Hasbro 2010 Annual Report Download - page 61

Operating Leases
Hasbro records lease expense in such a manner as to recognize this expense on a straight-line basis
inclusive of rent concessions and rent increases. Reimbursements from lessors for leasehold improvements are
deferred and recognized as a reduction to lease expense over the lease term.
Income Taxes
Hasbro uses the asset and liability approach for financial accounting and reporting of income taxes.
Deferred income taxes have not been provided on the majority of undistributed earnings of international
subsidiaries as the majority of such earnings are indefinitely reinvested by the Company.
The Company uses a two step process for the measurement of uncertain tax positions that have been
taken or are expected to be taken in a tax return. The first step is a determination of whether the tax position
should be recognized in the financial statements. The second step determines the measurement of the tax
position. The Company records potential interest and penalties on uncertain tax positions as a component of
income tax expense.
Foreign Currency Translation
Foreign currency assets and liabilities are translated into U.S. dollars at period-end rates, and revenues,
costs and expenses are translated at weighted average rates during each reporting period. Earnings include
gains or losses resulting from foreign currency transactions and, when required, translation gains and losses
resulting from the use of the U.S. dollar as the functional currency in highly inflationary economies. Other
gains and losses resulting from translation of financial statements are a component of other comprehensive
earnings.
Pension Plans, Postretirement and Postemployment Benefits
Pension expense and related amounts in the consolidated balance sheet are based on actuarial computa-
tions of current and future benefits. The Company’s policy is to fund amounts which are required by
applicable regulations and which are tax deductible. In 2011, the Company expects to contribute approximately
$5,400 to its pension plans. The estimated amounts of future payments to be made under other retirement
programs are being accrued currently over the period of active employment and are also included in pension
expense. Hasbro has a contributory postretirement health and life insurance plan covering substantially all
employees who retire under any of its United States defined benefit pension plans and meet certain age and
length of service requirements. The cost of providing these benefits on behalf of employees who retired prior
to 1993 is and will continue to be substantially borne by the Company. The cost of providing benefits on
behalf of substantially all employees who retire after 1992 is borne by the employee. It also has several plans
covering certain groups of employees, which may provide benefits to such employees following their period of
employment but prior to their retirement. The Company measures the costs of these obligations based on
actuarial computations.
Risk Management Contracts
Hasbro uses foreign currency forward contracts to mitigate the impact of currency rate fluctuations on
firmly committed and projected future foreign currency transactions. These over-the-counter contracts, which
hedge future purchases of inventory and other cross-border currency requirements not denominated in the
functional currency of the business unit, are primarily denominated in United States and Hong Kong dollars,
Euros and British pound sterling and are entered into with a number of counterparties, all of which are major
financial institutions. The Company believes that a default by a counterparty would not have a material
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HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements — (Continued)
(Thousands of Dollars and Shares Except Per Share Data)