Rayovac 2013 Annual Report Download - page 97

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SPECTRUM BRANDS HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
(Amounts in thousands, except per share figures)
intangibles are tested for impairment at least annually by comparing the fair value, determined using a relief from
royalty methodology, with the carrying value. Any excess of carrying value over fair value is recognized as an
impairment loss in income from operations.
ASC Topic 350: “Intangibles-Goodwill and Other,” (“ASC 350”) requires that goodwill and indefinite-
lived intangible assets be tested for impairment annually, or more often if an event or circumstance indicates that
an impairment loss may have been incurred. The Company’s management uses its judgment in assessing whether
assets may have become impaired between annual impairment tests. Indicators such as unexpected adverse
business conditions, economic factors, unanticipated technological change or competitive activities, loss of key
personnel, and acts by governments and courts may signal that an asset has become impaired.
During Fiscal 2013, Fiscal 2012 and Fiscal 2011, the Company’s goodwill and trade name intangibles were
tested for impairment as of the Company’s August financial period end, the Company’s annual testing date, as
well as in certain interim periods where an event or circumstance occurred that indicated an impairment loss may
have been incurred.
Intangibles with Indefinite Lives
In accordance with ASC 350, the Company conducts impairment testing on the Company’s goodwill. To
determine fair value during Fiscal 2013, Fiscal 2012 and Fiscal 2011, the Company used the discounted
estimated future cash flows methodology. Assumptions critical to the Company’s fair value estimates under the
discounted estimated future cash flows methodology are: (i) the present value factors used in determining the fair
value of the reporting units and trade names; (ii) projected average revenue growth rates used in estimating future
cash flows for the reporting unit; and (iii) projected long-term growth rates used in the derivation of terminal year
values. These and other assumptions are impacted by economic conditions and expectations of management and
will change in the future based on period specific facts and circumstances. The Company also tested the
aggregate estimated fair value of its reporting units for reasonableness by comparison to the total market
capitalization of the Company, which includes both its equity and debt securities.
In addition, in accordance with ASC 350, as part of the Company’s annual impairment testing, the Company
tested its indefinite-lived trade name intangible assets for impairment by comparing the carrying amount of such
trade names to their respective fair values. Fair value was determined using a relief from royalty methodology.
Assumptions critical to the Company’s fair value estimates under the relief from royalty methodology were:
(i) royalty rates, (ii) projected average revenue growth rates, and (iii) applicable discount rates.
In connection with the Company’s annual goodwill impairment testing performed during Fiscal 2013, Fiscal
2012 and Fiscal 2011, the first step of such testing indicated that the fair value of the Company’s reporting
segments were in excess of their carrying amounts and, accordingly, no further testing of goodwill was required.
During Fiscal 2013, the Company concluded that the fair value of its intangible assets exceeded their
carrying value.
During Fiscal 2012, the Company concluded that the fair value of its intangible assets exceeded their
carrying value. Additionally, during Fiscal 2012 the Company reclassified $3,450 of certain trade names from
indefinite lived to definite lived. These trade names are being amortized over their remaining useful lives, which
have been estimated to be 1-3 years.
In connection with its annual impairment testing of indefinite-lived intangible assets during Fiscal 2011, the
Company concluded that the fair values of certain trade name intangible assets were less than the carrying
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