Hasbro 2009 Annual Report Download - page 70

purpose subsidiary, Hasbro Receivables Funding, LLC (HRF), which is wholly-owned and consolidated by the
Company. HRF will, subject to certain conditions, sell, from time to time on a revolving basis, an undivided
fractional ownership interest in up to $250,000 of eligible domestic receivables to various multi-party
commercial paper conduits supported by a committed liquidity facility. During the period from the first day of
the October fiscal month through the last day of the following January fiscal month, this limit increased to
$300,000. Subsequent to December 27, 2009, in January 2010, the agreement was amended on a prospective
basis to eliminate the additional $50,000 available from the first day of the October fiscal month through the
last day of the following January fiscal month. Under the terms of the agreement, new receivables are added
to the pool as collections reduce previously held receivables. The Company expects to service, administer, and
collect the receivables on behalf of HRF and the conduits. The net proceeds of sale will be less than the face
amount of accounts receivable sold by an amount that approximates a financing cost.
The receivables facility contains certain restrictions on the Company and HRF that are customary for
facilities of this type. The commitments under the facility are subject to termination prior to their term upon
the occurrence of certain events, including payment defaults, breach of covenants, breach of representations or
warranties, bankruptcy, and failure of the receivables to satisfy certain performance criteria.
As of December 27, 2009, there were no amounts utilized under the receivables facility. At December 28,
2008 the utilization of the receivables facility was $250,000. As of December 27, 2009 the Company had
$300,000 available to sell under the facility. The transactions are accounted for as sales under current
accounting guidance. During 2009, 2008 and 2007, the loss on the sale of receivables totaled $2,514, $5,302
and $7,982, respectively, which is recorded in selling, distribution and administration expenses in the
accompanying consolidated statements of operations. The discount on interests sold is approximately equal to
the interest rate paid by the conduits to the holders of the commercial paper plus other fees. The discount rate
as of December 27, 2009 was approximately 1.03%.
Upon sale to the conduits, HRF continues to hold a subordinated retained interest in the receivables. The
subordinated interest in receivables is recorded at fair value, which is determined based on the present value of
future expected cash flows estimated using management’s best estimates of credit losses and discount rates
commensurate with the risks involved. Due to the short-term nature of trade receivables, the carrying amount,
less allowances, approximates fair value. Variations in the credit and discount assumptions generally do not
significantly impact fair value.
In 2010, the Company adopted revised accounting standards related to the transfer of financial assets. As
a result of the adoption of these standards, the Company will be required to account for the sale of the
receivables under the securitization facility as a secured borrowing. The receivables sold will continue to be
included in accounts receivable until collection. The proceeds from utilization of the facility will be recorded
as short-term debt.
(7) Accrued Liabilities
Components of accrued liabilities are as follows:
2009 2008
Royalties ................................................... $141,143 144,566
Advertising .................................................. 92,614 92,852
Payroll and management incentives ................................ 91,298 65,171
Other ...................................................... 303,332 305,264
$628,387 607,853
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HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements — (Continued)
(Thousands of Dollars and Shares Except Per Share Data)