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Summary of Significant Accounting Policies | 12 Months Ended
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Dec. 31, 2013
Summary of Significant Accounting Policies [Abstract] |
Summary of Significant Accounting Policies | 2. Summary of Significant Accounting Policies Consolidation The consolidated financial statements include the accounts of the Company and the Subsidiaries. All significant intercompany accounts and transactions are eliminated in consolidation. Use of estimates The preparation of these financial statements, in conformity with accounting principles generally accepted in the United States of America, required management to make estimates and assumptions that affected the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results may differ from these estimates. Revisions Certain amounts applicable to the prior periods have been revised to correct certain classification errors in prior years. Specifically, the presentation of the Company's consolidated balance sheets for the year ended December 31, 2012, was revised to decrease short-term deferred tax assets by $10.8 million, long-term deferred tax assets by $17.3 million and long-term deferred tax liabilities by $28.1 million. The revision had no effect on the results of operations (net or comprehensive income), financial condition (stockholders' equity), or cash flows in any period presented or in any previously issued financial statements. Additionally, the presentation of the Company's consolidated statements of income for the years ended December 31, 2011 and 2012, was revised to reduce selling expense and revenue by $24.4 million and $37.4 million related to an error in the classification of selling rebates. The revision had no effect on the operating income, net income or comprehensive income, the consolidated balance sheet or cash flows in any period presented or in any previously issued financial statements. These revisions were not considered to be material, individually or in the aggregate, to the previously issued financial statements. TABLE OF CONTENTS NU SKIN ENTERPRISES, INC. Notes to Consolidated Financial Statements Cash and cash equivalents Cash equivalents are short-term, highly liquid instruments with original maturities of 90 days or less. Inventories Inventories consist primarily of merchandise purchased for resale and are stated at the lower of cost or market, using the first-in, first-out method. The Company had adjustments to its inventory carry value totaling $5.5 million and $5.9 million as of December 31, 2012 and 2013, respectively. Inventories consist of the following (U.S. dollars in thousands):
|  | December 31, |
|  | 2012 |  |  | 2013 |
Raw materials |  | $ | 32,332 |  |  | $ | 117,982 |
Finished goods |  |  | 103,542 |  |  |  | 221,687 |
|  | $ | 135,874 |  |  | $ | 339,669 |
Property and equipment Property and equipment are recorded at cost and depreciated using the straight-line method over the following estimated useful lives:
Buildings |  | 39 years
Furniture and fixtures |  | 5 - 7 years
Computers and equipment |  | 3 - 5 years
Leasehold improvements |  | Shorter of estimated useful life or lease term
Scanners |  | 3 years
Vehicles |  | 3 - 5 years
Expenditures for maintenance and repairs are charged to expense as incurred. When an asset is sold or otherwise disposed of, the cost and associated accumulated depreciation are removed from the accounts and the resulting gain or loss is recognized in the statement of income. Property and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. An impairment loss is recognized if the carrying amount of the asset exceeds its fair value. Goodwill and other intangible assets Goodwill is recorded when the cost of acquired businesses exceeds the fair value of the identifiable net assets acquired. Goodwill and intangible assets with indefinite useful lives are not amortized, but are assessed for impairment annually. In addition, impairment testing is conducted when events occur or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. Goodwill and intangible assets with indefinite useful lives would be written down to fair value if considered impaired. Guidance under Accounting Standards Codification ("ASC") 350, Intangibles - Goodwill and Other, requires an entity to test goodwill for impairment on at least an annual basis. Beginning in 2011, the Company had the option to perform a qualitative assessment to determine whether further impairment testing is necessary or to perform a quantitative assessment by comparing the fair value of a reporting unit to its carrying amount, including goodwill. Under the qualitative assessment, an entity is not required to calculate the fair value of a reporting unit unless the entity determines that it is more likely than not that its fair value is less than its carrying amount. If under the quantitative assessment the fair value of a reporting unit is less than its carrying amount, then the amount of the impairment loss, if any, must be measured. The Company used the quantitative assessment for all periods presented. Intangible assets with finite useful lives are amortized to their estimated residual values over such finite lives using the straight-line method and reviewed