Rayovac 2015 Annual Report Download - page 82

As of September 30, 2015, we have U.S. federal net operating loss carryforwards (“NOLs”) of
$894.5 million, with a federal tax benefit of $313.1 million and future tax benefits related to state NOLs of
$68.7 million and capital loss carryforwards of $14.2 million with a federal and state tax benefit of $5.4 million.
Our total valuation allowance for the tax benefit of deferred tax assets that may not be realized is $305.4 million
at September 30, 2015. Of this amount, $268.7 million relates to U.S. net deferred tax assets and $36.7 million
relates to foreign net deferred tax assets. For the year ended September 30, 2015, we generated domestic pretax
profits of $3.4 million. Should we continue to generate domestic pretax profits in subsequent periods, there is a
reasonable possibility that some or most of the domestic valuation allowance of $268.7 million could be released
at some future date, which could result in a material tax benefit. We estimate that $118.6 million of valuation
allowance related to domestic deferred tax assets cannot be released regardless of the amount of domestic
operating income generated due to prior period ownership changes that limit the amount of NOLs we can use and
legal limitations on the use of capital losses.
As of September 30, 2015, we have provided no residual US taxes on earnings not yet taxed in the U.S. Due
to the valuation allowance recorded against U.S. net deferred tax assets, including NOLs, we do not recognize
any incremental U.S. tax expense on the expected future repatriation of foreign earnings. Should the U.S.
valuation allowance be released at some future date, the U.S. tax on future foreign earnings not considered to be
permanently reinvested might have a material effect on our effective tax rate. As of September 30, 2015, we
project $2.4 million of additional tax expense from non-U.S. withholding and other taxes expected to be incurred
on repatriation of foreign earnings.
See Note 13, “Income Taxes” of Notes to Consolidated Financial Statements elsewhere included in this
Annual Report.
New Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update
(“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue
recognition requirements in ASC 605, Revenue Recognition. This ASU requires revenue recognition to depict the
transfer of goods and services to customers in an amount that reflects the consideration to which the entity
expects to be entitled in exchange for those goods or services. The new revenue recognition model requires
identifying the contract and performance obligations, determining the transaction price, allocating the transaction
price to performance obligations and recognizing the revenue upon satisfaction of performance obligations. This
ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash
flows arising from customer contracts, including significant judgments and changes in judgements, and assets
recognized from costs incurred to obtain or fulfill a contract. This ASU can be applied either retrospectively to
each prior reporting period presented or retrospectively with the cumulative effect of initially applying the
updates recognized at the date of the initial application along with additional disclosures. In August 2015, the
FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606) Deferral of the Effective
Date, which amends the previously issued ASU to provide for a one year deferral from the original effective
date. As a result, the ASU will become effective for us beginning in the first quarter of our fiscal year ending
September 30, 2019, with early application only being for us beginning in the first quarter of our fiscal year
ending September 30, 2018. We are currently assessing the impact this pronouncement will have on the
consolidated financial statements of the Company.
In August 2015, the FASB issued ASU 2015-16, Business Combinations (Topic 805): Simplifying the
Accounting for Measurement-Period Adjustments. The amendments require that an acquirer (i) recognize
measurement period adjustments to estimated amounts in the reporting period in which the adjustment amounts
are determined; (ii) record, in the same period’s financial statements, the effect on earnings of changes in
depreciation, amortization, or other income effects, if any, as a result of the change to the estimated amounts,
calculated as if the accounting had been completed at the acquisition date; and (iii) present separately on the face
of the income statement or disclose in the notes the portion of the amount recorded in current period earnings by
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