Home Shopping Network 2010 Annual Report Download - page 45

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Table of Contents
HSN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Shipping and Handling Fees and Costs
Shipping and handling fees billed to customers are recorded as revenue. The costs associated with shipping goods to customers are
recorded as cost of sales.
Cash and Cash Equivalents
Cash and cash equivalents include cash and money market instruments with an original maturity of three months or less when purchased
and are stated at cost.
Accounts Receivable
Accounts receivable are stated at amounts due from customers, net of an allowance for doubtful accounts. HSN provides extended payment
terms to its customers known as Flexpay. Flexpay is offered on certain products sold by HSN. Revenue is recorded when delivery to the
customer has occurred, at which time HSN collects the first payment, sales tax and all shipping and handling fees. Subsequent collections are
due from customers in 30-day increments, payable automatically upon authorization of the customer’s method of payment. HSN accepts most
credit and select debit cards. HSN offers Flexpay programs ranging from two to six interest-free monthly payments. Flexpay receivables consist
of outstanding balances owed by customers, less a reserve for uncollectible balances. The balance of Flexpay receivables, net of allowance, at
December 31, 2010 and 2009 was $162.5 million and $154.7 million, respectively.
Accounts receivable outstanding longer than the contractual payment terms are considered past due. HSNi determines its allowance by
considering a number of factors, including the length of time accounts receivable are past due, HSNi’s previous loss history and the condition of
the general economy. HSNi writes off accounts receivable when they are deemed uncollectible.
Inventories
Inventories, which primarily consist of finished goods, are valued at the lower of cost or market, with the cost being determined based
upon the first-in, first-out method. Cost includes inbound freight and duties and, in the case of HSN, certain allocable costs, including certain
warehouse costs. Inventories include approximately $4.5 million and $4.9 million of these allocable general and administrative overhead costs at
December 31, 2010 and 2009, respectively, and approximately $17.6 million, $19.0 million and $19.7 million of such costs were included in the
accompanying consolidated statements of operations for the years ended December 31, 2010, 2009 and 2008, respectively. Market is determined
on the basis of net realizable value, giving consideration to obsolescence and other factors.
Property and Equipment
Property and equipment, including significant improvements, are recorded at cost. Repairs and maintenance and any gains or losses on
dispositions are included in operations.
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