Home Shopping Network 2011 Annual Report Download - page 46

HSN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
for actual, pending or threatened litigation, claims and assessments; and assumptions related to the determination
of stock-based compensation.
Certain Risks and Concentrations
HSNi’s business is subject to certain risks and concentrations including dependence on third-party
technology providers, exposure to risks associated with online commerce security, consumer credit risk and
credit card fraud. HSNi also depends on third-party service providers for processing certain fulfillment services.
NOTE 3—INTANGIBLE ASSETS
HSNi assesses the impairment of indefinite-lived identifiable 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 may not be recoverable. In performing this review,
HSNi assesses the fair values of its intangible assets. If it is determined that the fair value of the indefinite-lived
intangible assets is less than the carrying amount, an impairment charge, equal to the excess, is recorded. HSNi
utilizes a relief from royalty method to assess the 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.
HSNi conducted its annual test for impairment during the fourth quarter of 2011. HSNi employed and
considered the input of specialists to aid in determining appropriate royalty rates to be used in the fair value
calculation. The outcome of the annual impairment testing indicated the existence of impairment associated with
the indefinite-lived intangible assets at one of the Cornerstone brands. An impairment charge of $2.2 million was
recorded and is included in operating expenses in the line item “General and administrative” in the
accompanying consolidated statements of operations. An increase in the discount rates or declines in the future
estimated revenues or royalty rates could result in future material intangible asset impairment charges.
The balance of intangible assets, net, is as follows (in thousands):
December 31,
2011 2010
Intangible assets with indefinite lives .......................................... $258,048 $260,248
Intangible assets with definite lives, net ........................................ — 375
Total intangible assets, net .............................................. $258,048 $260,623
Intangible assets with indefinite lives relate principally to trade names and trademarks acquired in various
acquisitions. When definite-lived intangible assets are sold or expire, the cost of the asset and the related
accumulated amortization are eliminated and any gain or loss is recognized at such time. For the year ended
December 31, 2011, HSNi wrote off $5.6 million of fully amortized definite-lived intangible assets that expired
during the year.
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