for impairment whenever events or circumstances warrant such a review. TABLE OF CONTENTS NU SKIN ENTERPRISES, INC. Notes to Consolidated Financial Statements No impairment charges were recorded for goodwill or intangibles during the periods presented. Revenue recognition Revenue is recognized when products are shipped, which is when title and risk of loss pass to the purchaser of the products. A reserve for product returns is accrued based on historical experience totaling $6.2 million and $11.0 million as of December 31, 2012 and 2013, respectively. During the years ended December 31, 2011, 2012 and 2013, the Company recorded sales returns of $56.5 million, $56.1 million and $79.4 million, respectively. The Company generally requires cash or credit card payment at the point of sale. Accounts receivable generally represents amounts due from credit card companies and are generally collected within a few days of the purchase. As such, the Company has determined that no allowance for doubtful accounts is necessary. Amounts received prior to shipment of products and title passage to the purchaser of the products are recorded as deferred revenue. The Company's sales compensation plans generally do not provide rebates or selling discounts for purchasing its products and services. The Company classifies selling discounts and rebates, if any, as a reduction of revenue at the time the sale is recorded. Through the Company's product subscription and loyalty programs, which can vary from market to market, participants who commit to purchases on a monthly basis receive a discount from suggested retail or wholesale prices, as applicable. The Company applies this discount at the time of each purchase and not through a larger discount on the initial purchase. Participants may cancel their commitment at any time, however some markets charge a one-time early cancellation fee. All purchases under these programs are subject to the Company's standard product payment and return policies. In accordance with ASC 605-50, the Company classifies selling discounts and rebates, as a reduction of revenue at the time the sale is recorded. Advertising expenses Advertising costs are expensed as incurred. Advertising expense incurred for the years ended December 31, 2011, 2012 and 2013 totaled approximately $2.3 million, $5.1 million and $11.3 million, respectively. Selling expenses Selling expenses are the Company's most significant expense and are classified as operating expenses. Selling expenses include distributor commissions as well as wages, benefits, bonuses and other labor and unemployment expenses the Company pays to its sales force in Mainland China. In each of the Company's markets, except Mainland China, sales leaders can earn "multi-level" compensation under the Company's global sales compensation plan, including commissions for product sales to their consumer groups as well as the product sales made through the sales network they have developed and trained. The Company does not pay commissions on sales materials, which are sold to its sales force at or near cost. TABLE OF CONTENTS NU SKIN ENTERPRISES, INC. Notes to Consolidated Financial Statements Outside of Mainland China, the Company's distributors may make profits by purchasing the products from the Company at a discount and selling them to consumers with a mark-up. The Company does not account for nor pay additional commissions on these mark-ups received by distributors. In many markets, the Company also allows individuals who are not members of its sales force, referred to as "preferred customers," to buy products directly from the Company at a discount. The Company pays commissions on preferred customer purchases to the referring member of its sales force. Research and development Research and development costs are included in general and administrative expenses in the accompanying consolidated statements of income and are expensed as incurred and totaled $13.6 million, $14.9 million and $18.0 million in 2011, 2012 and 2013, respectively. Deferred tax assets and liabilities The Company accounts for income taxes in accordance with the Income Taxes Topic of the Financial Accounting Standards Codification. These standards establish financial accounting and reporting standards for the effects of income taxes that result from an enterprise's activities during the current and preceding years. The Company takes an asset and liability approach for financial accounting and reporting of income taxes. The Company pays income taxes in many foreign jurisdictions based on the profits realized in those jurisdictions, which can be significantly impacted by terms of intercompany transactions between the Company and its foreign affiliates. Deferred tax assets and liabilities are created in this process. The Company has netted these deferred tax assets and deferred tax liabilities by jurisdiction. