Summary of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2015

Accounting Policies [Abstract]

Cash and Cash Equivalents

Cash and Cash Equivalents

Cash and cash equivalents consist of cash on hand and marketable securities with an original maturity of less than three months. Cash equivalents, which primarily consist of money market funds, are carried at cost plus accrued income, which approximates fair value.

Accounts Receivable

Accounts Receivable

We extend credit to customers based upon our assessment of the customer’s financial condition.  Collateral is generally not required from customers.  Allowances for credit losses are generally based on trends, economic conditions, review of aging categories, historical experience and specific identification of customers at risk of default.

Investments

Investments

We have investments that are accounted for using both the equity method and cost method of accounting.  We utilize the equity method to account for investments in equity securities if our investment gives us the ability to exercise significant influence over operating and financial policies of the investee. Under the equity method of accounting, investments are initially recorded at cost and subsequently increased or decreased to reflect our proportionate share of net earnings or losses of the equity method investees. Cash payments to equity method investees, such as additional investments, loans, advances and expenses incurred on behalf of investees, as well as dividends from equity method investees, are recorded as adjustments to the investment balances. Goodwill and other intangible assets arising from the acquisition of an equity method investment are included in the carrying value of the investment. As goodwill is not reported separately, it is not separately tested for impairment. Instead, the entire equity method investment is tested for impairment whenever events or changes in circumstances indicate that the carrying amounts of such investments may not be recoverable.

We utilize the cost method to account for investments where we do not have the ability to exercise significant influence over operating and financial policies of the investee.  Our cost method investments, which are all in private companies, are recorded at cost and not adjusted to reflect our proportionate share of net earnings or losses of the cost method investee.

We regularly review our investments to determine if there has been any other-than-temporary decline in values.  These reviews require management judgments that often include estimating the outcome of future events and determining whether factors exist that indicate impairment has occurred. We evaluate, among other factors, the extent to which the investments carrying value exceeds fair value, the duration of the decline in fair value below carrying value and the current cash position, earnings and cash forecasts and near term prospects of the investee.  The carrying value of an investment is adjusted when a decline in fair value below cost is determined to be other-than-temporary.

Programs and Program Licenses

Programs and Program Licenses

Programming is either produced by us or for us by independent production companies or licensed under agreements with independent producers.

Costs of programs produced include capitalizable direct costs, production overhead, development costs and acquired production costs. Production costs for programs produced are capitalized.  Costs to produce live programming that are not expected to be rebroadcast are expensed as incurred. Program licenses generally have fixed terms, limit the number of times we can air the programs and require payments over the terms of the licenses. Licensed program assets and liabilities are recorded when programs become available for broadcast. Program licenses are not discounted for imputed interest. Program assets are amortized over the estimated useful lives of the programs based on future cash flows and are included within cost of services in the consolidated statements of operations. The amortization of program assets generally results in an accelerated method over the estimated useful lives.

Estimated future cash flows can change based upon market acceptance, advertising and network affiliate fee rates, the number of subscribers receiving our networks and program usage. Accordingly, we periodically review revenue estimates and planned program usage and revise our assumptions if necessary. If actual demand or market conditions are less favorable than projected, a write-down to net realizable value is recorded.  Development costs for programs that we have determined will not be produced are written off.

Deposits and the portion of the unamortized balance expected to be amortized within one year are classified as a current asset within programs and program licenses on the consolidated balance sheets, while those expected to be amortized after one year are separately stated as a non-current asset on the consolidated balance sheets.

Program liabilities payable within one year are classified as a current liability within program rights payable on the consolidated balance sheets. Program liabilities payable after one year are included in other non-current liabilities on the consolidated balance sheets. The carrying value of our program rights liabilities approximate fair value.

Property and Equipment

Property and Equipment

Property and equipment, including internal use software, is carried at historical cost less accumulated depreciation and impairments. Costs incurred in the preliminary project stage to develop or acquire internal use software or websites are expensed as incurred. Upon completion of the preliminary project stage and management authorization of the project, costs to acquire or develop internal use software, which primarily include coding, designing and developing system interfaces, installation and testing, are capitalized if it is probable the project will be completed and the software will be used for its intended function. Costs incurred after implementation, such as maintenance and training, are expensed as incurred.

