Black & Decker 2014 Annual Report Download - page 72

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Notes to Consolidated Financial Statements
A. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION — The Consolidated Financial Statements include the accounts of Stanley Black & Decker, Inc.
and its majority-owned subsidiaries (collectively the “Company”) which require consolidation, after the elimination of
intercompany accounts and transactions. The Company’s fiscal year ends on the Saturday nearest to December 31. There were
53 weeks in the fiscal year 2014 and 52 weeks in the fiscal years 2013 and 2012.
During the fourth quarter of 2014, the Company classified the Security segment’s Spain and Italy operations as held for sale
based on management's intention to sell these businesses. In the third quarter of 2013, the Company classified two small
businesses within the Security and Industrial segments as held for sale based on management's intention to sell these
businesses. These businesses were sold in 2014. In December 2012, the Company sold its Hardware & Home Improvement
business ("HHI"), including the residential portion of Tong Lung Metal Industry Co. ("Tong Lung"), to Spectrum Brands
Holdings, Inc. ("Spectrum") for approximately $1.4 billion in cash. The purchase and sale agreement stipulated that the sale
occur in a First and Second Closing. The First Closing, which excluded the residential portion of the Tong Lung business,
occurred on December 17, 2012 and resulted in an after-tax gain of $358.9 million. The Second Closing, in which the
residential portion of the Tong Lung business was sold for $93.5 million in cash, occurred on April 8, 2013 and resulted in an
after-tax gain of $4.7 million. The operating results of the above businesses have been reported as discontinued operations in
the Consolidated Financial Statements. Amounts previously reported have been reclassified to conform to this presentation in
accordance with ASC 205, "Presentation of Financial Statements," to allow for meaningful comparison of continuing
operations. The Consolidated Balance Sheets as of January 3, 2015 and December 28, 2013 aggregate amounts associated with
discontinued operations as described above. Refer to Note T, Discontinued Operations, for further discussion.
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect the amounts reported in the financial statements.
While management believes that the estimates and assumptions used in the preparation of the financial statements are
appropriate, actual results could differ from these estimates. Certain amounts reported in the previous years have been
reclassified to conform to the 2014 presentation.
FOREIGN CURRENCY — For foreign operations with functional currencies other than the U.S. dollar, asset and liability
accounts are translated at current exchange rates; income and expenses are translated using average exchange rates. Translation
adjustments are reported in a separate component of shareowners’ equity and exchange gains and losses on transactions are
included in earnings.
CASH EQUIVALENTS — Highly liquid investments with original maturities of three months or less are considered cash
equivalents.
ACCOUNTS AND FINANCING RECEIVABLE — Trade receivables are stated at gross invoice amounts less discounts,
other allowances and provisions for uncollectible accounts. Financing receivables are initially recorded at fair value, less
impairments or provisions for credit losses. Interest income earned from financing receivables that are not delinquent is
recorded on the effective interest method. The Company considers any financing receivable that has not been collected within
90 days of original billing date as past-due or delinquent. Additionally, the Company considers the credit quality of all past-due
or delinquent financing receivables as nonperforming.
ALLOWANCE FOR DOUBTFUL ACCOUNTS — The Company estimates its allowance for doubtful accounts using two
methods. First, a specific reserve is established for individual accounts where information indicates the customers may have an
inability to meet financial obligations. Second, a reserve is determined for all customers based on a range of percentages
applied to aging categories. These percentages are based on historical collection and write-off experience. Actual write-offs are
charged against the allowance when collection efforts have been unsuccessful.
INVENTORIES — U.S. inventories are predominantly valued at the lower of Last-In First-Out (“LIFO”) cost or market
because the Company believes it results in better matching of costs and revenues. Other inventories are valued at the lower of
First-In, First-Out (“FIFO”) cost or market because LIFO is not permitted for statutory reporting outside the U.S. See Note C,
Inventories, for a quantification of the LIFO impact on inventory valuation.