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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2. New Accounting Standards
Standards Implemented
In January 2010, the FASB issued Accounting Standards Update (“ASU”) 2010-06, Improving Disclosures about Fair Value Measurements.
ASU 2010-06 amends FASB Codification Topic 820, Fair Value Measurements and Disclosures, to require additional disclosures regarding fair
value measurements. Effective January 1, 2011, ASU 2010-06 required additional disclosures regarding activity in level 3 fair value
measurements. This disclosure requirement did not have an impact on our fair value disclosures.
Standards to be Implemented
In May 2011, the FASB issued ASU 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value
Measurement and Disclosure Requirements in U.S. GAAP and IFRS. ASU 2011-04 provides a consistent definition of fair value and ensures
that the fair value measurement and disclosure requirements are similar between U.S. GAAP and International Financial Reporting
Standards. ASU 2011-04 changes certain fair value measurement principles and enhances the disclosure requirements particularly for level 3
fair value measurements. ASU 2011-04 will be effective for Avon as of January 1, 2012 and will be applied prospectively. Avon is evaluating
the impact of adopting ASU 2011-04, but believes there will be no significant impact on its consolidated financial statements.
In June 2011, the FASB issued ASU 2011-05, Presentation of Comprehensive Income. ASU 2011-05 requires entities to present items of net
income and other comprehensive income either in one continuous statement, referred to as the statement of comprehensive income, or in
two separate, but consecutive, statements of net income and other comprehensive income. In addition, in December 2011, the FASB issued
ASU 2011-12, Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other
Comprehensive Income in Accounting Standards Update No. 2011-05. ASU 2011-12 defers the requirement to present components of
reclassifications of comprehensive income on the statement of comprehensive income, with all other requirements of ASU 2011-05
unaffected. Both ASU 2011-05 and 2011-12 will be effective as of January 1, 2012 for Avon and are not expected to have a significant
impact on our financial statements, other than presentation.
In September 2011, the FASB issued ASU 2011-08, Testing Goodwill for Impairment. ASU 2011-08 provides entities with an option to
perform a qualitative assessment to determine whether further impairment testing is necessary. ASU 2011-08 is effective for annual and
interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011, with early adoption permitted. This
standard is not expected to have a significant impact on our financial statements.
NOTE 3. Discontinued Operations
On November 8, 2010, the Company announced that Avon International Operations, Inc. (“AIO”), a wholly-owned subsidiary of the
Company, had agreed to sell the ownership interest in Avon Products Company Limited (“Avon Japan”) held by AIO pursuant to a tender
offer bid agreement between AIO and Devon Holdings K.K., an affiliate of TPG Capital (“Buyer”). The transaction included both the sale of
the Company’s stake in Avon Japan as well as certain pre-paid royalties in connection with intellectual property licenses for an aggregate
cash consideration of approximately $90. Avon Japan was previously reported within our Asia Pacific segment.
The transaction closed on December 29, 2010. Of the total cash consideration received, $81 was recognized in December 2010, resulting in
a net after tax gain of $10. The remaining $9 of the consideration received related to the use of Avon’s global brands, formulas and
products, and the use of the Avon name in Japan for a five year period. This portion of the royalty will be recognized on a straight line basis
over five years within continuing operations.
During 2011, we determined that the net after tax gain on sale of Avon Japan should have been reported as a net after tax loss of $3, to
correctly include all balances relating to Avon Japan that were previously included in Accumulated Other Comprehensive Loss (“AOCI”). See
Note 1, Description of the Business and Summary of Significant Accounting Policies, for further information.