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be ultimately realized. Uncertain Tax Positions The Company files income tax returns in the U.S. federal jurisdiction, and in various state and foreign jurisdictions. In 2013, the Company entered into a closing agreement with the United States Internal Revenue Service (the "IRS") for all adjustments for the 2009 and 2010 tax years. As a result of entering into the closing agreement, the Company is no longer subject to tax examinations from the IRS for all years for which tax returns have been filed except for 2011. With a few exceptions, the Company is no longer subject to state and local income tax examination by tax authorities for the years before 2008. In 2009, the Company entered into a voluntary program with the IRS called Compliance Assurance Process ("CAP"). The objective of CAP is to contemporaneously work with the IRS to achieve federal tax compliance and resolve all or most of the issues prior to filing of the tax return. The Company has elected to participate in the CAP program for 2014 and may elect to continue participating in CAP for future tax years; the Company may withdraw from the program at any time. In major foreign jurisdictions, the Company is no longer subject to income tax examinations for years before 2007. Along with the IRS examination of 2011, the Company is currently under examination in certain foreign jurisdictions; however, the outcomes of those reviews are not yet determinable. TABLE OF CONTENTS NU SKIN ENTERPRISES, INC. Notes to Consolidated Financial Statements A reconciliation of the beginning and ending amount of unrecognized tax benefits included in other liabilities is as follows (U.S. dollars in thousands):
|  | 2011 |  |  | 2012 |  |  | 2013 |
Gross balance at January 1 |  | $ | 14,821 |  |  | $ | 7,387 |  |  | $ | 9,045 |
Decreases related to prior year tax positions |  |  | (7,138 | ) |  |  | - |  |  |  | - |
Increases related to current year tax positions |  |  | 1,415 |  |  |  | 2,430 |  |  |  | 1,188 |
Settlements |  |  | (499 | ) |  |  | - |  |  |  | (1,671 | )
Decreases due to lapse of statutes of limitations |  |  | (1,255 | ) |  |  | (854 | ) |  |  | (1,086 | )
Currency adjustments |  |  | 43 |  |  |  | 82 |  |  |  | 8 |
Gross balance at December 31 |  | $ | 7,387 |  |  | $ | 9,045 |  |  | $ | 7,484 |
At December 31, 2013, the Company had $7.5 million in unrecognized tax benefits of which $2.1 million, if recognized, would affect the effective tax rate. In comparison, at December 31, 2012, the Company had $9.0 million in unrecognized tax benefits of which $3.8 million, if recognized, would affect the effective tax rate. The Company's unrecognized tax benefits relate to multiple foreign and domestic jurisdictions. Due to potential increases in unrecognized tax benefits from the multiple jurisdictions in which the Company operates, as well as the expiration of various statutes of limitation, it is reasonably possible that the Company's gross unrecognized tax benefits, net of foreign currency adjustments, may decrease within the next 12 months by a range of approximately $2 to $3 million. During each of the years ended December 31, 2011, 2012 and 2013, the Company recognized approximately ($0.8) million, $0.3 million and ($0.1) million, respectively in interest and penalties expenses/(benefits). The Company had approximately $0.8 million, $1.1 million and $0.9 million of accrued interest and penalties related to uncertain tax positions at December 31, 2011, 2012 and 2013, respectively. Interest and penalties related to uncertain tax positions are recognized as a component of income tax expense. Net income per share Net income per share is computed based on the weighted-average number of common shares outstanding during the periods presented. Additionally, diluted earnings per share data gives effect to all potentially dilutive common shares that were outstanding during the periods presented (Note 10). Foreign currency translation A significant portion of the Company's business operations occur outside of the United States. The local currency of each of the Company's Subsidiaries is considered its functional currency, except for NSEAP in Singapore where the U.S. dollar is used. All assets and liabilities are translated into U.S. dollars at exchange rates existing at the balance sheet dates, revenue and expenses are translated at weighted-average exchange rates and stockholders' equity is recorded at historical exchange rates. The resulting foreign currency translation adjustments are recorded as a separate component of stockholders' equity in the consolidated balance sheets and transaction gains and losses are included in other income and expense in the consolidated financial statements. Net of tax the accumulated other comprehensive income related to the foreign currency translation adjustments are $61.5 million, $54.7 million and $47.6 million at December 31, 2011, 2012 and 2013, respectively. TABLE OF CONTENTS NU SKIN ENTERPRISES, INC. Notes to Consolidated Financial Statements Classification of Venezuela as a Highly Inflationary Economy and Devaluation of Its Currency Since January 1, 2010, Venezuela has been designated as a highly inflationary economy. Highly inflationary accounting requires all gains and losses resulting from the re-measurement of its financial statements to be determined using official rates. Currency exchange restrictions enacted by the government of Venezuela require approval from the government's currency control agency organization in order for the Company's subsidiary in Venezuela to obtain U.S. dollars at the official exchange rate to pay for imported products or to repatriate