Hasbro 2015 Annual Report Download - page 76

Download and view the complete annual report

Please find page 76 of the 2015 Hasbro annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 126

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126

HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements — (Continued)
(Thousands of Dollars and Shares Except Per Share Data)
to minimum guaranteed amounts. Royalty revenues are recognized as they are reported as earned and payment
becomes assured, over the life of the license agreement.
The Company produces television programming for license to third parties. Revenues from the distribution
of television and other programming are recorded when the use of the content may be directed by the distributor
and when certain other conditions are met.
Revenue from product sales less related provisions for discounts, rebates and returns, as well as royalty,
television programming and digital gaming revenues comprise net revenues in the consolidated statements of
operations.
Costs of Sales
Cost of sales primarily consists of purchased materials, labor, tooling, manufacturing overheads and other
inventory-related costs such as obsolescence.
Royalties
The Company enters into license agreements with strategic partners, 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 when the related revenue is recognized in the consolidated statements of operations. If all or a portion of
the minimum guaranteed amounts appear not to be recoverable through future use of the rights obtained under
the license, the non-recoverable portion of the guaranty is charged to expense at that time.
Advertising
Production costs of commercials are expensed in the fiscal year during which the production is first aired.
The costs of other advertising and promotion programs are expensed in the fiscal year incurred.
Program Production Costs
The Company incurs costs in connection with the production of television programming and motion
pictures. These costs are capitalized by the Company as they are incurred and amortized using the individual-
film-forecast method, whereby these costs are amortized in the proportion that the current year’s revenues bear to
management’s estimate of total ultimate revenues as of the beginning of such period related to the program.
These capitalized costs are reported at the lower of cost, less accumulated amortization, or fair value, and
reviewed for impairment when an event or change in circumstances occurs that indicates that impairment may
exist. The fair value is determined using a discounted cash flow model which is primarily based on
management’s future revenue and cost estimates.
Shipping and Handling
Hasbro expenses costs related to the shipment and handling of goods to customers as incurred. For 2015,
2014 and 2013, these costs were $159,854, $157,326 and $155,316, respectively, and are included in selling,
distribution and administration expenses.
Operating Leases
Hasbro records lease expense on a straight-line basis inclusive of rent concessions and increases.
Reimbursements from lessors for leasehold improvements are deferred and recognized as a reduction to lease
expense over the remaining lease term.
65