Black & Decker 2011 Annual Report Download - page 65

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Notes to Consolidated Financial Statements
A. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION — 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 weeks in the fiscal
years 2011, 2010, and 2009.
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 Company sold three small businesses during 2011 for total cash proceeds of $27.1 million. The largest of these businesses was
part of the Company’s Industrial segment, with the two smaller businesses being part of the Company’s Security segment. The
operating results of these three businesses have been reported as discontinued operations in the Consolidated Statement of Operations
for all periods presented.
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 amounts reported in the financial statements. 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 shareowners’ 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. 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, Inventories, 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, at historical cost less accumulated depreciation and amortization. Costs related to maintenance and repairs which
do not prolong the assets useful life are expensed as incurred. Depreciation and amortization are provided using straight-line methods
over the estimated useful lives of the assets as follows:
Useful
Life
(Years)
Land improvements ................................
................................
10 —20
Buildings................................................................
..................
40
Machinery and equipment ................................
.......................
3 — 15
Computer software ................................
................................
3 — 5