2.2.0.7 false Significant Accounting Policies 0202 - Disclosure - Significant Accounting Policies true false false false 1 USD false false USD Standard http://www.xbrl.org/2003/iso4217 USD iso4217 0 USDEPS Divide http://www.xbrl.org/2003/iso4217 USD iso4217 http://www.xbrl.org/2003/instance shares xbrli 0 Shares Standard http://www.xbrl.org/2003/instance shares xbrli 0 $ 2 Significant Accounting Policies [Abstract] 0 hlf_SignificantAccountingPoliciesAbstract hlf false na duration Significant accounting policies. false false false false false true false false false false false false 1 false false false false 0 0 false false false xbrli:stringItemType string Significant accounting policies. false 3 Significant Accounting Policies 1 us-gaap_SignificantAccountingPoliciesTextBlock us-gaap true na duration No definition available. false false false false false false false false false false false verboselabel false 1 false false false false 0 0   <div align="left" style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>2. Significant Accounting Policies</b> </div> <div align="left" style="font-size: 10pt; margin-top: 10pt"><b><i>Basis of Presentation</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The unaudited interim financial information of the Company has been prepared in accordance with Article 10 of the Securities and Exchange Commission’s, or the SEC, Regulation S-X. Accordingly, it does not include all of the information required by generally accepted accounting principles in the U.S., or GAAP, for complete financial statements. The Company’s unaudited consolidated financial statements as of June 30, 2010, and for the three and six months ended June 30, 2010 and 2009, include Herbalife and all of its direct and indirect subsidiaries. In the opinion of management, the accompanying financial information contains all adjustments, consisting of normal recurring adjustments, necessary to present fairly the Company’s unaudited consolidated financial statements as of June 30, 2010, and for the three and six months ended June 30, 2010 and 2009. These unaudited consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2009, or the 2009 10-K. Operating results for the three and six months ended June 30, 2010, are not necessarily indicative of the results that may be expected for the year ending December 31, 2010. </div> <div align="left" style="font-size: 10pt; margin-top: 10pt"><b><i>New Accounting Pronouncements</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In May 2010, the Financial Accounting Standards Board, or FASB, issued Final Accounting Standards Update 2010-19<i>, Foreign Currency Issues: Multiple Foreign Currency Exchange Rates</i>, or ASU 2010-19, which codifies the SEC staff announcement made at the March 18, 2010, Emerging Issues Task Force meeting. ASU 2010-19 provides the SEC staff’s view on certain foreign currency issues relating to investments in Venezuela. ASU 2010-19 became effective on March 18, 2010. The Company has adopted this guidance and the financial statement impact relating to this adoption is discussed further below<i>.</i> </div> <div align="left" style="font-size: 10pt; margin-top: 10pt"><b><i>Venezuela</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><b><i>Currency Restrictions</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Currency restrictions enacted by the Venezuelan government in 2003 have become more restrictive and have impacted the ability of the Company’s subsidiary in Venezuela, Herbalife Venezuela, to obtain U.S. dollars in exchange for Venezuelan Bolivars, or Bolivars, at the official foreign exchange rates from the Venezuelan government and its foreign exchange commission, CADIVI. The application and approval processes have been intermittently delayed and the timing and ability to obtain U.S. dollars at the official exchange rates remain uncertain. In certain instances, the Company has made appropriate applications through CADIVI for approval to obtain U.S. dollars so that Herbalife Venezuela can pay for imported products and an annual dividend at the official exchange rate. In other instances, the Company used a lawful but less favorable parallel market mechanism for currency exchange. In May 2010, this less favorable parallel market was discontinued. