Rayovac 2011 Annual Report Download - page 86

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, home and
garden, small appliances 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.” 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.
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 2(b), Significant Accounting Policies and Practices—Revenue Recognition; Note 2(c), Significant
Accounting Policies and Practices—Use of Estimates and Note 2(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.
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