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Commitments and Contingencies | 12 Months Ended
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Dec. 31, 2013
Commitments and Contingencies [Abstract] |
Commitments and Contingencies | 19. Commitments and Contingencies The Company is subject to governmental regulations pertaining to product formulation, labeling and packaging, product claims and advertising and to the Company's direct selling system. The Company is also subject to the jurisdiction of numerous foreign tax and customs authorities. Any assertions or determination that either the Company or the Company's sales force is not in compliance with existing statutes, laws, rules or regulations could potentially have a material adverse effect on the Company's operations. In addition, in any country or jurisdiction, the adoption of new statutes, laws, rules or regulations or changes in the interpretation of existing statutes, laws, rules or regulations could have a material adverse effect on the Company and its operations. Although management believes that the Company is in compliance in all material respects with the statutes, laws, rules and regulations of every jurisdiction in which it operates, no assurance can be given that the Company's compliance with applicable statutes, laws, rules and regulations will not be challenged by foreign authorities or that such challenges will not have a material adverse effect on the Company's financial position or results of operations or cash flows. The Company and its Subsidiaries are defendants in litigation and proceedings involving various matters. Except as noted below, in the opinion of the Company's management, based upon advice of its counsel handling such litigation and proceedings, adverse outcomes, if any, will not likely result in a material effect on the Company's consolidated financial condition, results of operations or cash flows. TABLE OF CONTENTS NU SKIN ENTERPRISES, INC. Notes to Consolidated Financial Statements The Company is subject to regular audits by federal, state and foreign tax authorities. These audits may result in additional tax liabilities. The Company believes it has appropriately provided for income taxes for all years. Several factors drive the calculation of its tax reserves. Some of these factors include: (i) the expiration of various statutes of limitations; (ii) changes in tax law and regulations; (iii) issuance of tax rulings; and (iv) settlements with tax authorities. Changes in any of these factors may result in adjustments to the Company's reserves, which would impact its reported financial results. The Company is currently involved in a dispute related to customs assessments on several of the Company's products made by Yokohama Customs for the period of October 2006 through September 2009 in connection with post-importation audits, as well as the disputed portion of the Company's import duties from October 2009 to the present, which the Company has or will hold in bond or pay under protest. Additional assessments related to any prior period are barred by applicable statutes of limitations. The aggregate amount of these assessments and disputed duties was approximately 4.2 billion Japanese yen as of December 31, 2013 (approximately $40.2 million), net of any recovery of consumption taxes. The issue in this case is whether a United States entity utilizing a commissionaire agent in Japan to import its products can use the manufacturer's invoice or must use another valuation method, and, if an alternative method must be used, what the allowable deductions would be in determining the proper valuation. Following the Company's review of the assessments and after consulting with the Company's legal and customs advisors, the Company believes that the additional assessments are improper and are not supported by applicable customs laws. The Company filed letters of protest with the applicable Customs authorities, which were rejected. The Company then appealed the matter to the Ministry of Finance in Japan. In the second quarter of 2011, the Ministry of Finance in Japan denied the Company's administrative appeal. The Company disagrees with the Ministry of Finance's administrative decision. The Company is now pursuing the matter in Tokyo District Court, which the Company believes will provide a more independent determination of the matter. In addition, the Company is currently being required to post a bond or make a deposit to secure any additional duties that may be due and payable on these current imports. Because the Company believes that the assessment of higher duties by the customs authorities is an improper application of the regulations, the Company is currently expensing the portion of the duties the Company believes is supported under applicable customs law, and recording the additional deposit or payment as a receivable within long-term assets on its consolidated financial statements. If the Company is unsuccessful in recovering the amounts assessed and paid, the Company will record a non-cash expense for the full amount of the disputed assessments. The Company anticipates that additional disputed duties will be limited going forward as the Company has entered into an arrangement to purchase a majority of the affected products in Japan from a Japanese company that purchases and imports the products from the manufacturers. Following a number of negative media stories published in January 2014 by the People's Daily in Mainland China, the Company received inquiries from various government regulators in Mainland China asking the Company to respond to a number of allegations relating to its business practices, products and business model. In response to this media and regulatory scrutiny the Company has voluntarily taken a number of actions in Mainland China, including temporarily suspending its business promotional meetings, temporarily suspending acceptance of applications for any new sales representatives, and extending its product refund and return policies. The adverse publicity and suspension of business promotional meetings and acceptance of applications has had a significant negative impact on the number of Sales Leaders and Actives, and the Company's revenue in the short term will be negatively impacted by these voluntary actions. Any inability to resume normal business operations in the near term could have a more significant impact on our business. The Company's Audit Committee also commenced an internal review of its business practices in Mainland China, which is ongoing. Based upon the results of the internal review to date, the Company currently plans to focus its attention during the next several months on training the Company's sales force and reinforcing or enhancing our existing sales and other policies in Mainland China. It is currently unclear what impact the adverse publicity and the Company's voluntary actions will have on its business in this market in the longer term or whether these voluntary actions will be effective in addressing concerns of regulators in Mainland China. Regardless, it is likely that the Company will be fined and could potentially face some other form of sanctions from these regulators. These other sanctions could include a formal suspension of the Company's ability to recruit new sales people and direct sellers, a temporary suspension of the Company's ability to sell products in various markets or, in the most extreme cases, loss of existing licenses to operate in various jurisdictions in Mainland China. While any of these actions or outcomes could materially harm the Company's business and financial condition, the Company has not accrued for any related costs as of December 31, 2013. TABLE OF CONTENTS NU SKIN ENTERPRISES, INC. Notes to Consolidated Financial Statements In addition, the Company is currently being sued in several purported class action lawsuits and a derivative claim relating to this recent negative media and regulatory scrutiny and the associated decline in the Company's stock price. These lawsuits, or others filed alleging similar facts, could result in monetary or other penalties that may affect the Company's operating results and financial condition. 20. Dividends per Share

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