Rayovac 2011 Annual Report Download - page 104

SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
(In thousands, except per share amounts)
The Company enters into various promotional arrangements, primarily with retail customers, including
arrangements entitling such retailers to cash rebates from the Company based on the level of their purchases,
which require the Company to estimate and accrue the estimated costs of the promotional programs. These costs
are treated as a reduction of Net sales.
The Company also enters into promotional arrangements that target the ultimate consumer. The costs
associated with such arrangements are treated as either a reduction of Net sales or an increase of Cost of goods
sold, based on the type of promotional program. The income statement presentation of the Company’s
promotional arrangements complies with ASC Topic 605: “Revenue Recognition.” For all types of promotional
arrangements and programs, the Company monitors its commitments and uses various measures, including past
experience, to determine amounts to be recorded for the estimate of the earned, but unpaid, promotional costs.
The terms of the Company’s customer-related promotional arrangements and programs are tailored to each
customer and are documented through written contracts, correspondence or other communications with the
individual customers.
The Company also enters into various arrangements, primarily with retail customers, which require the
Company to make upfront cash, or “slotting” payments, in order to secure the right to distribute through such
customers. The Company capitalizes slotting payments; provided the payments are supported by a time or
volume based arrangement with the retailer, and amortizes 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 the accompanying Consolidated
Statements of Financial Position.
(c) Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(d) Cash Equivalents
For purposes of the accompanying Consolidated Statements of Cash Flows, the Company considers all highly
liquid debt instruments purchased with original maturities of three months or less to be cash equivalents.
(e) Concentrations of Credit Risk, Major Customers and Employees
Trade receivables subject the Company to credit risk. Trade accounts receivable are carried at net realizable
value. The Company extends credit to its customers based upon an evaluation of the customer’s financial
condition and credit history, but generally does not require collateral. The Company monitors its customers’
credit and financial condition based on changing economic conditions and will make adjustments to credit
policies as required. Provisions for losses on uncollectible trade receivables are determined based on ongoing
evaluations of the Company’s receivables, principally on the basis of historical collection experience and
evaluations of the risks of nonpayment for a given customer.
The Company has a broad range of customers including many large retail outlet chains, one of which
accounts for a significant percentage of its sales volume. This major customer represented approximately 24%,
22% and 23% of the Successor Company’s Net sales during Fiscal 2011, Fiscal 2010 and the period from
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