Energizer 2002 Annual Report Download - page 31

6. Accounts Receivable Write-down
On January 23, 2002, Kmart filed for Chapter 11 bankruptcy protection.
Energizer’s Special Purpose Entity (SPE) (see Note 15) had pre-petition
accounts receivable from Kmart Corporation of $20.0. In the year ended
September 30, 2002, Energizer recorded total charges related to such
receivables of $15.0 pre-tax, or $9.3 after-tax. It is not yet known what por-
tion, if any, of the balance will be collected.
7. Intellectual Property Rights Income
In fiscal 2001, Energizer recorded income of $20.0 pre-tax, or $12.3 after-
tax, related to the licensing of intellectual property rights.
8. Goodwill and Intangible Assets and
Amortization
Energizer monitors changing business conditions, which may indicate
that the remaining useful life of goodwill and other intangible assets
may warrant revision or carrying amounts may require adjustment.
Continuing unfavorable business trends in Europe and the unfavorable
costs of U.S. dollar-based products resulting from currency declines
represented such conditions. As part of its annual business planning
cycle, Energizer performed an evaluation of its European business in
the fourth quarter of fiscal 2001, which resulted in a provision for
goodwill impairment of $119.0. As of September 30, 2001, the remain-
ing carrying amount of goodwill related to Energizer’s European busi-
ness after the provision for impairment was $8.5.
On October 1, 2001, Energizer adopted Statement of Financial Accounting
Standards No. 142, “Goodwill and Intangible Assets” (SFAS 142). SFAS
142 eliminates the amortization of goodwill and instead requires goodwill
be tested for impairment at least annually. Intangible assets deemed to
have an indefinite life under SFAS 142 are no longer amortized, but
instead reviewed at least annually for impairment. Intangible assets with
finite lives are amortized over its useful life.
As businesses have been acquired in the past, Energizer has allocated
goodwill and other intangible assets to reporting units within each operating
segment. Energizer’s intangible assets are comprised of trademarks related
to the Energizer name, which are deemed indefinite-lived intangibles. Thus
beginning in fiscal 2002, these trademarks are no longer amortized.
As part of the implementation of SFAS 142, Energizer completed
transitional tests in the first quarter of fiscal 2002, which resulted in no
impairment. As part of its business planning cycle in the fourth quarter
of fiscal 2002, Energizer completed its impairment test of goodwill and
intangibles, which resulted in no impairment. The fair value of the report-
ing unit was estimated using the discounted cash flow method.
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