Black & Decker 2012 Annual Report Download - page 74

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SALES TAXES — Sales and value added taxes collected from customers and remitted to governmental authorities are
excluded from Net sales reported in the Consolidated Statements of Operations.
SHIPPING AND HANDLING COSTS — The Company generally does not bill customers for freight. Shipping and handling
costs associated with inbound freight are reported in cost of sales. Shipping costs associated with outbound freight are reported
as a reduction of net sales and amounted to $184.1 million, $160.5 million, and $130.4 million in 2012, 2011, and 2010,
respectively. Distribution costs are classified as SG&A and amounted to $205.3 million, $204.7 million and $187.9 million in
2012, 2011 and 2010, respectively.
STOCK-BASED COMPENSATION — Compensation cost relating to stock-based compensation grants is recognized on a
straight-line basis over the vesting period, which is generally four years. The expense for stock options and restricted stock
units awarded to retirement eligible employees (those aged 55 and over, and with 10 or more years of service) is recognized on
the grant date, or (if later) by the date they become retirement-eligible.
POSTRETIREMENT DEFINED BENEFIT PLAN — The Company uses the corridor approach to determine expense
recognition for each defined benefit pension and other postretirement plan. The corridor approach defers actuarial gains and
losses resulting from variances between actual and expected results (based on economic estimates or actuarial assumptions) and
amortizes them over future periods. For pension plans, these unrecognized gains and losses are amortized when the net gains
and losses exceed 10% of the greater of the market-related value of plan assets or the projected benefit obligation at the
beginning of the year. For other postretirement benefits, amortization occurs when the net gains and losses exceed 10% of the
accumulated postretirement benefit obligation at the beginning of the year. For ongoing, active plans, the amount in excess of
the corridor is amortized on a straight-line basis over the average remaining service period for active plan participants. For
plans with primarily inactive participants, the amount in excess of the corridor is amortized on a straight-line basis over the
average remaining life expectancy of inactive plan participants.
INCOME TAXES — The Company accounts for income taxes under the asset and liability method in accordance with ASC
740, "Income Taxes" ("ASC 740"), which requires the recognition of deferred tax assets and liabilities for the expected future
tax consequences of events that have been included in the financial statements. Deferred tax assets and liabilities are
determined based on the differences between the financial statements and tax basis of assets and liabilities using the enacted tax
rates in effect for the year in which the differences are expected to reverse. Any changes in tax rates on deferred tax assets and
liabilities are recognized in income in the period that includes the enactment date.
The Company records net deferred tax assets to the extent that it is more likely than not that these assets will be realized. In
making this determination, Management considers all available positive and negative evidence, including future reversals of
existing temporary differences, estimates of future taxable income, tax-planning strategies, and the realizability of net operating
loss carry forwards. In the event that it is determined that an asset is not more likely that not to be realized, a valuation
allowance is recorded against the asset. Valuation allowances related to deferred tax assets can be impacted by changes to tax
laws, changes to statutory tax rates and future taxable income levels. In the event the Company were to determine that it would
not be able to realize all or a portion of its deferred tax assets in the future, the unrealizable amount would be charged to
earnings in the period in which that determination is made. Conversely, if the Company were to determine that it would be
able to realize deferred tax assets in the future in excess of the net carrying amounts, it would decrease the recorded valuation
allowance through a favorable adjustment to earnings in the period that the determination was made.
The Company records uncertain tax positions in accordance with ASC 740, which requires a two step process. First,
management determines whether it is more likely than not that a tax position will be sustained based on the technical merits of
the position and second, for those tax positions that meet the more likely than not threshold, management recognizes the largest
amount of the tax benefit that is greater than 50 percent likely to be realized upon ultimate settlement with the related taxing
authority. The Company maintains an accounting policy of recording interest and penalties on uncertain tax positions as a
component of the income tax expense on continuing operations in the Consolidated Statement of Operations.
The Company is subject to tax in a number of locations, including many state and foreign jurisdictions. Significant judgment is
required when calculating the worldwide provision for income taxes. Many factors are considered when evaluating and
estimating the Company's tax positions and tax benefits, which may require periodic adjustments and which may not accurately
anticipate actual outcomes. It is reasonably possible that the amount of the unrecognized benefit with respect to certain of the
Company's unrecognized tax positions will significantly increase or decrease within the next 12 months. These changes may be
the result of settlements of ongoing audits or final decisions in transfer pricing matters. The Company periodically assesses its
liabilities and contingencies for all tax years still subject to audit based on the most current available information, which
involves inherent uncertainty.