Home Shopping Network 2011 Annual Report Download - page 44

HSN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
probable that the project will be completed and the software will be used to perform the function intended.
Capitalized internal use software is depreciated on a straight-line basis over the estimated useful life of the
software, not to exceed three years. Capitalized software costs, net of accumulated amortization, totaled $23.0
million and $25.2 million at December 31, 2011 and 2010, respectively, and are included in “Property and
equipment, net” in the accompanying consolidated balance sheets. Amortization expense related to the
capitalized software costs was $13.5 million, $14.7 million and $13.9 million for the years ended December 31,
2011, 2010 and 2009, respectively, and included in depreciation expense in the consolidated statements of
operations.
Indefinite-Lived Intangible Assets
Indefinite-lived intangible assets, primarily trade names and trademarks, are tested annually for impairment
as of October 1 or upon the occurrence of certain events or substantive changes in circumstances. See Note 3 for
a further discussion on indefinite-lived intangible assets.
Long-Lived Assets and Intangible Assets with Definite Lives
Long-lived assets, including property and equipment and intangible assets with definite lives, are tested for
recoverability whenever events or changes in circumstances indicate that their carrying amount may not be
recoverable. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the
undiscounted cash flows expected to result from the use and eventual disposition of the asset. If the carrying
amount is deemed to not be recoverable, an impairment loss is recorded as the amount by which the carrying
amount of the long-lived asset exceeds its fair value. Amortization of definite-lived intangible assets is recorded
on a straight-line basis over their estimated lives.
Cable and Satellite Distribution Fees
Cable and satellite distribution fees relate to fees paid in connection with annual or multi-year cable and
satellite contracts for carriage of HSN’s programming. Fees that are paid upfront are amortized on a straight-line
basis over the terms of the respective contracts. Unpaid fees are accrued and included in the line item “Accrued
expenses and other current liabilities” in the accompanying consolidated balance sheets.
Cable and satellite distribution fees and amortization are included in “Selling and marketing expense” in the
accompanying consolidated statements of operations. Prepaid cable and satellite distribution fees covering
periods within one year are included in “Prepaid expenses and other current assets” in the accompanying
consolidated balance sheets. The long-term portions of upfront payments relating to multi-year cable and satellite
contracts are included in “Other non-current assets” in the accompanying consolidated balance sheets.
Advertising
Advertising costs include catalog production and distribution costs. Advertising costs are expensed in the
period incurred, except for Cornerstone’s direct costs of producing and distributing its catalogs, which are
capitalized. These capitalized costs are amortized over the expected future revenue stream, which is generally
three months from the date catalogs are mailed. Such capitalized costs totaled $19.8 million and $17.6 million as
of December 31, 2011 and 2010, respectively, and are included in “Prepaid expenses and other current assets” in
the accompanying consolidated balance sheets.
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