Rayovac 2013 Annual Report Download - page 77

Acquisition and Integration Related Charges
The costs of plans to (i) exit an activity of an acquired company,(ii) involuntarily terminate employees of
an acquired company or (iii) relocate employees of an acquired company are measured and recorded in
accordance with the provisions of the ASC 805. Under ASC 805, if certain conditions are met, such costs are
recognized as a liability assumed as of the consummation date of the purchase business combination and
included in the allocation of the acquisition cost. Costs related to terminated activities or employees of the
acquired company that do not meet the conditions prescribed in ASC 805 are treated as acquisition and
integration related charges and expensed as incurred.
See Note 2(x), “Significant Accounting Policies and Practices—Acquisition and Integration Related
Charges” of Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K.
Accounting for Acquisitions
Accounting for acquisitions requires us to recognize and measure identifiable assets acquired, liabilities
assumed and any non-controlling interest in the acquired entity. Our accounting for acquisitions involves
significant judgments and estimates, including the fair value of certain forms of consideration, the fair value of
acquired intangible assets, which involve projections of future revenues, cash flows and terminal value, which
are then either discounted at an estimated discount rate or measured at an estimated royalty rate, and the fair
value of other acquired assets and assumed liabilities, including potential contingencies, and the useful lives of
the assets. The projections are developed using internal forecasts, available industry and market data and
estimates of long-term rates of growth for our business. The impact of prior or future acquisitions on our
financial position or results of operations may be materially impacted by the change in or initial selection of
assumptions and estimates.
See Note 15, “Acquisitions” of Notes to Consolidated Financial Statements included in this Annual Report
on Form 10-K for further discussion of ASC 805 purchase accounting valuation assumptions.
Deferred Income Tax Asset and Other Tax Reserves
We assess our deferred tax asset and record a valuation allowance, when necessary, to reduce our deferred
tax asset to the amount that is more likely than not to be realized. We have considered future taxable income,
taxable temporary differences and ongoing prudent and feasible tax planning strategies in assessing the need for
the valuation allowance. Should we determine that we would not be able to realize all or part of our net deferred
tax asset in the future, an adjustment to the deferred tax asset would be charged to income in the period we made
that determination.
We establish reserves when, despite our belief that our tax returns are fully supportable, we believe that
certain positions may be challenged and ultimately modified. We adjust the reserves in light of changing facts
and circumstances. Our effective tax rate includes the impact of income tax related reserve positions and changes
to income tax reserves that we consider appropriate. A number of years may elapse before a particular matter for
which we have established a reserve is finally resolved. Unfavorable settlement of any particular issue may
require the use of cash or a reduction in our net operating loss carryforwards. Favorable resolution would be
recognized as a reduction to the effective rate in the year of resolution. Tax reserves are presented on the balance
sheet in other liabilities.
See Note 9, “Income Taxes” of Notes to Consolidated Financial Statements included in this Annual Report
on Form 10-K.
Loss Contingencies
Loss contingencies are recorded as liabilities when it is probable that a loss has been incurred and the
amount of the loss can be reasonably estimated. The outcome of existing litigation, the impact of environmental
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