Home Shopping Network 2013 Annual Report Download - page 41

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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, Ballard Designs, Chasing Fireflies, Frontgate, Garnet Hill, Grandin Road, Improvements and
TravelSmith; (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 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.” Smith+Noble, a Cornerstone brand that specialized in window treatments, was sold in
May 2012 and The Territory Ahead, a Cornerstone brand that specialized in casual apparel, was sold in July 2012.
HSN offerings primarily consist of jewelry, fashion (apparel & accessories), beauty & health, and home & other
(including household, home design, electronics, culinary and other). Merchandise offered by Cornerstone primarily consists of
home furnishings (including indoor/outdoor furniture, home décor, tabletop, textiles, 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. The operating results of Smith+Noble and The Territory Ahead are presented as
discontinued operations in the consolidated statements of operations and the consolidated statements of cash flows for all
periods presented. See Note 17 for further discussion of discontinued operations.
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 2013, 2012, and 2011 include 52, 52 and 53 weeks,
respectively.
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. Actual returns of product sales have not materially varied from estimates in any of the periods presented.
HSNi's estimated return rates were 17.0%, 17.8%, and 18.5% in 2013, 2012, and 2011, 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.