dividends back to the Company. The government of Venezuela enacted additional currency exchange restrictions, which effectively replaced the market rate with the System for Foreign Currency Denominated Securities ("SITME"), which is administered by the Venezuela Central Bank. Under SITME, entities domiciled in Venezuela can obtain U.S. dollar denominated securities in limited quantities each month through banking institutions approved by the government. As of December 31, 2013, the Company had approximately $34.0 million of cash in Venezuela, which is subject to the currency exchange restrictions by the government of Venezuela.At this time, the Company is not able to reasonably estimate the future state of exchange controls in Venezuela and its availability of U.S. dollars at the official exchange rate or at the SITME rate. On February 12, 2013, the Venezuelan government announced the devaluation of the bolivar official rate to 6.3. During 2011, 2012 and 2013, the Company's Venezuelan subsidiary's net sales revenue represented approximately 0.3%, 0.7% and 1.1% of consolidated net sales revenue, respectively. The Company's Venezuelan subsidiary held total assets of $15.6 million and $38.8 million (which includes intercompany receivables denominated in U.S. dollars of $15.6 million and $37.9 million) at December 31, 2012 and 2013, respectively. Fair value of financial instruments The carrying value of financial instruments including cash and cash equivalents, accounts receivable and accounts payable approximate fair values due to the short-term nature of these instruments. The Company's current investments as of December 31, 2013 include certificates of deposits and pre-refunded municipal bonds that are classified by management as held-to-maturity as the Company had the positive intent and ability to hold to maturity. The carrying value of these current investments approximate fair values due to the short-term nature of these instruments. As of December 31, 2012 and 2013, the long-term debt fair value is $199.5 million and $188.3 million, respectively. The estimated fair value of the Company's debt is based on interest rates available for debt with similar terms and remaining maturities. The Company has classified these instruments as Level 2 in the fair value hierarchy. Fair value estimates are made at a specific point in time, based on relevant market information. The FASB Codification defines fair value as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. On a quarterly basis, the Company measures at fair value certain financial assets, including cash equivalents. Accounting standards specify a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect data obtained from independent sources, while unobservable inputs reflect the Company's market assumptions. These two types of inputs have created the following fair-value hierarchy: TABLE OF CONTENTS NU SKIN ENTERPRISES, INC. Notes to Consolidated Financial Statements ▪ Level 1 – quoted prices in active markets for identical assets or liabilities; ▪ Level 2 – inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; ▪ Level 3 – unobservable inputs based on the Company's own assumptions. Accounting standards permit companies, at their option, to choose to measure many financial instruments and certain other items at fair value. The Company has elected to not fair value existing eligible items. Stock-based compensation All share-based payments, including grants of stock options and restricted stock units, are required to be recognized in our financial statements based upon their respective grant date fair values. The Black-Scholes option pricing model is used to estimate the fair value of stock options. The determination of the fair value of stock options is affected by our stock price and a number of assumptions, including expected volatility, expected life, risk-free interest rate and expected dividends. We use historical volatility as the expected volatility assumption required in the Black-Scholes model. The expected life of the stock options is based on historical data trended into the future. The risk-free interest rate assumption is based on observed interest rates appropriate for the expected terms of our stock options. The fair value of our restricted stock units is based on the closing market price of our stock on the date of grant less our expected dividend yield. We recognize stock-based compensation net of any estimated forfeitures over the requisite service period of the award. The total compensation expense related to equity compensation plans was approximately $15.5 million, $21.4 million and $32.6 million for the years ended December 31, 2011, 2012 and 2013. For the years ended December 31, 2011, 2012 and 2013, all stock-based compensation expense was recorded within general and administrative expenses. Reporting comprehensive income Comprehensive income is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources, and it includes all changes in equity during a period except those resulting from investments by owners and distributions to owners. Accounting for derivative instruments and hedging activities The Company recognizes all derivatives as either assets or liabilities, with the instruments measured at fair value. The Company manages