Energizer 2014 Annual Report Download - page 64

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ENERGIZER HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share)
(1) Basis of Presentation and Use of Estimates
The financial statements include the accounts of the Company and its subsidiaries. All significant intercompany transactions are
eliminated. The Company has no material equity method investments or variable interests.
The financial statements and related footnote disclosures within this document do not include the potential future impact of the
proposed spin-off transaction, if consummated. The effect of the proposed spin-off transaction could significantly change and
materially impact future disclosures, accounting positions, results of operations, balance sheet and cash flow positions. See
Note 3 of the Notes to Consolidated Financial Statements.
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 promotional programs
and incentives, product returns, bad debts, the carrying value of inventories, intangible and other long-lived assets, income
taxes, pensions and other postretirement benefits, share-based compensation, contingencies and acquisitions. Actual results
could differ materially from those estimates. However, in regard to periodic impairment testing of goodwill and indefinite-
lived intangible assets, significant deterioration in future cash flow projections, changes in discount rates used in discounted
cash flow models or changes in other assumptions used in estimating fair values, versus those anticipated at the time of the
initial acquisition as well as subsequent estimated valuations, could result in impairment charges that may materially affect the
financial statements in a given year.
(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, except as noted below.
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 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. At September 30,
2014, the Company has net monetary assets in Venezuela of approximately $79. See Note 6 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 cash transaction exposures and,
to a lesser extent, to manage other translation exposures. F/X instruments used are selected based on their risk reduction
attributes, costs and the related market conditions. The Company has designated certain foreign currency contracts as cash flow
hedges for accounting purposes as of September 30, 2014.
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