Rayovac 2014 Annual Report Download - page 74

We enter into various promotional arrangements, primarily with retail customers, including arrangements
entitling such retailers to cash rebates from us based on the level of their purchases, which require us to estimate
and accrue the costs of the promotional programs. These costs are generally treated as a reduction of net sales.
We also enter into promotional arrangements that target the ultimate consumer. Such arrangements are
treated as either a reduction in net sales or an increase in cost of sales, based on the type of promotional program.
The income statement presentation of our promotional arrangements complies with ASC Topic 605: “Revenue
Recognition.” Cash consideration, or an equivalent thereto, given to a customer is generally classified as a
reduction of net sales. If we provide a customer anything other than cash, the cost of the consideration is
classified as an expense and included in cost of sales.
For all types of promotional arrangements and programs, we monitor our commitments and use statistical
measures and past experience to determine the amounts to be recorded for the estimate of the earned, but unpaid,
promotional costs. The terms of our customer-related promotional arrangements and programs are tailored to
each customer and are generally documented through written contracts, correspondence or other communications
with the individual customers.
We also enter into various arrangements, primarily with retail customers, which require us to make an
upfront cash or “slotting” payment to secure the right to distribute through such customer. We capitalize slotting
payments provided the payments are supported by a time or volume based arrangement with the retailer, and
amortize 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 our Consolidated Statements of Financial Position included in this Annual Report
on Form 10-K.
Our trade receivables subject us to credit risk which is evaluated based on changing economic, political and
specific customer conditions. We assess these risks and make provisions for the ability to collect based on our
best estimate of the risks presented and information available at the date of the financial statements. The use of
different assumptions may change our estimate of the ability to collect. We extend credit to our customers based
upon an evaluation of the customer’s financial condition and credit history and generally do not require
collateral. Our credit terms generally range between 30 and 90 days from invoice date, depending upon the
evaluation of the customer’s financial condition and history. We monitor our customers’ credit and financial
condition in order to assess whether the economic conditions have changed and adjust our credit policies with
respect to any individual customer as we determine appropriate. These adjustments may include, but are not
limited to, restricting shipments to customers, reducing credit limits, shortening credit terms, requiring cash
payments in advance of shipment or securing credit insurance.
See Note 2(b), “Significant Accounting Policies and Practices—Revenue Recognition;” Note 2(c),
“Significant Accounting Policies and Practices—Use of Estimates” and Note 2(e), “Significant Accounting
Policies and Practices—Concentrations of Credit Risk and Major Customers;” of Notes to Consolidated Financial
Statements included in 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 a 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. Our 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, we used
discount rates of 2.0% to 13.5% in Fiscal 2014 and of 1.8% to 13.0% in Fiscal 2013. In adjusting the discount
rates from Fiscal 2013 to Fiscal 2014, 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 are reflective of the rates at which the
pension benefits could be effectively settled.
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