Energizer 2010 Annual Report Download - page 85

Exhibit 13
ENERGIZER HOLDINGS, INC.
(Dollars in millions, except per share and percentage data)
75
(1) Basis of Presentation and Use of Estimates
The financial statements include the accounts of the Company and its majority-owned
subsidiaries. All significant intercompany transactions are eliminated. Investments in affiliated
companies, 20% through 50% owned, are accounted for under the equity method.
Preparation of the financial statements in conformity with generally accepted accounting
principles in the U.S. (GAAP) requires Energizer Holdings, Inc. and its subsidiaries (the
Company) to make estimates and assumptions that affect the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities and the reported amounts of revenues
and expenses. On an ongoing basis, the Company evaluates its estimates, including those
related to customer programs and incentives, product returns, bad debts, inventories, intangible
and other long-lived assets, income taxes, financing, pensions and other postretirement benefits,
contingencies and acquisitions. Actual results could differ from those estimates.
(2) Summary of Significant Accounting Policies
The Company's significant accounting policies, which conform to GAAP and are applied on a
consistent basis among all years presented, except as indicated, are described below.
Foreign Currency Translation – Financial statements of foreign operations where the local
currency is the functional currency are translated using end-of-period exchange rates for assets
and liabilities, and average exchange rates during the period for results of operations. Related
translation adjustments are reported as a component within accumulated other comprehensive
income in the shareholders’ equity section of the Consolidated Balance Sheets.
For foreign operations that are considered highly inflationary, translation practices differ in that
inventories, properties, accumulated depreciation and depreciation expense are translated at
historical rates of exchange, and translation adjustments for monetary assets and liabilities are
included in earnings. Gains and losses from foreign currency transactions are generally included
in earnings.
Effective January 1, 2010, the financial statements for our Venezuela subsidiary are
consolidated under the rules governing the translation of financial information in a highly
inflationary economy based on the use of the blended National Consumer Price Index in
Venezuela. Under GAAP, an economy is considered highly inflationary if the cumulative inflation
rate for a three year period meets or exceeds 100 percent. If a subsidiary is considered to be in
a highly inflationary economy, the financial statements of the subsidiary must be re-measured
into our reporting currency (U.S. dollar) and future exchange gains and losses from the re-
measurement of monetary assets and liabilities are reflected in current earnings, rather than
exclusively in the equity section of the balance sheet, until such time as the economy is no
longer considered highly inflationary. For further information regarding the Company’s
Venezuela affiliate, see Note 3 of the Notes to Consolidated Financial Statements.
Financial Instruments and Derivative Securities – The Company uses financial instruments,
from time to time, in the management of foreign currency, interest rate and other risks that are
inherent to its business operations. Such instruments are not held or issued for trading
purposes.
Foreign exchange (F/X) instruments, including currency forwards, are used primarily to reduce
transaction exposures and, to a lesser extent, to manage other translation exposures. F/X
instruments used are selected based on their risk reduction attributes and the related market