Rayovac 2008 Annual Report Download - page 68

Table of Contents
Index to Financial Statements
Practices—Concentrations of Credit Risk and Major Customers and Employees, of Notes to Consolidated Financial Statements of this Annual Report on
Form 10-K for more information about our revenue recognition and credit policies.
Pensions
Our accounting for pension benefits is primarily based on discount rate, expected and actual return on plan assets and other assumptions made by
management, and is impacted by outside factors such as equity and fixed income market performance. Pension liability is principally the estimated present value
of future benefits, net of plan assets. In calculating the estimated present value of future benefits, net of plan assets, for both Fiscal 2008 and 2007, we used
discount rates of 5.0 to 7.0% in Fiscal 2008 and 4.5% to 6.25% in Fiscal 2007. In adjusting the discount rates from Fiscal 2007 to 2008, we considered the
change in the general market interest rates of debt and solicited the advice of our actuary. We believe the discount rates used is reflective of the rates at which the
pension benefits could be effectively settled.
Pension expense is principally the sum of interest and service cost of the plan, less the expected return on plan assets and the amortization of the difference
between our assumptions and actual experience. The expected return on plan assets is calculated by applying an assumed rate of return to the fair value of plan
assets. We used expected returns on plan assets of 4.5% to 8.0% in both Fiscal 2008 and Fiscal 2007. Based on the advice of our independent actuary, we believe
the expected rates of return are reflective of the long-term average rate of earnings expected on the funds invested. If such expected returns were overstated, it
would ultimately increase future pension expense. Similarly, an understatement of the expected return would ultimately decrease future pension expense. If plan
assets decline due to poor performance by the markets and/or interest rate declines our pension liability will increase, ultimately increasing future pension
expense.
Effective September 30, 2007, we adopted SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans—an
amendment of FASB Statements No. 87, 88, 106, and 132(R)”, (“SFAS 158”). The recognition and disclosure provisions of this statement require recognition of
the overfunded or underfunded status of defined benefit pension and postretirement plans as an asset or liability in the statement of financial position, and
recognition of changes in that funded status in Accumulated Other Comprehensive Income in the year in which the adoption occurs. We measure plan assets and
obligations of our domestic pension plans as of June 30 each year and either June 30 or September 30 each year for our foreign pension plans and our other
domestic postretirement plans. The measurement date provisions of SFAS 158, which will become effective for us in our fiscal year ended September 30, 2009
(“Fiscal 2009”), will require us to measure all of our defined benefit pension and postretirement plan assets and obligations as of September 30 which is our
fiscal year end.
See Note 12, Employee Benefit Plans, of Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for a more complete
discussion of our employee benefit plans.
Restructuring and Related Charges
Restructuring charges are recognized and measured according to the provisions of SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal
Activities” (“SFAS 146”). Under SFAS 146, restructuring charges include, but are not limited to, termination and related costs consisting primarily of severance
costs and retention bonuses, and contract termination costs consisting primarily of lease termination costs. Related charges, as defined by us, include, but are not
limited to, other costs directly associated with exit and integration activities, including impairment of property and other assets, departmental costs of full-time
incremental integration employees, and any other items related to the exit or integration activities. Costs for such activities are estimated by us after evaluating
detailed analyses of the cost to be incurred. We present restructuring and related charges on a combined basis.
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Source: Spectrum Brands, Inc, 10-K, December 10, 2008