foreign exchange risk in certain jurisdictions through the use of foreign currency debt. Portions of the Company's Japanese yen borrowings have been designated, and are effective, as economic hedges of the net investment in its foreign operations. Accordingly, foreign currency transaction gains or losses due to spot rate fluctuations on these debt instruments are included in foreign currency translation adjustment within other comprehensive income. Included in the cumulative translation adjustment are $0.9 million of pretax net losses, $7.3 million of pretax net gains and $10.5 million of pretax net losses for the years ended December 31, 2011, 2012 and 2013, respectively from Japanese yen borrowings. TABLE OF CONTENTS NU SKIN ENTERPRISES, INC. Notes to Consolidated Financial Statements Additionally, the Company's Subsidiaries enter into significant transactions with each other and third parties that may not be denominated in the respective Subsidiaries' functional currencies. The Company regularly monitors its foreign currency risks and seeks to reduce its exposure to fluctuations in foreign exchange rates using foreign currency exchange contracts and through certain intercompany loans of foreign currency. Hedge effectiveness is assessed at inception and throughout the life of the hedge to ensure the hedge qualifies for hedge accounting treatment. Changes in fair value associated with hedge ineffectiveness, if any, are recorded in the results of operations currently. In the event that an anticipated transaction is no longer likely to occur, the Company recognizes the change in fair value of the derivative in its results of operations currently. Changes in the fair value of derivatives are recorded in current earnings or accumulated other comprehensive loss, depending on the intended use of the derivative and its resulting designation. The gains and losses in accumulated other comprehensive loss stemming from these derivatives will be reclassified into earnings in the period during which the hedged forecasted transaction affects earnings. The fair value of the receivable and payable amounts related to these unrealized gains and losses is classified as other current assets and liabilities. The Company does not use such derivative financial instruments for trading or speculative purposes. Gains and losses on certain intercompany loans of foreign currency are recorded as other income and expense in the consolidated statements of income. Recent accounting pronouncements In February 2013, the FASB issued ASU No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. This pronouncement was issued to improve the reporting of reclassifications out of accumulated other comprehensive income. The amendments in this update seek to attain that objective by requiring an entity to report the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in net income if the amount being reclassified is required under U.S. GAAP to be reclassified in its entirety to net income. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income in the same reporting period, an entity is required to cross-reference other disclosures required under U.S. GAAP that provide additional detail about those amounts. This would be the case when a portion of the amount reclassified out of accumulated other comprehensive income is reclassified to a balance sheet account (i.e. inventory) instead of directly to income or expense in the same reporting period. This pronouncement is effective prospectively for reporting periods beginning after December 15, 2012. The adoption of ASU 2013-02 did not have a material impact on the Company's consolidated financial position, results of operations or cash flows. In July 2013, the FASB issued ASU No. 2013-11, Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (a consensus of the Emerging Issues Task Force). This ASU addresses when unrecognized tax benefits should be presented as reductions to deferred tax assets for net operating loss carryforwards in the financial statements. This ASU is effective prospectively for fiscal years, and interim periods within those years, beginning after December 15, 2013. Early adoption and retrospective application is permitted. The Company did not early adopt and does not anticipate the adoption of ASU 2013-11 to have a material impact to the consolidated financial position, results of operations or cash flows. TABLE OF CONTENTS NU SKIN ENTERPRISES, INC. Notes to Consolidated Financial Statements

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- Definition The entire disclosure for all significant accounting policies of the reporting entity. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6367646&loc=d3e18780-107790 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6367646&loc=d3e18726-107790 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Accounting Principles Board Opinion (APB) -Number 22 -Paragraph 8 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section 50 -Paragraph 6 -URI http://asc.fasb.org/extlink&oid=6367646&loc=d3e18861-107790 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6367646&loc=d3e18743-107790 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=6367646&loc=d3e18854-107790 + Details
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