Rayovac 2004 Annual Report Download - page 72

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RAYOVAC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(In thousands, except per share amounts)
(2) Significant Accounting Policies and Practices
(a) Principles of Consolidation and Fiscal Year End
The consolidated financial statements include the financial statements of Rayovac Corporation and its
subsidiaries and are prepared in accordance with U.S. generally accepted accounting principles. All
intercompany transactions have been eliminated. The Company’s fiscal year ends September 30. References
herein to 2004, 2003 and 2002 refer to the fiscal years ended September 30, 2004, 2003 and 2002, respectively.
(b) Revenue Recognition
The Company recognizes revenue from product sales upon shipment to the customer which is the point at which
all risks and rewards of ownership of the product is passed, provided that: there are no uncertainties regarding
customer acceptance; persuasive evidence of an arrangement exists; the price to the buyer is fixed or
determinable; and collectibility is deemed reasonably assured. The Company is not obligated to allow for, and
the Company’s general policy is not to accept, product returns associated with battery sales. The Company does
accept returns related to its shaving, grooming and personal care products. The Company estimates and accrues
the cost of these returns, which are treated as a reduction of net sales.
The Company enters into various promotional arrangements, primarily with retail customers, including
arrangements entitling such retailers to cash rebates from the Company based on the level of their purchases,
which require the Company to estimate and accrue the estimated costs of the promotional programs. These costs
are generally treated as a reduction of net sales.
The Company also enters into promotional arrangements targeted to the ultimate consumer. Such
arrangements are treated as either a reduction of net sales or an increase of cost of sales, based on the type of
promotional program. The income statement characterization of the Company’s promotional arrangements
complies with the Emerging Issues Task Force (“EITF”) No. 01-09, Accounting for Consideration Given by a
Vendor to a Customer (Including a Reseller of the Vendor’s Products).
For all types of promotional arrangements and programs, the Company monitors its commitments and uses
statistical measures and past experience to determine amounts to be recorded for the estimate of the earned, but
unpaid, promotional costs. The terms of the Company’s customer-related promotional arrangements and
programs are individualized to each customer and are generally documented through written contracts,
correspondence or other communications with the individual customers.
The Company also enters into various contractual arrangements, primarily with retail customers, which
require the Company to make upfront cash, or “slotting” payments, to secure the right to distribute through such
customer. The Company capitalizes slotting payments, provided the payments are supported by a time or volume
based contractual arrangement with the retailer, and will amortize the associated payment over the appropriate
time or volume based term of the contractual arrangement. The amortization of the slotting payment is treated as
a reduction in net sales and the corresponding asset is included in Deferred charges and other in the Consolidated
Balance Sheets.
(c) Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ from those estimates.
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