Hasbro 2015 Annual Report Download - page 73

HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements — (Continued)
(Thousands of Dollars and Shares Except Per Share Data)
The Company records an allowance for doubtful accounts based on management’s assessment of the
business environment, customers’ financial condition, historical collection experience, accounts receivable aging
and customer disputes. When a significant event occurs, such as a bankruptcy filing by a specific customer, and
on a quarterly basis, the allowance is reviewed for adequacy and the balance is adjusted to reflect current risk
assessments.
Accounts receivable, net on the consolidated balance sheet represents amounts due from customers less the
allowance for doubtful accounts as well as allowances for discounts, rebates and returns.
Inventories
Inventories are valued at the lower of cost (first-in, first-out) or market. Based upon a consideration of
quantities on hand, actual and projected sales volume, anticipated product selling price and product lines planned
to be discontinued, slow-moving and obsolete inventory is written down to its estimated net realizable value. At
December 27, 2015 and December 28, 2014, finished goods, net of the related obsolescence reserve comprised
98% and 94% of inventories, respectively. Following the sale of the Company’s manufacturing operations,
finished goods are expected to continue to make up a substantial portion of inventories with the remaining
balance comprised of certain raw materials or components sourced on behalf of the Company’s third party
manufacturers.
Equity Method Investment
For the Company’s equity method investments, only the Company’s investment in and amounts due to and
from the equity method investment are included in the consolidated balance sheets and only the Company’s share
of the equity method investment’s earnings (losses) is included in other expense, net in the consolidated
statements of operations. Dividends, cash distributions, loans or other cash received from the equity method
investment, additional cash investments, loan repayments or other cash paid to the investee are included in the
consolidated statements of cash flows.
The Company reviews its equity method investments for impairment on a periodic basis. If it has been
determined that the fair value of the equity investment is less than its related carrying value and that this decline
is other-than-temporary, the carrying value of the investment is adjusted downward to reflect these declines in
value. The Company has one significant equity method investment, its 40% interest in a joint venture with
Discovery Communications, Inc. (“Discovery”).
The Company and Discovery are party to an option agreement with respect to this joint venture. The
Company has recorded a liability for this option agreement at fair value which is included in other liabilities in
the consolidated balance sheets. Unrealized gains and losses on this option are recognized in the consolidated
statements of operations as they occur.
See notes 5 and 12 for additional information.
Redeemable Noncontrolling Interests
Redeemable noncontrolling interests are those noncontrolling interests which are or may become
redeemable at a fixed or determinable price on a fixed or determinable date, at the option of the holder, or upon
occurrence of an event. The financial results and position of the redeemable noncontrolling interest are included
in their entirety in the Company’s consolidated statements of operations and consolidated balance sheets. The
value of the redeemable noncontrolling interests is presented in the consolidated balance sheets as temporary
equity between liabilities and shareholders’ equity. Earnings (losses) attributable to the noncontrolling interest
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