Home Shopping Network 2011 Annual Report Download - page 41

HSN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1—ORGANIZATION
Company Overview
HSN, Inc. (“HSNi”) is an interactive multi-channel retailer that markets and sells a wide range of third party
and private label merchandise directly to consumers through various platforms including (i) television home
shopping programming broadcast on the HSN television networks; (ii) catalogs, which consist primarily of the
Cornerstone portfolio of leading print catalogs which includes Frontgate, Ballard Designs, Garnet Hill, Grandin
Road, Smith+Noble, The Territory Ahead, TravelSmith and Improvements; (iii) websites, which consist
primarily of HSN.com and the eight branded websites operated by Cornerstone; (iv) retail and outlet stores; and
(v) mobile devices. HSNi’s television home shopping business, related digital sales and retail and outlet stores
are referred to herein as “HSN” and all catalog operations, including related digital sales and stores, are
collectively referred to herein as “Cornerstone.”
HSN offerings primarily consist of jewelry, fashion (apparel & accessories), beauty & wellness, and
home & other (including housewares, home fashions, electronics, culinary, fitness and other). Merchandise
offered by Cornerstone primarily consists of home furnishings (including indoor/outdoor furniture, window
treatments and other home related goods) and apparel & accessories.
Basis of Presentation
HSNi was incorporated in Delaware in May 2008 in connection with the spin-off of several businesses
previously owned by IAC/InterActiveCorp, or IAC. The spin-off from IAC occurred August 20, 2008 concurrent
with the spin-offs from IAC of Interval Leisure Group, Inc., Ticketmaster Entertainment, Inc. (now a wholly-
owned subsidiary of Live Nation Entertainment, Inc.), and Tree.com, Inc. Throughout these financial statements,
the separation transaction is referred to as the “Spin-off” and each of these companies as “Spincos.” In
connection with the Spin-off, HSNi's shares began trading on the NASDAQ Global Select Market under the
symbol “HSNI.”
The consolidated financial statements include the accounts of HSN, Inc. and its subsidiaries. Intercompany
accounts and transactions have been eliminated.
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. Cornerstone’s fiscal years 2011, 2010 and 2009
include 53, 52 and 52 weeks, respectively. There are no intervening events that materially affect HSNi’s
consolidated balance sheets or consolidated statements of operations.
Restatement of Previously Issued Financial Information
As part of our 2011 year-end closing process, HSNi performed a review of its accounting for deferred tax
assets and liabilities that were recorded as a part of the Spin-off. As a result, HSNi identified an error in the
application of its accounting policies on the recognition of deferred tax liabilities created by partnership
investment basis differences. These differences originated from two separate transactions involving HSNi
predecessor companies occurring in 1996 and 2002. The correction of the error is to record deferred tax liabilities
and to reduce equity for periods presented prior to the Spin-off and as of September 30, 2008 by $263.5 million.
These additional deferred tax liabilities would have been realized during the fourth quarter of 2008 when the
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