Sunbeam 2002 Annual Report Download - page 32

Jarden Corporation
Notes to Consolidated Financial Statements (Continued)
Cash and Cash Equivalents
Cash equivalents include financial investments with a maturity of three months or less when purchased.
Inventories
Inventories are stated at the lower of cost, determined on the first-in, first-out method, or market.
Property, Plant and Equipment
Property, plant and equipment are recorded at cost. Maintenance and repair costs are charged to expense
as incurred, and expenditures that extend the useful lives of the assets are capitalized. The Company reviews
property, plant and equipment for impairment whenever events or circumstances indicate that carrying
amounts may not be recoverable through future undiscounted cash flows, excluding interest cost.
Depreciation
Depreciation is calculated on the straight-line basis in amounts sufficient to amortize the cost of the assets
over their estimated useful lives (buildings – 30 to 50 years; machinery and equipment–3to20years).
Intangible Assets
Intangible assets consist principally of goodwill and intangible assets recorded in connection with brand
names and manufacturing processes expertise. Goodwill represents the excess of the purchase prices of
acquired businesses over the estimated fair values of the net assets acquired. In conjunction with new
accounting guidance (see Note 2) the Company’s goodwill and intangible assets that are deemed to have
indefinite lives are no longer amortized but are subject to annual impairment tests. Other intangible assets are
amortized over their useful lives and are evaluated for impairment whenever events or circumstances indicate
that carrying amounts may not be recoverable through future undiscounted cash flows, excluding interest
costs. If facts or circumstances suggest that the Company’s intangible assets are impaired, the Company
assesses the fair value of the intangible assets and reduces them to an amount that results in book value
approximating fair value.
Taxes on Income
Deferred taxes are provided for differences between the financial statement and tax basis of assets and
liabilities using enacted tax rates. The Company established a valuation allowance against a portion of the net
tax benefit associated with all carryforwards and temporary differences at December 31, 2001, as it was more
likely than not that these would not be fully utilized in the available carryforward period. A portion of this
valuation allowance remains as of December 31, 2002 (see Note 10).
Fair Value and Credit Risk of Financial Instruments
The carrying values of cash and cash equivalents, accounts receivable, notes payable, accounts payable
and accrued liabilities approximate their fair market values due to the short-term maturities of these
instruments. The fair market value of the Company’s senior subordinated notes was determined based on
quoted market prices (see Note 9). The fair market value of the Company’s other long-term debt was estimated
using rates currently available to the Company for debt with similar terms and maturities (see Note 9).
The Company enters into interest rate swaps to manage interest rate exposures. The Company designates
the interest rate swaps as hedges of underlying debt. Interest expense is adjusted to include the payment made
or received under the swap agreements. The fair market value of the swap agreements was estimated based on
the current market value of similar instruments (see Note 16).
Financial instruments that potentially subject the Company to credit risk consist primarily of trade
receivables and interest-bearing investments. Trade receivable credit risk is limited due to the diversity of the
Company’s customers and the Company’s ongoing credit review procedures. Collateral for trade receivables is
generally not required. The Company places its interest-bearing cash equivalents with major financial
institutions.
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