Rayovac 2008 Annual Report Download - page 67

Table of Contents
Index to Financial Statements
Revenue Recognition and Concentration of Credit Risk
We recognize revenue from product sales generally upon delivery to the customer or the shipping point in situations where the customer picks up the
product or where delivery terms so stipulate. This represents the point at which title and all risks and rewards of ownership of the product are passed, provided
that: there are no uncertainties regarding customer acceptance; there is persuasive evidence that an arrangement exists; the price to the buyer is fixed or
determinable; and collectibility is deemed reasonably assured. We are generally not obligated to allow for, and our general policy is not to accept, product returns
for battery sales. We do accept returns in specific instances related to our electric shaving and grooming, electric personal care, lawn and garden, household
insect control and pet supply products. The provision for customer returns is based on historical sales and returns and other relevant information. We estimate
and accrue the cost of returns, which are treated as a reduction of net sales.
We enter into various promotional arrangements, primarily with retail customers, including arrangements entitling such retailers to cash rebates from us
based on the level of their purchases, which require us to estimate and accrue the costs of the promotional programs. These costs are generally treated as a
reduction of net sales.
We also enter into promotional arrangements that target the ultimate consumer. Such arrangements are treated as either a reduction of net sales or an
increase in cost of sales, based on the type of promotional program. The income statement presentation of our promotional arrangements complies with Emerging
Issues Task Force (“EITF”) No. 01-09, “Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor’s Products).” Cash
consideration, or an equivalent thereto, given to a customer is generally classified as a reduction of net sales. If we provide a customer anything other than cash,
the cost of the consideration is classified as an expense and included in cost of sales.
For all types of promotional arrangements and programs, we monitor our commitments and use statistical measures and past experience to determine the
amounts to be recorded for the estimate of the earned, but unpaid, promotional costs. The terms of our customer-related promotional arrangements and programs
are tailored to each customer and are generally documented through written contracts, correspondence or other communications with the individual customers.
We also enter into various arrangements, primarily with retail customers, which require us to make an upfront cash, or “slotting” payment, to secure the
right to distribute through such customer. We capitalize slotting payments, provided the payments are supported by a time or volume based arrangement with the
retailer, and amortize the associated payment over the appropriate time or volume based term of the arrangement. The amortization of slotting payments is treated
as a reduction in net sales and a corresponding asset is reported in Deferred charges and other in our Consolidated Balance Sheets included in this Annual Report
on Form 10-K.
Our trade receivables subject us to credit risk which is evaluated based on changing economic, political and specific customer conditions. We assess these
risks and make provisions for collectibility based on our best estimate of the risks presented and information available at the date of the financial statements. The
use of different assumptions may change our estimate of collectibility. We extend credit to our customers based upon an evaluation of the customer’s financial
condition and credit history and generally do not require collateral. Our credit terms generally range between 30 and 90 days from invoice date, depending upon
the evaluation of the customer’s financial condition and history. We monitor our customers’ credit and financial condition in order to assess whether the
economic conditions have changed and adjust our credit policies with respect to any individual customer as we determine appropriate. These adjustments may
include, but are not limited to, restricting shipments to customers, reducing credit limits, shortening credit terms, requiring cash payments in advance of shipment
or securing credit insurance.
See Note 2(b), Significant Accounting Policies and Practices—Revenue Recognition, Note 2(c), Significant Accounting Policies and Practices—Use of
Estimates and Note 2(e), Significant Accounting Policies and
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Source: Spectrum Brands, Inc, 10-K, December 10, 2008