Home Shopping Network 2012 Annual Report Download - page 45

Table of Contents
Property and Equipment
Property and equipment, including significant improvements, are recorded at cost. Repairs and maintenance and any gains or losses on
dispositions are included in the statement of operations.
Depreciation is recorded on a straight-line basis to allocate the cost of depreciable assets to operations over the shorter of the estimated
service life or lease period.
HSNi capitalizes certain qualified costs incurred in connection with the development of internal use software. Capitalization of internal use
software costs begins when the preliminary project stage is completed; management with the relevant authority authorizes and commits to the
funding of the software project; and it is 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 five
years. Capitalized software costs, net of accumulated amortization, totaled
$21.6 million and $23.0 million at December 31, 2012 and 2011,
respectively, and are included in “Property and equipment, net” in the accompanying consolidated balance sheets. Amortization expense related
to the capitalized software costs was $12.7 million , $13.1 million and $14.2 million for the years ended December 31, 2012, 2011 and 2010,
respectively, and included in depreciation expense in the consolidated statements of operations.
Goodwill and Indefinite-Lived Intangible Assets
Goodwill acquired in business combinations is assigned to the reporting units that are expected to benefit from the combination as of the
acquisition date. Goodwill and indefinite-lived intangible assets, primarily trade names and trademarks, are assessed 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 goodwill
and 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 generally recorded on a straight-line or accelerated 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 included in "Prepaid expenses and other current assets" in the accompanying consolidated
balance sheets and 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.
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 $19.1 million
and $19.8 million as of December 31, 2012 and 2011, respectively, and are included in “Prepaid expenses and other current assets” in the
accompanying consolidated balance sheets.
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Asset Category
Depreciation Period
Computer and broadcast equipment and capitalized software
3 to 6 Years
Buildings, leasehold improvements and land improvements
3 to 40 Years
Furniture and other equipment 3 to 10 Years