January
14, 2008
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Re:
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The
Hershey Company
Form
10-K for the Fiscal Year Ended December 31, 2006
Filed
February 23, 2007
Form
10-Q for the Fiscal Quarter Ended September 30, 2007
Filed
November 7, 2007
File
No. 1-00183
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1.
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We
note your disclosure that, following the adoption of SAB 108, you
changed
one of five criteria of your revenue recognition policy to delay
the
recognition of revenue on goods in transit until they are received
by your
customers, and also that you made adjustments to correct certain
liabilities as of December 31, 2006. Explain to us, in
reasonable detail, how you considered disclosing the nature and
amount of
each individual error being corrected along with when and how each
error
arose. As part of your response, explain how you considered the
interpretive response to Question 3 of SAB 108, which requires
such
disclosure even though such errors may have previously been considered
immaterial.
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2.
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Explain
to us why your Statements of Stockholders’ Equity does not reflect the
adjustment to retained earnings in 2006 for the adjustments made
in
connection with SAB 108.
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3.
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Identify
for us the policy you used to evaluate materiality for periods
prior to
the application of SAB 108. Explain how that policy was applied
to the specific items described under this
note.
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·
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There
would not have been a significant impact on the amount of incentive
compensation.
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·
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Annual
earnings estimates are discussed in the context of ranges. For
example, a range of 9-11% growth. Our actual results were well
in excess of our stated long-term objectives for 2004 and 2005,
and the
adjustments would not have changed that fact.
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·
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The
adjustments result from the consistent application of our accounting
policy regarding the recognition of revenue. Amounts were
recorded based on the shipping dates processed in our enterprise-wide
information system. The adjustments were not the result of a
top-level consolidating or manual journal entries. Further, our
former policy of recognizing revenue upon shipment was applied
consistently for all periods.
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·
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There
was no impact on the amount of cash flows generated by operating,
investing or financing activities in the statement of cash
flows. The adjustments that impact net income were offset by
changes in working capital and, therefore, operating cash flow
amounts
were not affected.
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·
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Adjustments
to total shareholders’ equity resulting from the change to our revenue
recognition policy and the correction of certain liabilities were
immaterial. There were no debt covenants that were
impacted.
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4.
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Explain
to us why it was necessary to change your revenue recognition policy
as a
result of SAB 108. Include in your response an explanation of
how your prior policy differed from your current policy, whether
it
previously complied with GAAP, and how applying the change earlier
would
have impacted your financial statements. Tell us why you did
not make a cumulative adjustment relating to revenue
recognition.
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·
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a
valid customer order with a fixed price has been
received;
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·
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a
delivery appointment with the customer has been made;
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·
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the
product has been shipped in accordance with the delivery appointment
within the required lead time;
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·
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there
is no further significant obligation to assist in the resale of
the
product; and
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·
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collectibility
is reasonably assured.
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5.
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In
future filings, please ensure that the certifications reflect the
exact
language required by Item 601(b)(31) of Regulation S-K. For
example, we note that you modified the Exchange Act rule references
in the
introductory language in paragraph 4 and omitted the language “(the
registrant’s fourth fiscal quarter in the case of an annual report)” in
paragraph 4(d) and the language “(or persons performing the equivalent
functions)” in the introductory language in paragraph
5.
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·
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the
Company is responsible for the adequacy and accuracy of the disclosure
in
the Company’s filing;
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·
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Staff
comments or changes to disclosure in response to Staff comments
do not
foreclose the Commission from taking any action with respect to
the
filing; and
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·
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the
Company may not assert Staff comments as a defense in any proceeding
initiated by the Commission or any person under the federal securities
laws of the United States.
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