Rayovac 2009 Annual Report Download - page 157

Table of Contents
Index to Financial Statements SPECTRUM BRANDS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(In thousands, except per share amounts)
(h) Property, Plant and Equipment
Property, plant and equipment are stated at lower of cost or at fair value if acquired in a purchase business combination. Depreciation on plant and
equipment is calculated on the straight−line method over the estimated useful lives of the assets. Depreciable lives by major classification are as follows:
Building and improvements 20−40 years
Machinery, equipment and other 2−15 years
Plant and equipment held under capital leases are amortized on a straight−line basis over the shorter of the lease term or estimated useful life of the
asset.
The Company reviews long−lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. The Company evaluates recoverability of assets to be held and used by comparing the carrying amount of an asset to future net cash
flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by
which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair
value less costs to sell.
(i) Intangible Assets
Intangible assets are recorded at cost or at fair value if acquired in a purchase business combination. In connection with fresh−start reporting, Intangible
Assets were recorded at their estimated fair value on August 30, 2009. Customer lists and proprietary technology intangibles are amortized, using the
straight−line method, over their estimated useful lives of approximately 4 to 20 years. Excess of cost over fair value of net assets acquired (goodwill) and
indefinite−lived intangible assets (certain trade name intangibles) are not amortized. Goodwill is tested for impairment at least annually, at the reporting unit
level with such groupings being consistent with the Company’s reportable segments. If impairment is indicated, a write−down to fair value (normally
measured by discounting estimated future cash flows) is recorded. Indefinite−lived trade name intangibles are tested for impairment at least annually by
comparing the fair value, determined using a relief from royalty methodology, with the carrying value. Any excess of carrying value over fair value is
recognized as an impairment loss in income from operations. ASC Topic 350: “Intangibles−Goodwill and Other,” formerly SFAS No. 142, “Goodwill and
Other Intangible Assets,” (“ASC 350”) requires that goodwill and indefinite−lived intangible assets be tested for impairment annually, or more often if an
event or circumstance indicates that an impairment loss may have been incurred. During the eleven month period ended August 30, 2009 Fiscal 2008 and
Fiscal 2007, the Predecessor Company’s goodwill and trade name intangibles where tested for impairment as of the Company’s August financial period end,
the annual testing date for the Company, as well as certain interim periods where an event or circumstance occurred that indicated an impairment loss may
have been incurred.
Intangibles with Indefinite Lives
In accordance with ASC 350, the Company conducts impairment testing on the Company’s goodwill. To determine fair value during the eleven
month period ended August 30, 2009, Fiscal 2008 and Fiscal 2007 the Company used the discounted estimated future cash flows methodology, third party
valuations and negotiated sales prices. Assumptions critical to the Company’s fair value estimates under the discounted estimated future cash flows
methodology are: (i) the present value factors used in determining the fair value of the reporting units and trade names; (ii) royalty rates used in the
Company’s trade name valuations; (iii) projected average revenue growth rates used in the reporting unit and trade name models; and (iv) projected
long−term growth rates used in
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