Hasbro 2015 Annual Report Download - page 74

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HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements — (Continued)
(Thousands of Dollars and Shares Except Per Share Data)
are presented as a separate line on the consolidated statements of operations which is necessary to identify those
earnings specifically attributable to Hasbro.
Presently, the Company has one investment with a redeemable noncontrolling interest which is the
Company’s 70% majority interest in Backflip Studios, LLC (“Backflip”). The Company may be required to
purchase the remaining 30% in the future contingent on the achievement by Backflip of certain predetermined
financial performance metrics (the “metrics”). Because the Company does not know the ultimate timing that
these metrics may be met and, thereby, cannot currently estimate the purchase price of the remaining 30%, the
value reported reflects the fair value of the redeemable noncontrolling interest on the date of acquisition which
has been adjusted for cumulative earnings (losses) attributable to the noncontrolling interest since the date of
acquisition as well as capital contributions made by or distributions made to the noncontrolling interest since the
acquisition.
Property, Plant and Equipment, Net
Property, plant and equipment are stated at cost less accumulated depreciation. Depreciation is computed
using accelerated and straight-line methods to depreciate the cost of property, plant and equipment over their
estimated useful lives. The principal lives, in years, used in determining depreciation rates of various assets are:
land improvements 15 to 19, buildings and improvements 15 to 25 and machinery and equipment (including
computer hardware and software) 3 to 12. Depreciation expense is classified in the consolidated statements of
operations based on the nature of the property and equipment being depreciated. Tools, dies and molds are
depreciated over a three-year period or their useful lives, whichever is less, using an accelerated method. The
Company generally owns all tools, dies and molds related to its products.
Property, plant and equipment, net is reviewed for impairment whenever events or circumstances indicate
the carrying value may not be recoverable. Recoverability is measured by a comparison of the carrying amount
of the asset to future undiscounted cash flows expected to be generated by the asset or asset group. If such assets
are considered to be impaired, the impairment to be recognized would be measured by the amount by which the
carrying value of the assets exceeds their fair value wherein the fair value is the appraised value. Furthermore,
assets to be disposed of are carried at the lower of the net book value or their estimated fair value less disposal
costs.
Goodwill and Other Intangibles, Net
Goodwill results from acquisitions the Company has made over time. Substantially all of the other
intangibles consist of the cost of acquired product rights. In establishing the value of such rights, the Company
considers existing trademarks, copyrights, patents, license agreements and other product-related rights. These
rights were valued on their acquisition date based on the anticipated future cash flows from the underlying
product line. The Company has certain intangible assets related to the Tonka and Milton Bradley acquisitions
that have an indefinite life.
Goodwill and intangible assets deemed to have indefinite lives are not amortized and are tested for
impairment at least annually. The annual test begins with goodwill and all intangible assets being allocated to
applicable reporting units. This quantitative two-step process begins with an estimation of fair value of the
reporting unit using an income approach, which looks to the present value of expected future cash flows. The
first step is a screen for potential impairment while the second step measures the amount of impairment if there is
an indication from the first step that one exists. When performing the quantitative two-step impairment test,
goodwill and intangible assets with indefinite lives are tested for impairment by comparing their carrying value
to their estimated fair value, also calculated using the present value of expected future cash flows.
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