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In June 2010, the Venezuelan government introduced additional regulations under a new regulated system, SITME, which is controlled by the Central Bank of Venezuela. SITME provides a mechanism to exchange Bolivars into U.S. dollars through the purchase and sale of U.S. dollar denominated bonds issued in Venezuela. However, SITME is only available in certain limited circumstances. Specifically, SITME can only be used for product purchases and it is not available for other matters such as the payment of dividends. Also, SITME can only be used for amounts of up to $50,000 per day and $350,000 per month and is generally only available to the extent the applicant has not exchanged and received U.S. dollars via the CADIVI process within the previous 90 days. While the Company currently plans to continue to import products into Venezuela and exchange Bolivars for U.S. dollars based on the exchange mechanisms prescribed by the Venezuelan government, if the current SITME restrictions are not lifted or substantially eased, the Company may make significant changes to Herbalife Venezuela’s operations which could negatively impact the Company’s business. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><b><i>Highly Inflationary Economy and Accounting</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Venezuela’s inflation rate as measured using the blended National Consumer Price Index and Consumer Price Index rate exceeded a three-year cumulative inflation rate of 100% as of December 31, 2009. Accordingly, effective January 1, 2010, Venezuela was considered a highly inflationary economy. Pursuant to the highly inflationary basis of accounting under U.S. GAAP, Herbalife Venezuela changed its functional currency from the Bolivar to the U.S. dollar. Subsequent movements in the Bolivar to U.S. dollar exchange rate will impact the Company’s consolidated earnings. Prior to January 1, 2010 when the Bolivar was the functional currency, movements in the Bolivar to U.S. dollar were recorded as a component of equity through other comprehensive income. Pursuant to highly inflationary accounting rules, the Company is no longer required to translate Herbalife Venezuela’s financial statements since their functional currency is now the U.S. dollar. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Based on relevant facts and circumstances at the applicable times, the Company used the parallel market exchange rate for remeasurement purposes effective January 1, 2010 until the parallel market was discontinued in May 2010. On January 1, 2010, in connection with the determination that Venezuela was a highly inflationary economy, the Company remeasured Herbalife Venezuela’s opening balance sheet’s monetary assets and liabilities at the parallel market rate, which resulted in the Company recording a non-tax deductible foreign exchange loss of $15.1 million. This charge included a $9.9 million foreign exchange loss relating to Herbalife Venezuela’s U.S. dollar cash and cash equivalents that were remeasured at the parallel market rate and then translated at the official rate at December 31, 2009, as discussed in the Company’s 2009 10-K. Also, Herbalife Venezuela’s $34.2 million cash and cash equivalents reported in the Company’s consolidated balance sheet at December 31, 2009, which included U.S. dollar denominated cash, was reduced to approximately $12.5 million on January 1, 2010. However, nonmonetary assets, such as inventory, reported on the Company’s consolidated balance sheet at December 31, 2009, remained at historical cost subsequent to Venezuela becoming a highly inflationary economy. Therefore, the incremental costs related to the Company’s 2009 imported products recorded at the parallel market exchange rate negatively impacted the Company’s first quarter 2010 consolidated statement of income by approximately $12.7 million as these products were sold during the first quarter of 2010. This amount is non tax deductible. See Note 8, <i>Income Taxes, </i>for additional discussion on income tax impact related to Venezuela becoming highly inflationary. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><b><i>Official Exchange Rate Devaluation</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In early January 2010, Venezuela announced an official exchange rate devaluation of the Bolivar to an official rate of 4.30 Bolivars per U.S. dollar for non-essential items and 2.60 Bolivars per U.S. dollar for essential items. The Company’s imports fall into both classifications. During 2010, because the Company used the parallel market exchange rate for remeasurement purposes until the parallel market was discontinued in May 2010, any U.S. dollars obtained from CADIVI at the official rate had a positive impact to the Company’s consolidated net earnings. Specifically, the Company recorded $0.1 million and $3.8 million of foreign exchange gains, in the three and six months ended June 30, 2010, respectively, to selling, general and administrative expenses within the Company’s consolidated statements of income as a result of receiving U.S. dollars approved by CADIVI at the official exchange rate, primarily related to products imported in 2009 and early 2010. The majority of Herbalife Venezuela’s 2010 importations were not registered with CADIVI so the official exchange rates are not available to pay for these U.S. imports. Herbalife Venezuela also has an outstanding dividend payable to the Company of $4.2 million, which was declared in December 2008 and registered with CADIVI. The request to obtain U.S. dollars at the official rate to settle the outstanding dividend payable is pending CADIVI’s approval. Also, Herbalife Venezuela has an outstanding intercompany payable balance of $0.1 million, which was registered with CADIVI in 2009 and is pending CADIVI’s approval. