Rayovac 2012 Annual Report Download - page 78

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.
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. Our 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 4.0% to 13.5% in Fiscal 2012 and of 4.2% to 13.6% in Fiscal 2011. In adjusting the discount
rates from Fiscal 2011 to 2012, 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 4.0% to 7.8% in Fiscal 2012 and 3.0% to 7.8% in Fiscal 2011. 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 and required funding contributions. Similarly, an understatement of the expected
return would ultimately decrease future pension expense and required funding contributions. If plan assets
decline due to poor performance by the markets and/or interest rates decline resulting in a lower discount rate,
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