Black & Decker 2010 Annual Report Download - page 78

Notes to Consolidated Financial Statements
A. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION — On March 12, 2010 a wholly owned subsidiary of The Stanley Works was
merged with and into The Black & Decker Corporation (“Black & Decker”), with the result that Black &
Decker became a wholly owned subsidiary of The Stanley Works (the “Merger”). In connection with the
Merger, The Stanley Works changed its name to Stanley Black & Decker, Inc. The results of the operations
and cash flows of Black & Decker have been included in the Company’s consolidated financial statements
from the time of the consummation of the Merger on March 12, 2010 (see Note E, Merger and Acquisitions).
The Consolidated Financial Statements include the accounts of Stanley Black & Decker, Inc. and its majority-
owned subsidiaries (collectively the “Company”) which require consolidation, after the elimination of
intercompany accounts and transactions. The Company’s fiscal year ends on the Saturday nearest to
December 31. There were 52, 52 and 53 weeks in the fiscal years 2010, 2009 and 2008, respectively.
The preparation of financial statements in conformity with accounting principles generally accepted in the
United States of America requires management to make estimates and assumptions that affect the reported
amounts of assets, liabilities, revenues and expenses, as well as certain financial statement disclosures. While
management believes that the estimates and assumptions used in the preparation of the financial statements are
appropriate, actual results could differ from these estimates.
FOREIGN CURRENCY — For foreign operations with functional currencies other than the U.S. dollar, asset
and liability accounts are translated at current exchange rates; income and expenses are translated using
weighted-average exchange rates. Translation adjustments are reported in a separate component of share-
owners’ equity and exchange gains and losses on transactions are included in earnings.
CASH EQUIVALENTS — Highly liquid investments with original maturities of three months or less are
considered cash equivalents.
ACCOUNTS AND FINANCING RECEIVABLE — Trade receivables are stated at gross invoice amount less
discounts, other allowances and provision for uncollectible accounts and financing receivables are initially
recorded at fair value, less impairments or provisions for credit losses. Interest income earned from financing
receivables that are not delinquent is recorded on the effective interest method. The Company considers any
financing receivable that has not been collected within 90 days of original billing date as past-due or
delinquent. Additionally, the Company considers the credit quality of all past-due or delinquent financing
receivables as nonperforming.
ALLOWANCE FOR DOUBTFUL ACCOUNTS — The Company estimates its allowance for doubtful
accounts using two methods. First, a specific reserve is established for individual accounts where information
indicates the customers may have an inability to meet financial obligations. Second, a reserve is determined
for all customers based on a range of percentages applied to aging categories. These percentages are based on
historical collection and write-off experience. Actual write-offs are charged against the allowance when
collection efforts have been unsuccessful.
INVENTORIES — U.S inventories are predominantly valued at the lower of Last-In First-Out (“LIFO”) cost
or market because the Company believes it results in better matching of costs and revenues. Other inventories
are valued at the lower of First-In, First-Out (“FIFO”) cost or market because LIFO is not permitted for
statutory reporting outside the U.S. See Note C, Inventory, for a quantification of the LIFO impact on
inventory valuation.
PROPERTY, PLANT AND EQUIPMENT — The Company generally values property, plant and equipment
(“PP&E”), including capitalized software, on the basis of historical cost less accumulated depreciation and
amortization. Costs related to maintenance and repairs which do not prolong the assets’ useful lives are
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