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Recoverability of Long-Lived Assets
HSNi reviews the carrying value of all long-lived assets, primarily property and equipment and definite-
lived intangible assets, for impairment whenever triggering events or changes in circumstances indicate that the
carrying value of an asset may be impaired. Impairment is considered to have occurred whenever the carrying
value of a long-lived asset exceeds the sum of the undiscounted cash flows that is expected to result from the use
and eventual disposition of the asset. The impairment is measured by comparing the fair value of the asset to its
carrying value. Our valuation methodologies include, but are not limited to, discounting the future cash flows
from the asset being tested. Significant judgments include determining if a triggering event has occurred,
determining the future cash flows from the assets and applying the appropriate discount rate when measuring the
fair value. The determination of cash flows is based upon assumptions that may not occur.
Impairment of Indefinite-Lived Intangible Assets
HSNi assesses the impairment of identifiable indefinite-lived intangible assets, principally trademarks and
trade names acquired in various acquisitions, at least annually during the fourth quarter and whenever events or
changes in circumstances indicate that the carrying value of an asset may be impaired. In performing this review,
HSNi is required to make an assessment of the fair value of its intangible assets. If it is determined that the fair
value of its intangible assets is less than the carrying amount, an impairment charge, equal to the excess, is
recorded. HSNi utilizes the relief from royalty method to assess fair values of its trademarks and trade names.
In assessing fair value, HSNi considers, among other indicators, differences between estimated and actual
revenue streams and changes in the related discount, royalty and terminal growth rates. Determining these rates
requires the exercise of significant judgments. These factors used in the determination of fair value are sensitive
to, among other things, changes in the retail consumer market and the general economy. For more information on
the impairment charges recognized during 2011, see Note 3 of Notes to Consolidated Financial Statements.
Returns Reserves
Net sales from HSNi primarily consist of merchandise sales and are reduced by incentive discounts and
sales returns. HSNi's sales policy allows customers to return virtually all 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. Actual
levels of product returns may vary from these estimates. HSNi's estimated return rates were 18.2%, 17.8% and
17.8% in 2011, 2010 and 2009, respectively.
Allowance for Doubtful Accounts
HSNi makes judgments as to its ability to collect outstanding receivables and provide allowances when it
has determined that all or a portion of the receivable will not be collected. HSNi determines its allowance by
considering a number of factors, including the length of time accounts receivable are past due, its previous loss
history and the condition of the general economy. HSNi writes off accounts receivable when they become
uncollectible.
Income Taxes
Estimates of deferred income taxes and the significant items giving rise to the deferred tax assets and
liabilities are shown in Note 12 of Notes to Consolidated Financial Statements, and reflect management's
assessment of actual future taxes to be paid on items reflected in the consolidated financial statements, giving
consideration to both timing and the probability of realization. Actual income taxes could vary from these
estimates due to future changes in income tax law, state income tax apportionment, as well as actual operating
results of HSNi that vary significantly from anticipated results. Valuation allowances are related to items for
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