Rayovac 2010 Annual Report Download - page 93

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 ASC 805. Under ASC 805, 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 ASC 805 are treated as restructuring and related
charges and expensed as incurred.
See Note 14, 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 our business, financial condition or
results of operations.
See further discussion in Item 3, Legal Proceedings, and Note 12, 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 included in this Annual Report on
Form 10-K. The Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K
contain additional information related to our accounting policies, including recent accounting pronouncements,
and should be read in conjunction with this discussion.
83