Rayovac 2009 Annual Report Download - page 80

Table of Contents
Index to Financial Statements
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 Statements of
Financial Position 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 3(b), Significant Accounting Policies and Practices—Revenue Recognition, Note 3(c), Significant Accounting Policies and Practices—Use
of Estimates and Note 3(e), Significant Accounting Policies and Practices—Concentrations of Credit Risk and Major Customers and Employees, of Notes to
Consolidated Financial Statements included in this Annual Report on Form 10−K for more information about our revenue recognition and credit policies.
Pensions
Our accounting for pension benefits is primarily based on a discount rate, expected and actual return on plan assets and other assumptions made by
management, and is impacted by outside factors such as equity and fixed income market performance. Pension liability is principally the estimated present
value of future benefits, net of plan assets. In calculating the estimated present value of future benefits, net of plan assets, we used discount rates of 5.0 to
11.8% in Fiscal 2009 and 5.0 to 7.0% in Fiscal 2008. In adjusting the discount rates from Fiscal 2008 to 2009, we considered the change in the general
market interest rates of debt and solicited the advice of our actuary. We believe the discount rates used are reflective of the rates at which the pension
benefits could be effectively settled.
Pension expense is principally the sum of interest and service cost of the plan, less the expected return on plan assets and the amortization of the
difference between our assumptions and actual experience. The expected return on plan assets is calculated by applying an assumed rate of return to the fair
value of plan assets. We used expected returns on plan assets of 4.5% to 8.0% in both Fiscal 2009 and Fiscal 2008. Based on the advice of our independent
actuary, we believe the expected rates of return are reflective of the long−term average rate of earnings expected on the funds invested. If such expected
returns were overstated, it would ultimately increase future pension expense. Similarly, an understatement of the expected return would ultimately decrease
future pension expense. If plan assets decline due to poor performance by the markets and/or interest rate declines our pension liability will increase,
ultimately increasing future pension expense.
Effective September 30, 2007, we adopted ASC Topic 715: “Compensation−Retirement Benefits,” formerly SFAS No. 158, “Employers’ Accounting
for Defined Benefit Pension and Other Postretirement Plans—an amendment of FASB Statements No. 87, 88, 106, and 132(R)”, (“ASC 715”). The
recognition and disclosure provisions of this statement require recognition of the overfunded or underfunded status of defined benefit pension and
postretirement plans as an asset or liability in the statement of financial position, and recognition of changes in that funded status in Accumulated Other
Comprehensive Income in the year in which the adoption
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