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Basis of Presentation (Policies) | 9 Months Ended
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Sep. 30, 2018
Basis of Presentation [Abstract] |
Description of New Accounting Pronouncements Not yet Adopted | Accounting pronouncements issued but not yet adopted In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which revises the accounting treatment related to lessee accounting. Under the new guidance, lessees will be required to recognize a lease liability and a right-of-use asset for all leases. The new lease guidance also simplifies the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and lease liabilities. In July 2018, the FASB issued ASU No. 2018-11, which provides entities a transition method in which the entity may apply the new lease standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings at January 1, 2019. The Company intends to elect this optional transition method. While the Company is currently evaluating the effect that the updated standard will have on its ongoing financial reporting, it expects that the operating leases listed in note 7 - Leases will be recognized as right of- use assets and operating lease liabilities on the consolidated balance sheets upon adoption of the new standard. The Company does not anticipate that the adoption will have a material impact on its consolidated statements of operations. In February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220), which addresses the effect of the change in the U.S. federal corporate tax rate due to the enactment of the December 22, 2017 Tax Cuts and Jobs Act (the "Tax Act") on items within accumulated other comprehensive income (loss). The guidance will be effective for the Company in the first quarter of 2019 with early adoption permitted. The Company is currently assessing the impact that adopting this new accounting standard will have on its consolidated financial statements. In August 2018, the FASB issued ASU 2018-15, Intangibles- Goodwill and Other- Internal-Use Software (Subtopic 350-40), which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The guidance will be effective for the Company in the first quarter of 2020 with early adoption permitted. The Company is currently assessing the impact that adopting this new accounting standard will have on its consolidated financial statements.
New accounting pronouncements policy | On May 28, 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. This new guidance also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments, changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. In March 2016, the FASB issued ASU No. 2016-08, which clarifies principal versus agent considerations, in April 2016, the FASB issued ASU No. 2016-10, which clarifies the identification of performance obligations and the implementation guidance for licensing, and in May 2016, the FASB issued ASU No. 2016-12, which clarifies assessing collectibility, presentation of sales taxes, noncash consideration, and completed contracts and contract modifications at transition. On January 1, 2018, the Company adopted the new accounting standard ASC 606, Revenue from Contracts with Customers, and all related amendments ("ASC 606") to all contracts using the modified retrospective method. The Company recognized the cumulative effect of initially applying the new revenue standard as a $14 million adjustment to the opening balance of retained earnings. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods. The Company does not expect the adoption of the new revenue standard to have a material impact to its net income on an ongoing basis. Refer to the table below for the adoption of this guidance. In October 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory, which requires an entity to recognize at the transaction date the income tax consequences of intercompany asset transfers other than inventory. The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, with early adoption permitted. The Company adopted this guidance on January 1, 2018 and there was no significant effect of the standard on its condensed consolidated financial statements. The cumulative effect of the changes due to the adoption of ASC 606 and ASU No. 2016-16 were as follows:
(in millions) | Balance at December 31, 2017 | Adjustments Due to ASC 606 | Adjustments Due to ASU 2016-16 | Balance at January 1, 2018
Assets: |  |  |  |
Inventories | $ | 1,019 |  | (22 | ) | — |  | 997 |
Prepaid expenses and other current assets | 51 |  | — |  | (1 | ) | 50 |
Liabilities: |  |  |  |
Accrued liabilities | 872 |  | (36 | ) | — |  | 836 |
Equity: |  |  |  |
Accumulated deficit | $ | (2,772 | ) | 14 |  | (1 | ) | (2,759 | )
In accordance with the new revenue standard requirements, the impact of adoption on our condensed consolidated statements of operations was as follows:
Statements of Operations | Three months ended September 30, 2018 |  | Nine months ended September 30, 2018 |
(in millions) | As Reported | Balances Without Adoption of ASC 606 | Effect of Change Increase/(Decrease) | As Reported | Balances Without Adoption of ASC 606 | Effect of Change Increase/(Decrease)
Net revenue | $ | 2,058 |  | 2,020 |  | 38 |  | 6,234 |  | 6,126 |  | 108 |
Costs and expenses: |  |  |  |  |  |
Cost of goods sold | 1,300 |  | 1,295 |  | 5 |  | 3,906 |  | 3,892 |  | 14 |
Operating | 144 |  | 142 |  | 2 |  | 433 |  | 430 |  | 3 |
Selling, general and administrative, including transaction related costs and stock-based compensation | 235 |  | 209 |  | 26 |  | 652 |  | 574 |  | 78 |
Income tax expense | 69 |  | 68 |  | 1 |  | 224 |  | 221 |  | 3 |
Net income | $ | 173 |  | 169 |  | 4 |  | 616 |  | 606 |  | 10 |
The effect of changes of adoption is primarily due to the timing of revenue recognition and the classification of income for its QVC-branded credit card ("Q-Card Income"). For the three and nine months ended September 30, 2018, revenue is recognized at the time of shipment to its customers consistent with when control passes and Q-Card Income is recognized in revenue. For the three and nine months ended September 30, 2017, revenue was recognized at the time of delivery to the customers and deferred revenue was recorded to account for the shipments in-transit. In addition, Q-Card Income was recognized as an offset to selling, general and administrative expenses. The Company also recognized a separate $58 million asset (included in prepaid expenses and other current assets) related to the expected return of inventory and a $140 million liability (included in accrued liabilities) relating to its sales return reserve at September 30, 2018, instead of the net presentation of the liability that was reported at December 31, 2017 and September 30, 2017. In January 2016, the FASB issued ASU No. 2016-01, Financial Statements - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, which requires equity investments with readily determinable fair values (except those accounted for under the equity method of accounting or those that result in consolidation) to be measured at fair value with changes in fair value recognized in net income and simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment. The new standard is effective for the Company for fiscal years and interim periods beginning after December 15, 2017. The Company adopted this guidance during the first quarter of 2018 and there was no significant effect of the standard on its financial reporting. In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which addresses eight specific cash flow issues to reduce the diversity in practice for appropriate classification on the statement of cash flows. The amendments in this ASU are effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017 with early adoption permitted. The Company adopted this guidance during the first quarter of 2018 and there was no significant effect of the standard on its condensed consolidated financial statements. In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, which requires entities to show the changes in the total of cash, cash equivalents, restricted cash and restricted cash equivalents in the statement of cash flows. The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, with early adoption permitted. The Company adopted this guidance during the first quarter of 2018 and has reclassified prior period balances in cash and cash equivalents within the condensed consolidated statements of cash flows in order to conform with current period presentation. In May 2017, the FASB issued ASU No. 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting, to provide clarity to which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. The amendments in this update are effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017 with early adoption permitted. The Company adopted this guidance during the first quarter of 2018 and there was no significant effect of the standard on its condensed consolidated financial statements.

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