Rayovac 2008 Annual Report Download - page 69

Table of Contents
Index to Financial Statements
Liabilities from restructuring and related charges are recorded for estimated costs of facility closures, significant organizational adjustment and measures
undertaken by management to exit certain activities. Costs for such activities are estimated by management after evaluating detailed analyses of the cost to be
incurred. Such liabilities could include amounts for items such as severance costs and related benefits (including settlements of pension plans), impairment of
property and equipment and other current or long term assets, lease termination payments and any other items directly related to the exit activities. While the
actions are carried out as expeditiously as possible, restructuring and related charges are estimates. Changes in estimates resulting in an increase to or a reversal
of a previously recorded liability may be required as management executes a restructuring plan.
We report restructuring and related charges associated with manufacturing and related initiatives in cost of goods sold. Restructuring and related charges
reflected in cost of goods sold include, but are not limited to, termination and related costs associated with manufacturing employees, asset impairments relating
to manufacturing initiatives and other costs directly related to the restructuring initiatives implemented.
We report restructuring and related charges associated with administrative functions in operating expenses, such as initiatives impacting sales, marketing,
distribution or other non-manufacturing related functions. Restructuring and related charges reflected in operating expenses include, but are not limited to,
termination and related costs, any asset impairments relating to the administrative functions and other costs directly related to the initiatives implemented.
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 the EITF Issue No. 95-3, “Recognition of Liabilities in Connection with
a Purchase Business Combination” (“EITF 95-3”). Under EITF 95-3, if certain conditions 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 terminated 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.
See Note 16, Restructuring and Related Charges, of Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K for a
more complete discussion of our restructuring initiatives and related costs.
Loss Contingencies
Loss contingencies are recorded as liabilities when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. The
outcome of existing litigation, the impact of environmental matters and pending or potential examinations by various taxing authorities are examples of situations
evaluated as loss contingencies. Estimating the probability and magnitude of losses is often dependent upon management’s judgment of potential actions by third
parties and regulators. It is possible that changes in estimates or an increased probability of an unfavorable outcome could materially affect future results of
operations.
See further discussion in Item 3, “Legal Proceedings,” and Note 14, Commitments and Contingencies, of Notes to the Consolidated Financial Statements
included in this Annual Report on Form 10-K.
Other Significant Accounting Policies
Other significant accounting policies, primarily those with lower levels of uncertainty than those discussed above, are also critical to understanding the
Consolidated Financial Statements. The Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K contain additional
information related to our accounting policies and should be read in conjunction with this discussion.
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Source: Spectrum Brands, Inc, 10-K, December 10, 2008