Rayovac 2009 Annual Report Download - page 158

Table of Contents
Index to Financial Statements SPECTRUM BRANDS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(In thousands, except per share amounts)
the derivation of terminal year values. These and other assumptions are impacted by economic conditions and expectations of management and will change
in the future based on period specific facts and circumstances. The Company also tested fair value for reasonableness by comparison to the total market
capitalization of the Company, which includes both its equity and debt securities. In addition, in accordance with ASC 350, as part of the Company’s annual
impairment testing, the Company tested its indefinite−lived trade name intangible assets for impairment by comparing the carrying amount of such trade
names to their respective fair values. Fair value was determined using a relief from royalty methodology. Assumptions critical to the Company’s fair value
estimates under the relief from royalty methodology were: (i) royalty rates; and (ii) projected average revenue growth rates.
In connection with the Predecessor Company’s annual goodwill impairment testing performed during Fiscal 2009, which was completed on the
Predecessor Company before applying fresh−start reporting, the first step of such testing indicated that the fair value of the Predecessor Company’s
reporting segments were in excess of their carrying amounts and, accordingly, no further testing of goodwill was required. In connection with its annual
goodwill impairment testing in Fiscal 2008 the Predecessor Company first compared the fair value of its reporting units with their carrying amounts,
including goodwill. This first step indicated that the fair value of the Predecessor Company’s Global Pet Supplies and Home and Garden Business was less
than the Predecessor Company’s carrying amount of those reporting units and, accordingly, further testing of goodwill was required to determine the
impairment charge required by ASC 350. Accordingly, the Predecessor Company then compared the carrying amount of the Global Pet Supplies and the
Home and Garden Business goodwill to the respective implied fair value of their goodwill. The carrying amounts of the Global Pet Supplies and the Home
and Garden Business goodwill exceeded their implied fair values and, therefore, during Fiscal 2008 the Predecessor Company recorded a non−cash pretax
impairment charge equal to the excess of the carrying amount of the respective reporting unit’s goodwill over the implied fair value of such goodwill of
which $270,811 related to Global Pet Supplies and $49,801 related to the Home and Garden Business. In connection with the Predecessor Company’s
annual goodwill impairment testing performed during Fiscal 2007 the first step of such testing indicated that the fair value of the Predecessor Company’s
Global Batteries and Personal Care and Global Pet Supplies reporting segments were in excess of their carrying amounts and, accordingly, no further testing
of goodwill was required. However, as more fully discussed in Note 1, Description of Business, in Fiscal 2007 the Home and Garden Business had been
designated by the Predecessor Company as a discontinued operation and classified as an asset held for sale. Therefore, in accordance with ASC Topic 360:
“Property, Plant and Equipment,” formerly SFAS No. 144, “Accounting for the Impairment or Disposal of Long−Lived Assets” (“ASC 360”), long−lived
assets to be disposed of by sale are recorded at the lower of their carrying value or fair value less costs to sell. Accordingly, the Predecessor Company
recorded a non−cash pretax charge equal to the excess of the carrying amount of the Home and Garden Business goodwill over the implied fair value of
such goodwill of approximately $124,013.
Furthermore, during the eleven month period ended August 30, 2009, Fiscal 2008 and Fiscal 2007, in connection with its annual impairment testing,
the Predecessor Company concluded that the fair values of certain trade name intangible assets were less than the carrying amounts of those assets. As a
result, during the eleven month period ended August 30, 2009, Fiscal 2008 and Fiscal 2007 the Predecessor Company recorded non−cash pretax impairment
charges of approximately $34,391, $224,100 and $24,400, respectively, equal to the excess of the carrying amounts of the intangible assets over the fair
value of such assets.
In accordance with ASC 360 and ASC 350, in addition to its annual impairment testing the Company conducts goodwill and trade name intangible
asset impairment testing if an event or circumstance (“triggering event”) occurs that indicates an impairment loss may have been incurred. The Company’s
management uses its judgment in assessing whether assets may have become impaired between annual impairment tests. Indicators
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