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Table of Contents
HSN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
after the spin-off. The historical combined financial statements of HSNi and its subsidiaries reflect the contribution or other transfer to HSNi of
all of the subsidiaries and assets and the assumption by HSNi of all of the liabilities relating to the HSNi Businesses in connection with the spin-
off and the allocation to HSNi of certain IAC corporate expenses relating to the HSNi Businesses. Accordingly, the historical combined financial
statements of HSNi reflect the historical financial position, results of operations and cash flows of the HSNi Businesses since their respective
dates of acquisition by IAC, based on the historical consolidated financial statements and accounting records of IAC and using the historical
results of operations and historical bases of the assets and liabilities of the HSNi Businesses with the exception of accounting for income taxes.
For purposes of these financial statements, income taxes have been principally computed for HSNi on an as if stand-alone, separate tax return
basis prior to the spin-off. Our income tax payable, as well as deferred tax assets and liabilities, represent the estimated impact of filing a
consolidated income tax return with IAC through the spin-off, and filing a stand-alone consolidated income tax return thereafter. Intercompany
transactions and accounts have been eliminated.
In the opinion of HSNi’s management, the assumptions underlying these consolidated statements are reasonable. However, this financial
information does not necessarily reflect what the historical financial position, results of operations and cash flows of HSNi would have been had
HSNi been a stand-alone company during the periods presented prior to the spin-off.
Fiscal Year
HSNi’s consolidated financial results are reported on a calendar year basis ending on December 31. HSN’s reporting period is the same as
HSNi. Cornerstone has a 4-4-5 week accounting cycle with the fiscal year ending on the Saturday on or immediately preceding December 31.
Fiscal years 2010, 2009 and 2008 include 52, 52 and 53 weeks, respectively. There are no intervening events that materially affect HSNi’s
consolidated balance sheets or consolidated statements of operations.
Reclassifications
Certain reclassifications were made to prior period amounts in the consolidated statements of shareholders’ equity and cash flows to
conform with the classifications of such amounts for the most recent period. These reclassifications did not change the following previously
reported balances: the components of shareholders’ equity, net cash provided by (used in) operating, investing and financing activities
attributable to continuing operations, and total cash (used in) provided by operating activities attributable to discontinued operations.
NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
Revenue primarily consists of merchandise sales and is reduced by incentive discounts and sales returns to arrive at net sales. Revenue is
recorded when delivery to the customer has occurred. Delivery is considered to have occurred when the customer takes title and assumes the
risks and rewards of ownership, which is on the date of shipment. HSNi’s sales policy allows customers to return merchandise for a full refund
or exchange, subject to pre-established time restrictions. Allowances for returned merchandise and other adjustments (including reimbursed
shipping and handling costs) are provided based upon past experience. HSNi believes that actual returns of product sales have not materially
varied from estimates in any of the periods presented. HSNi’s estimated return rates were 17.8%, 17.8% and 18.4% in 2010, 2009 and 2008,
respectively. Sales taxes collected are not included in revenue.
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