Hasbro 2009 Annual Report Download - page 61

The Company bases its estimates for discounts, rebates and returns on agreed customer terms and historical
experience.
The Company enters into arrangements licensing its brand names on specifically approved products. The
licensees pay the Company royalties as products are sold, in some cases subject to minimum guaranteed
amounts. Royalty revenues are recognized as they are reported as earned and payment becomes assured, over
the life of the agreement. Revenue from product sales less related provisions for discounts, rebates and returns,
as well as royalty revenues comprise net revenues in the consolidated statements of operations.
Royalties
The Company enters into license agreements with inventors, designers and others for the use of
intellectual properties in its products. These agreements may call for payment in advance or future payment of
minimum guaranteed amounts. Amounts paid in advance are recorded as an asset and charged to expense as
revenue from the related products is recognized. If all or a portion of the minimum guaranteed amounts appear
not to be recoverable through future use of the rights obtained under license, the non-recoverable portion of
the guaranty is charged to expense at that time.
Advertising
Production costs of commercials are charged to operations in the fiscal year during which the production
is first aired. The costs of other advertising, promotion and marketing programs are charged to operations in
the fiscal year incurred.
Film and Programming Costs
In 2009, the Company incurred certain costs to commence the production of films and television
programming. These costs are capitalized by the Company as they are incurred and will be amortized based
on the proportion of the film’s or program’s revenues recognized for such period to the estimated remaining
ultimate revenues related to the film or program. These costs are reported at the lower of cost, less
accumulated amortization, or fair value, and reviewed for impairment annually or when an event occurs that
indicates that an impairment may exist. At December 27, 2009, the Company had approximately $5,300 of
such costs recorded in other assets. There was no amortization or impairment of such costs in 2009.
Shipping and Handling
Hasbro expenses costs related to the shipment and handling of goods to customers as incurred. For 2009,
2008, and 2007, these costs were $155,496, $178,738 and $167,868, respectively, and are included in selling,
distribution and administration expenses.
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.
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HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements — (Continued)
(Thousands of Dollars and Shares Except Per Share Data)