Rayovac 2007 Annual Report Download - page 51

SPECTRUM BRANDS | 2007 ANNUAL REPORT 49
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Spectrum Brands, Inc.
(x) Restructuring and Related Charges
The costs of plans to (i) exit an activity of an acquired company,
(ii) involuntarily terminate employees of an acquired company, or
(iii) relocate employees of an acquired company are measured and
recorded in accordance with the provisions of EITF 95-3, “Recog-
nition of Liabilities in Connection with a Purchase Business
Combination” (“EITF 95-3”). Under EITF 95-3, if certain condi-
tions are met, such costs are recognized as a liability assumed as of
the consummation date of the purchase business combination
and included in the allocation of the acquisition cost. Costs related
to activities or employees of the acquired company that do not
meet the conditions prescribed in EITF 95-3 are treated as
restructuring and related charges and expensed as incurred.
Restructuring charges are recognized and measured accord-
ing to the provisions of SFAS No. 146, “Accounting for Costs
Associated with Exit or Disposal Activities” (“SFAS 146”). Under
SFAS 146, restructuring charges include, but are not limited to,
termination and related costs consisting primarily of severance
costs and retention bonuses, and contract termination costs
consisting primarily of lease termination costs. Related charges,
as defi ned by the Company, include, but are not limited to, other
costs directly associated with exit and integration activities,
including impairment of property and other assets, departmen-
tal costs of full-time incremental integration employees, and any
other items related to the exit or integration activities. Costs for
such activities are estimated by management after evaluating
detailed analyses of the cost to be incurred. The Company pres-
ents restructuring and related charges on a combined basis. (See
Note 16, Restructuring and Related Charges, for a more complete
discussion of restructuring initiatives and related costs).
(y) Adoption of New Accounting Pronouncements
In June 2006, the Emerging Issues Task Force (“EITF”) issued
EITF 06-3, “How Taxes Collected from Customers and Remit-
ted to Governmental Authorities Should Be Presented in the
Income Statement (That is, Gross versus Net Presentation),” to
clarify diversity in practice on the presentation of different types
of taxes in the fi nancial statements. The EITF concluded that,
for taxes within the scope of the issue, a company may adopt a
policy of presenting taxes as either gross within revenue or net.
That is, it may include charges to customers for taxes within
revenues and the charge for the taxes from the taxing authority
within cost of sales, or, alternatively, it may net the charge to the
customer and the charge from the taxing authority. If taxes are
reported on a gross basis, and are signifi cant, an entity should
disclose the amounts of those taxes subject to EITF 06-3. The
guidance is effective for interim and annual reporting periods
beginning after December 15, 2006. The Company currently
records its sales net of any value added or sales tax accordingly;
the adoption of EITF 06-3 will not have a material impact on its
fi nancial position, 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 Inter-
pretation of FASB Statement No. 109” (“FIN 48”). FIN 48 clari-
fi es the accounting for uncertainty in income taxes recognized in
an enterprise’s fi nancial statements in accordance with State-
ment of Financial Accounting Standards No. 109, “Accounting
for Income Taxes”. FIN 48 prescribes a recognition threshold
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 derecog-
nition, 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 sus-
tained upon examination, including resolution of any related
appeals or litigation processes, based on the technical merits of
the position. In evaluating whether a tax position has met the
more-likely-than-not recognition threshold, the enterprise
should presume that the position will be examined by the appro-
priate taxing authority that has full knowledge of all relevant
information. The second step is measurement, whereby a tax
position that meets the more-likely-than-not recognition thresh-
old 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 state-
ments, 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 rec-
ognition threshold at the effective date may be recognized or
continue to be recognized upon adoption of FIN 48. The cumu-
lative effect of applying the provisions of FIN 48 should be
reported as an adjustment to the opening balance of retained
earnings (or other appropriate components of equity or net
assets in the statement of fi nancial position) for that fi scal year.
The Company does not expect the adoption of FIN 48 to have a
material effect on its fi nancial condition, results of operation
and cash fl ows.
In September 2006, the FASB issued Statement of Financial
Accounting Standards 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