Depreciation is computed using a straight-line method over estimated useful lives as follows:

Category                                       Buildings and improvements	Useful Life 35 to 45 years
Leasehold improvements	Term of lease or useful life
Program production equipment	3 to 15 years
Office and other equipment	3 to 10 years
Computer hardware and software	3 to 5 years

Goodwill

Goodwill

Goodwill represents the cost of acquisitions in excess of the fair value of the acquired businesses’ tangible assets and separately identifiable intangible assets acquired. Goodwill is not amortized but is tested for impairment at the reporting unit level at least annually, or when events occur or circumstances change that would indicate the fair value of a reporting unit may be below its carrying value. We perform our annual impairment review during the fourth quarter. A reporting unit is defined as operating segments or groupings of businesses one level below the operating segment level. As of December 31, 2015, our reporting units for purposes of performing the impairment test for goodwill were U.S. Networks, International Networks conducting business in EMEA, International Networks conducting business in APAC and TVN.

Finite-Lived Intangible Assets

Finite-Lived Intangible Assets

Finite-lived intangible assets consist mainly of the value assigned to network distribution relationships, tradenames, broadcast licenses, customer and advertiser lists and other acquired rights.

Network distribution relationships represent the value assigned to programming services’ relationships with cable and satellite television systems and telecommunication service providers that distribute its programs. These relationships and distribution provide the opportunity to deliver advertising to viewers. We amortize these contractual relationships on a straight-line basis over the terms of the distribution contracts and expected renewal periods, which approximate 20 years.

Customer and advertiser lists, trade names and other intangible assets are amortized in relation to their expected future cash flows or on a straight-line basis over estimated useful lives of up to 25 years.

Impairment of Long-Lived Assets

Impairment of Long-Lived Assets

Long-lived assets, primarily property and equipment and finite-lived intangible assets, are reviewed for impairment whenever events or circumstances indicate the fair value of the assets may be below its carrying value. Recoverability for long-lived assets is determined by comparing the forecasted undiscounted cash flows of the operation to which the assets relate to the carrying amount of the assets. If the undiscounted cash flows are less than the carrying amount of the assets, then the carrying value of the assets are written down to estimated fair values, which are primarily based on forecasted discounted cash flows.  Fair value of long-lived assets is determined based on a combination of discounted cash flows and market approaches.

Income Taxes

Income Taxes

Some of our consolidated subsidiary companies are general partnerships and limited liability companies, which are treated as partnerships for tax purposes. Generally, income taxes on partnership income and losses accrue to the individual partners. Accordingly, our consolidated financial statements do not include any significant provision for income taxes on the non-controlling partners’ share of those consolidated subsidiary companies’ income.

No provision has been made for U.S. or foreign income taxes that could result from future remittances of undistributed earnings of our foreign subsidiaries that management intends to indefinitely reinvest outside the United States.

Deferred income taxes are provided for temporary differences between the tax basis and reported amounts of assets and liabilities that will result in taxable or deductible amounts in future years. Our temporary differences primarily result from intangible assets, investments and deferred compensation. A valuation allowance is provided if it is more likely than not that some or all of the deferred tax assets will not be realized.

We report a liability for unrecognized tax benefits resulting from uncertain tax positions taken, or expected to be taken, on a tax return.  Interest and penalties associated with such tax positions are included in the tax provision.  The liability for additional taxes and interest is included within other liabilities (less current portion) on the consolidated balance sheets.

Revenue Recognition

Revenue Recognition

Revenue is recognized when persuasive evidence of a sales arrangement exists, delivery occurs or services are rendered, the sales price is fixed or determinable and collectability is reasonably assured.  Revenue is reported net of sales taxes, value added taxes and other taxes collected from our customers.

Our primary sources of revenue are from the sale of television, internet and mobile advertising and fees for programming services per subscriber (“network affiliate fees”).

Revenue recognition policies for each source of revenue are described below.

Advertising

Advertising revenue is recognized, net of agency commissions, when advertisements are displayed.  Internet and mobile advertising includes (i) fixed duration campaigns whereby a banner, text or other advertisement appears for a specified period of time for a fee; (ii) impression-based campaigns where the fee is based upon the number of times an advertisement appears in web pages viewed by a user; and (iii) click-through based campaigns where the fee is based upon the number of users who click on an advertisement and are directed to the advertiser’s website.  Advertising revenue from fixed duration campaigns are recognized over the period in which the advertising appears.  Internet and mobile advertising revenue that is based upon the number of impressions delivered or the number of click-throughs achieved is recognized as impressions are delivered or click-throughs occur.

Advertising contracts may guarantee the advertiser a minimum audience for the programs in which their advertisements are broadcast over the term of the advertising contracts. We provide the advertiser with additional advertising time if we do not deliver the guaranteed audience size. If we determine we have not delivered the guaranteed audience, an accrual for “make-good” advertisements is recorded as a reduction of revenue. The estimated make-good accrual is adjusted throughout the term of the advertising contracts.

