Revenue (Policies) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Revenue [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Revenue recognition policy |
(j) Revenue recognition
For the year ended December 31, 2018, the Company recognizes revenue at the time of shipment to customers. As a result of the adoption of ASC 606 (defined below), the revenue for shipments in transit is no longer recorded as deferred revenue. For the years ended December 31, 2017 and 2016, the revenue for shipments in-transit was recorded as deferred revenue. Refer to the Adoption of New Accounting Pronouncements section below for further explanation.
The Company's general policy is to allow customers the right to return merchandise. An allowance for returned merchandise is provided at the time revenue is recorded as a percentage of sales based on historical experience.
Revenue Recognition
For the year ended December 31, 2018, revenue is recognized when obligations with the Company's customers are satisfied; generally this occurs at the time of shipment to its customers consistent with when control of the shipped product passes. The recognized revenue reflects the consideration the Company expects to receive in exchange for transferring goods, net of allowances for returns.
The Company generally recognizes revenue related to the PLCC over time as the PLCC is used by QVC's customers.
Sales, value add, use and other taxes the Company collects concurrent with revenue-producing activities are excluded from revenue.
The Company has elected to treat shipping and handling activities that occur after the customer obtains control of the goods as a fulfillment cost and not as a promised good or service. Accordingly, the Company accrues the related shipping costs and recognizes revenue upon delivery of the goods to the shipping carrier. In electing this accounting policy, all shipping and handling activities are treated as fulfillment costs.
The Company generally has payment terms with its customers of one year or less and has elected the practical expedient applicable to such contracts under ASC 606 not to consider the time value of money.
Significant Judgments
Our products are generally sold with a right of return and we may provide other credits or incentives, which are accounted for as variable consideration when estimating the amount of revenue to recognize. Returns and credits are estimated at contract inception and updated at the end of each reporting period as additional information becomes available. The Company has determined that it is generally the principal in vendor arrangements as the Company can establish control over the goods prior to shipment. Accordingly, the Company records revenue for these arrangements on a gross basis.
The total reduction in net revenue due to returns for the years ended December 31, 2018, 2017 and 2016 aggregated to $2,213 million, $1,811 million and $1,815 million, respectively.
As a result of the adoption of ASC 606 the Company recognized a separate $116 million asset (included in prepaid expenses and other current assets) related to the expected return of inventory and a $242 million liability (included in accrued liabilities) relating to its sales return reserve at December 31, 2018, instead of the net presentation of the liability that was reported at December 31, 2017 and 2016.
A summary of activity in the allowance for sales returns, recorded on a gross basis for the year ended December 31, 2018 and recorded on a net margin basis for the years ending December 31, 2017 and 2016, was as follows:
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