Rayovac 2009 Annual Report Download - page 79

Table of Contents
Index to Financial Statements
light of a sustained decline in market capitalization coupled with the decline of the fair value of our debt securities, we also considered these factors in the
Fiscal 2008 annual impairment testing.
In accordance with ASC 740, we establish valuation allowances for deferred tax assets when we estimate it is more likely than not that the tax assets
will not be realized. We base these estimates on projections of future income, including tax−planning strategies, by individual tax jurisdictions. Changes in
industry and economic conditions and the competitive environment may impact the accuracy of our projections. In accordance with ASC 740, during each
reporting period we assess the likelihood that our deferred tax assets will be realized and determine if adjustments to the valuation allowance are
appropriate. As a result of this assessment, during Fiscal 2009 we recorded a reduction in the valuation allowance of approximately $363 million. Of the
total, $314 million was recorded as a non−cash deferred income tax benefit and $49 million as a reduction to goodwill. During Fiscal 2008 and Fiscal 2007
we recorded a non−cash deferred income tax charge of approximately $200 million and $245 million, respectively, related to increasing the valuation
allowance against our net deferred tax assets.
See Note 3(h), Significant Accounting Policies and Practices—Property, Plant and Equipment, Note 3(i), Significant Accounting Policies and
Practices—Intangible Assets, Note 5, Property, Plant and Equipment, Note 6, Assets Held for Sale, Note 7, Goodwill and Intangible Assets, Note 9, Income
Taxes, and Note 10, Discontinued Operations, of Notes to Consolidated Financial Statements included in this Annual Report on Form 10−K for more
information about these assets.
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
ASC Topic 605: “Revenue Recognition,” formerly the 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.
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