Network Affiliate Fees

Cable and satellite television operators and telecommunication service providers generally pay a network affiliate fee for the right to distribute our programming under the terms of multi-year distribution contracts. Network affiliate fees are reported net of volume discounts earned by the distributors and incentive costs offered to system operators in exchange for initial multi-year distribution contracts. We recognize network affiliate fees as revenue over the term of the contracts, including any free periods. Network launch incentives are capitalized as assets upon launch of our programming and amortized against network affiliate fees based on the ratio of each period’s revenue to expected total revenue over the term of the contracts.

Network affiliate fees due to us, net of applicable discounts, are reported to us by cable and satellite television operators and telecommunication service providers. Such information is generally not received until after the close of the reporting period. Therefore, reported network affiliate fee revenues are based upon our estimates of the number of subscribers receiving our programming and the amount of volume-based discounts each cable and satellite television operator and telecommunication provider is entitled to receive. We subsequently adjust these estimated amounts based upon the actual amounts of network affiliate fees received.  Such adjustments have not been significant.

Revenues associated with digital distribution arrangements are recognized when we transfer control and the rights to distribute the content to a customer.

Merchandise Sales

TVN operates a teleshopping business, which includes selling merchandise to individual customers. Merchandise sales are recognized when goods are shipped to the customer, with a right to return within ten days. Historical experience is used to estimate and provide for such returns at the time of sale.

Cost of Services

Cost of Services

Cost of services reflects the cost of providing our broadcast signal, programming and other content to respective distribution platforms. The expenses captured within cost of services in our consolidated statements of operations include programming, satellite transmission fees, production and operations and other direct costs. Cost of services also includes the cost incurred to buy or produce inventory for TVN’s teleshopping business.

Marketing and Advertising Costs

Marketing and Advertising

Marketing and advertising costs, which totaled $169.1 million in 2015, $160.4 million in 2014 and $144.5 million in 2013 and are reported within selling, general and administrative in the consolidated statements of operations, include costs incurred to promote our businesses and to attract traffic to our websites. Advertising production costs are deferred and expensed the first time the advertisement is shown. Other marketing and advertising costs are expensed as incurred.

Share-Based Compensation

Share-Based Compensation

We have a Long-Term Incentive Plan (the “LTI Plan”), that was amended in the second quarter of 2015 (the “Amended LTI Plan”) and which is described more fully in Note 19 - Capital Stock and Share Compensation Plans. The Amended LTI Plan provides for long-term performance compensation for key employees and members of the Board of Directors (the “Board”). A variety of discretionary awards for employees and non-employee directors are authorized under the Amended LTI Plan, including incentive or non-qualified stock options, stock appreciation rights, restricted shares, restricted share units (“RSUs”), performance-based restricted share units (“PBRSUs”) and other share-based awards and dividend equivalents.

Compensation cost is based on the grant date fair value of the award.  The fair value of awards that grant the employee the right to the appreciation of the underlying shares, such as stock options, is measured using a binomial lattice model.  A Monte Carlo simulation model is used to determine the fair value of awards with market conditions.  The fair value of awards that grant the employee the underlying shares is measured by the fair value of a class A common share of SNI stock.

Certain awards of class A common shares have performance and service conditions under which the number of shares granted is determined by the extent to which such conditions are met (“Performance Shares”). Compensation costs for Performance Shares not based on market conditions are measured by the grant date fair value of a class A common share and the number of shares earned. In periods prior to completion of the performance period, compensation costs are based on estimates of the number of shares that will be earned. Compensation costs related to Performance Shares with a market-based condition are recognized regardless of whether the market condition is satisfied, provided the requisite service has been provided.

Compensation costs, net of estimated forfeitures due to termination of employment, are recognized on a straight-line basis over the requisite service period of the award. The requisite service period is generally the vesting period stated in the award. A portion of our share-based grants generally vest upon the retirement of the employee, so grants to retirement-eligible employees are expensed immediately, and grants to employees who will become retirement-eligible prior to the end of the stated vesting period are expensed over such shorter period.

Net Income Per Share

Net Income per Share

The computation of basic earnings per share (“EPS”) is calculated by dividing net income attributable to SNI by the weighted average number of common shares outstanding, including participating securities outstanding.  Diluted EPS is similar to basic EPS, but adjusts for the effect of the potential issuance of common shares. We include all unvested share awards that contain non-forfeitable rights to dividends or dividend equivalents, whether paid or unpaid, in the number of shares outstanding in our basic and diluted EPS.

The following table presents information about basic and diluted weighted average shares outstanding:

	For the years ended December 31,
(in thousands)	2015		2014		2013
Basic weighted average shares outstanding		129,665		141,297		147,326
Effect of dilutive securities:
Unvested performance share awards and share units held    by employees		189		228		274
Stock options held by employees and directors		401		668		902
Diluted weighted average shares outstanding		130,255		142,193		148,502
Anti-dilutive share awards		863		298		129