product lines.
Recoverability of Royalty Advances and Commitments
The Company’s ability to earn-out royalty advances and contractual obligations with respect to minimum
guaranteed royalties is assessed by comparing the remaining minimum guaranty to the estimated future sales
forecasts and related cash flow projections to be derived from the related product. If sales forecasts and related
cash flows from the particular product do not support the recoverability of the remaining minimum guaranty
or, if the Company decides to discontinue a product line with royalty advances or commitments, a charge to
royalty expense to write-off the non-recoverable minimum guaranty is required. The preparation of revenue
forecasts and related cash flows for these products requires judgments and estimates. Actual revenues and
related cash flows or changes in the assessment of anticipated revenues and cash flows related to these
products could result in a change to the assessment of recoverability of remaining minimum guaranteed
royalties. At December 27, 2009, the Company had $120,115 of prepaid royalties, $43,115 of which are
included in prepaid expenses and other current assets and $77,000 of which are included in other assets.
Pension Costs and Obligations
Pension expense is based on actuarial computations of current and future benefits using estimates for
expected return on assets and applicable discount rates. At the end of 2007 the Company froze benefits under
its two largest pension plans in the U.S., with no future benefits accruing to employees. The Company will
continue to pay benefits under the plan consistent with the provisions existing at the date of the plan benefit
freeze. The estimates for the Company’s U.S. plans are established at the Company’s measurement date. The
Company uses its fiscal year-end date as its measurement date to measure the liabilities and assets of the plans
and to establish the expense for the upcoming year.
The Company estimates expected return on assets using a weighted average rate based on historical
market data for the investment classes of assets held by the plan, the allocation of plan assets among those
investment classes, and the current economic environment. Based on this information, the Company’s estimate
of expected return on U.S. plan assets used in the calculation of 2009 pension expense for the U.S. plans was
8.50%. A decrease in the estimate used for expected return on plan assets would increase pension expense,
while an increase in this estimate would decrease pension expense. A decrease of 0.25% in the estimate of
expected return on plan assets would have increased 2009 pension expense for U.S. plans by approximately
$560.
Discount rates are selected based upon rates of return at the measurement date on high quality corporate
bond investments currently available and expected to be available during the period to maturity of the pension
benefits. The Company’s discount rate for its U.S. plans used for the calculation of 2009 pension expense
averaged 6.20%. A decrease in the discount rate would result in greater pension expense while an increase in
the discount rate would decrease pension expense. A decrease of 0.25% in the Company’s discount rate would
have increased 2009 pension expense and the 2009 projected benefit obligation by approximately $343 and
$8,711, respectively.
Actual results that differ from the actuarial assumptions are accumulated and, if outside a certain corridor,
amortized over future periods and, therefore affect recognized expense in future periods. At December 27,
2009, the Company’s U.S. plans had unrecognized actuarial losses of $81,323 included in accumulated other
comprehensive earnings related to its defined benefit pension plans compared to $87,906 at December 28,
2008. The decrease primarily reflects amortization of these actuarial losses in 2009. Pension plan assets are
valued on the basis of their fair market value on the measurement date. These changes in the fair market value
of plan assets impact the amount of future pension expense due to amortization of the unrecognized actuarial
losses or gains.
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