Rayovac 2010 Annual Report Download - page 120

SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(In thousands, except per share amounts)
no uncertainties regarding customer acceptance; there is persuasive evidence that 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 in specific instances related to its shaving, grooming, personal care,
home and garden, small appliances and pet products. The provision for customer returns is based on historical
sales and returns and other relevant information. The Company estimates and accrues the cost of 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 treated as a reduction of Net sales.
The Company also enters into promotional arrangements that target the ultimate consumer. Such
arrangements are treated as either a reduction of Net sales or an increase of Cost of goods sold, based on the type
of promotional program. The income statement presentation of the Company’s promotional arrangements
complies with ASC Topic 605: “Revenue Recognition.” For all types of promotional arrangements and programs,
the Company monitors its commitments and uses various measures, including 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 tailored to each customer and are
documented through written contracts, correspondence or other communications with the individual customers.
The Company also enters into various arrangements, primarily with retail customers, which require the
Company to make upfront cash, or “slotting” payments, to secure the right to distribute through such customers.
The Company capitalizes slotting payments; provided the payments are supported by a time or volume based
arrangement with the retailer, and amortizes the associated payment over the appropriate time or volume based
term of the arrangement. The amortization of slotting payments is treated as a reduction in Net sales and a
corresponding asset is reported in Deferred charges and other in the accompanying Consolidated Statements of
Financial Position.
(c) Use of Estimates
The preparation of financial statements in conformity with GAAP 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.
(d) Cash Equivalents
For purposes of the accompanying Consolidated Statements of Cash Flows, the Company considers all highly
liquid debt instruments purchased with original maturities of three months or less to be cash equivalents.
(e) Concentrations of Credit Risk, Major Customers and Employees
Trade receivables subject the Company to credit risk. Trade accounts receivable are carried at net realizable
value. The Company extends credit to its customers based upon an evaluation of the customer’s financial
condition and credit history, but generally does not require collateral. The Company monitors its customers’
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