Rayovac 2006 Annual Report Download - page 89

SPECTRUM BRANDS | 2006 ANNUAL REPORT 77
statement of fi nancial position is effective for fi scal years ending
after December 15, 2008. As of September 30, 2006, the
Company’s net unfunded benefi t obligation was approximately
$55,000; accordingly, the adoption of SFAS 158 will have a mate-
rial impact on its fi nancial condition.
In September 2006, the Securities and Exchange Commission
(“SEC”) staff issued Staff Accounting Bulletin (“SAB”) Topic 1N,
“Financial Statements—Considering the Effects of Prior Year
Misstatements when Quantifying Misstatements in Current Year Financial
Statements,” (“SAB 108”). SAB 108 provides guidance on how to
evaluate prior period fi nancial statement misstatements for pur-
poses of assessing their materiality in the current period. If the
prior period effect is material to the current period, then the
prior period is required to be corrected. Correcting prior year
fi nancial statements would not require an amendment of prior
year fi nancial statements, but such corrections would be made
the next time the Company fi les the prior year fi nancial state-
ments. Upon adoption, SAB 108 allows a one-time transitional
cumulative effect adjustment to retained earnings for corrections
of prior period misstatements required under this statement.
SAB 108 is effective for fi scal years beginning after November 15,
2006. The Company does not believe the adoption of SAB 108 will
have a material impact on its fi nancial position, results of opera-
tions or cash fl ows.
In September 2006, the FASB issued FASB Statement No. 157,
“Fair Value Measurements,” (“SFAS 157”). SFAS 157 provides
guidance for using fair value to measure assets and liabilities.
The FASB believes SFAS 157 also responds to investors’ requests
for expanded information about the extent to which companies
measure assets and liabilities at fair value, the information used
to measure fair value and the effect of fair value measurements
on earnings. SFAS 157 applies whenever other standards
require (or permit) assets or liabilities to be measured at fair
value but does not expand the use of fair value in any new cir-
cumstances. Under SFAS 157, fair value refers to the price that
would be received to sell an asset or paid to transfer a liability
in an orderly transaction between market participants in the
market in which the reporting entity transacts. In SFAS 157,
the FASB clarifi es the principle that fair value should be based
on the assumptions market participants would use when pric-
ing the asset or liability. In support of this principle, SFAS 157
establishes a fair value hierarchy that prioritizes the informa-
tion used to develop those assumptions. The fair value hierarchy
gives the highest priority to quoted prices in active markets and
the lowest priority to unobservable data, for example, the
reporting entity’s own data. Under SFAS 157, fair value mea-
surements would be separately disclosed by level within the fair
value hierarchy. The provisions of SFAS 157 are effective for
fi nancial statements issued for fi scal years beginning after
November 15, 2007, and interim periods within those fi scal
years. Earlier application is encouraged, provided that the
reporting entity has not yet issued fi nancial statements for that
fi scal year, including any fi nancial statements for an interim
period within that fi scal year. The Company is currently evalu-
ating the impact that SFAS 157 will have on its fi nancial condi-
tion, results of operations or cash fl ows.
In July 2006, the FASB issued FASB Interpretation (“FIN”)
No. 48, “Accounting for Uncertainty in Income Taxes—An Interpretation
of FASB Statement No. 109,” (“FIN 48”). FIN 48 clarifi es the account-
ing for uncertainty in income taxes recognized in an enterprise’s
fi nancial statements in accordance with FASB Statement No. 109,
Accounting for Income Taxes. FIN 48 prescribes a recognition thresh-
old and measurement attribute for the fi nancial statement recogni-
tion and measurement of a tax position taken or expected to be
taken in a tax return. FIN 48 also provides guidance on de-recogni-
tion, classifi cation, interest and penalties, accounting in interim
periods, disclosure and transition. The evaluation of a tax position
in accordance with FIN 48 is a two-step process. The fi rst step is
recognition whereby the enterprise determines whether it is more
likely than not that a tax position will be sustained upon examina-
tion, including resolution of any related appeals or litigation pro-
cesses, based on the technical merits of the position. In evaluating
whether a tax position has met the more-likely-than-not recogni-
tion threshold, the enterprise should presume that the position will
be examined by the appropriate taxing authority that has full
knowledge of all relevant information. The second step is measure-
ment whereby a tax position that meets the more-likely-than-not
recognition threshold is calculated to determine the amount of
benefi t to recognize in the fi nancial statements. The tax position is
measured at the largest amount of benefi t that is greater than 50%
likely of being realized upon ultimate settlement. The provisions of
FIN 48 are effective for fi scal years beginning after December 15,
2006. Earlier application is permitted as long as the enterprise has
not yet issued fi nancial statements, including interim fi nancial
statements, in the period of adoption. The provisions of FIN 48 are
to be applied to all tax positions upon initial adoption of this stan-
dard. Only tax positions that meet the more-likely-than-not recog-
nition threshold at the effective date may be recognized or continue
to be recognized upon adoption of FIN 48. The cumulative effect of
applying the provisions of FIN 48 should be reported as an adjust-
ment to the opening balance of retained earnings (or other appro-
priate components of equity or net assets in the statement of
fi nancial position) for that fi scal year. The Company is currently
evaluating the impact that FIN 48 will have on its fi nancial condi-
tion, results of operations or cash fl ows.
2006 Form 10-K Annual Report
Spectrum Brands, Inc.