Rayovac 2011 Annual Report Download - page 108

SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
(In thousands, except per share amounts)
be recovered through projected undiscounted future cash flows. If projected undiscounted future cash flows
indicate that the carrying value of the assets will not be recovered, an adjustment would be made to reduce the
carrying value to an amount equal to estimated fair value determined based on projected future cash flows
discounted at the Company’s incremental borrowing rate. The cash flow projections used in estimating fair value
are based on historical performance and management’s estimate of future performance, giving consideration to
existing and anticipated competitive and economic conditions.
Impairment reviews are conducted at the judgment of management when it believes that a change in
circumstances in the business or external factors warrants a review. Circumstances such as the discontinuation of
a product or product line, a sudden or consistent decline in the sales forecast for a product, changes in technology
or in the way an asset is being used, a history of operating or cash flow losses, or an adverse change in legal
factors or in the business climate, among others, may trigger an impairment review.
(j) Debt Issuance Costs
Debt issuance costs are capitalized and amortized to interest expense using the effective interest method over the
lives of the related debt agreements.
(k) Accounts Payable
Included in accounts payable are book overdrafts, net of deposits on hand, on disbursement accounts that are
replenished when checks are presented for payment.
(l) Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry
forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes
enactment date. The Company recognizes the effect of income tax positions only if those positions are more
likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is
greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in
which the change in judgment occurs. Accrued interest expense and penalties related to uncertain tax positions
are recorded in Income tax expense.
(m) Foreign Currency Translation
Local currencies are considered the functional currencies for most of the Company’s operations outside the
United States. Assets and liabilities of the Company’s foreign subsidiaries are translated at the rate of exchange
existing at year-end, with revenues, expenses, and cash flows translated at the average of the monthly exchange
rates. Adjustments resulting from translation of the financial statements are recorded as a component of
Accumulated other comprehensive income (loss) (“AOCI”). Also included in AOCI are the effects of exchange
rate changes on intercompany balances of a long-term nature.
As of September 30, 2011 and September 30, 2010, accumulated gains related to foreign currency
translation adjustments of $8,377 and $18,492, respectively, were reflected in the accompanying Consolidated
Statements of Financial Position in AOCI.
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