Rayovac 2015 Annual Report Download - page 81

activities are estimated by us after evaluating detailed analyses of the costs to be incurred. Such liabilities could
include amounts for items such as severance costs and related benefits (including settlements of pension plans),
impairment of property and equipment and other current or long term assets, lease termination payments and any
other items directly related to the exit activities.
Restructuring and related charges associated with manufacturing and related initiatives are reported in cost
of goods sold. Restructuring and related charges reflected in cost of goods sold include, but are not limited to,
termination and related costs associated with manufacturing employees, asset impairments relating to
manufacturing initiatives and other costs directly related to the restructuring initiatives implemented.
Restructuring and related charges associated with administrative functions are reported in operating expenses,
such as initiatives impacting sales, marketing, distribution or other non-manufacturing related functions.
Restructuring and related charges reflected in operating expenses include, but are not limited to, termination and
related costs, any asset impairments relating to the administrative functions and other costs directly related to the
initiatives implemented.
While the actions are carried out as expeditiously as possible, restructuring and related charges are
estimates. Changes in estimates resulting in an increase to or a reversal of a previously recorded liability may be
required as we execute a restructuring plan. See Note 4, “Restructuring and Related Charges” of Notes to
Consolidated Financial Statements included elsewhere in this Annual Report for a more complete discussion of
our restructuring initiatives and related costs.
Income Taxes
The Company is subject to income taxes in the U.S. and numerous foreign jurisdictions. Significant
judgment is required in determining our worldwide provision for income taxes and recording the related deferred
tax assets and liabilities.
The Company assesses its income tax positions and records tax liabilities for all years subject to
examination based upon management’s evaluation of the facts and circumstances and information available for
reporting. For those income tax positions where it is more-likely-than-not that a tax benefit will not be sustained
upon conclusion of an examination, the Company has recorded a reserve based upon the largest amount of tax
benefit having a cumulatively greater than 50% likelihood of being realized upon ultimate settlement with the
applicable taxing authority assuming that it has full knowledge of all relevant information. For those income tax
positions where it is more-likely-than-not that a tax benefit will be sustained, the Company did not recognize a
reserve. As of September 30, 2015, the total amount of unrecognized tax benefits, including interest and
penalties, that if not recognized, would affect the effective tax rate in future periods was $14.3 million. Our
effective tax rate includes the impact of income tax reserves and changes to those reserves when considered
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.
The Company recognizes deferred tax assets and liabilities for future tax consequences attributable to
differences between financial statement carrying amounts of existing assets and liabilities and their respective tax
bases, net operating losses, tax credit, and other carryforwards. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled. The Company regularly reviews its deferred tax assets for recoverability and
establishes a valuation allowance based on historical losses, projected future taxable income, expected timing of
the reversals of existing temporary differences, and ongoing prudent and feasible tax planning strategies. We
base these estimates on projections of future income, including tax planning strategies, in certain jurisdictions.
Changes in industry conditions and other economic conditions may impact our ability to project future income.
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 make that determination.
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