Home Shopping Network 2011 Annual Report Download - page 42

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HSN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
underlying partnership investment basis differences were eliminated as a part of HSNi’s goodwill and intangible
asset impairments.
The net effect of this error on HSNi’s financial statements as of and for the year ended December 31, 2008
was that its income tax benefit was understated; and additional paid-in capital and accumulated deficit were
overstated by $263.5 million such that there is no effect on total shareholders’ equity. Net loss for the year ended
December 31, 2008, which was previously reported as $2.40 billion, has been restated to $2.13 billion; and net
loss per basic and diluted share for the year ended December 31, 2008, which was previously reported as $42.54,
has been restated to $37.85. The correction of this error had no effect on total assets, liabilities or total
shareholders’ equity as of or subsequent to December 31, 2008.
Additional paid-in capital and accumulated deficit for the years ended December 31, 2008, 2009 and 2010
were overstated by $263.5 million each such that there is no effect on total shareholders’ equity and have been
adjusted herein.
The restatement had no impact on reported cash flows and did not impact HSNi’s compliance with debt
covenants or other contractual requirements. Further, the restatement did not affect any reported results of
operations subsequent to 2008. Based on our evaluation of quantitative and qualitative factors, HSNi believes the
identified misstatements are not material to its financial statements presented herein.
All referenced amounts in this Annual Report on Form 10-K for current and prior periods (and prior-period
comparisons) reflect the balances and amounts on a restated basis, as applicable.
Reclassifications
Certain reclassifications were made to prior period amounts in the consolidated statements of operations and
cash flows to conform to the current year presentation.
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 18.2%, 17.8% and 17.8% in 2011, 2010 and 2009, respectively. Sales taxes collected
are not included in revenue.
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.
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