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><b><i>Remeasurement of Monetary Assets and Liabilities</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">During the second quarter of 2010, the Company recorded a $4.0 million pre-tax ($2.6 million post-tax) net foreign exchange gain to selling, general and administrative expenses, within the Company’s consolidated statement of income, as a result of remeasuring its Bolivar denominated monetary assets and liabilities as of June 30, 2010 at the SITME rate of 5.3 Bolivars per U.S. dollar as opposed to the last parallel market rate prior to the closure of the parallel market in May 2010 of 8.3 Bolivars per U.S. dollar. Herbalife Venezuela’s cash and cash equivalents, primarily denominated in Bolivars, increased by $5.2 million as a result of using the SITME rate as opposed to the last quoted parallel market rate. As of June 30, 2010, Herbalife Venezuela’s net monetary Bolivar denominated assets and liabilities approximated $11.1 million U.S. dollars which included Bolivar denominated cash and cash equivalents approximating $14.3 million U.S. dollars, and were all remeasured at the new regulated rate under the SITME. However, the amounts remeasured using the new regulated rate may not represent the true economics because of the restrictions that currently exist in the SITME. While the Company continues to monitor the new exchange mechanism and restrictions under SITME, there is no assurance that the Company will be able to exchange Bolivars into U.S. dollars on a timely basis. Therefore, these remeasured amounts, including cash and cash equivalents, being reported on the Company’s consolidated balance sheet using the new regulated rate may not accurately represent the amount of U.S. dollars that the Company could ultimately realize. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><b><i>Consolidation of Herbalife Venezuela</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Company currently plans to continue its operation in Venezuela and to import products into Venezuela. Herbalife Venezuela will continue to apply for legal exchange mechanisms to convert its Bolivars to U.S. dollars. Despite the currency exchange restrictions in Venezuela, the Company continues to control Herbalife Venezuela and its operations. The mere existence of the exchange restrictions discussed above does not in and of itself create a presumption that this lack of exchangeability is other-than-temporary, nor does it create a presumption that an entity should deconsolidate its Venezuelan operations. Therefore, the Company continues to consolidate Herbalife Venezuela in its consolidated financial statements for U.S. GAAP purposes. Herbalife Venezuela’s Bolivar denominated assets and liabilities are currently being remeasured at the SITME rate for remeasurement purposes. However, this may not represent the true economics since there are currency volume and exchange restrictions that exist in this market. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Although there are delays in the CADIVI approval process, when applicable, the Company plans to continue applying to CADIVI to obtain the official rate relating to the importation of the Company’s products. In addition, the Company plans to utilize the SITME market to the extent allowable under current restrictions in order to exchange Bolivars to U.S. dollars. The Company’s ability to access the official exchange rate and the SITME rate could impact what exchange rates will be used for remeasurement purposes in future periods. The Company continues to assess and monitor the current economic and political environment in Venezuela. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Although Venezuela is an important market in the Company’s South and Central America Region, Herbalife Venezuela’s net sales represented less than 2% of the Company’s consolidated net sales for the six months ended June 30, 2010, and its total assets represented less than 3% of the Company’s consolidated total assets as of June 30, 2010. </div> </div>  <!-- Begin Block Tagged Note false false false us-types:textBlockItemType textblock This element may be used to describe all significant accounting policies of the reporting entity. Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Accounting Principles Board Opinion (APB) -Number 22 -Paragraph 8 false 1 2 false UnKnown UnKnown UnKnown false true