Rayovac 2013 Annual Report Download - page 98

SPECTRUM BRANDS HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
(Amounts in thousands, except per share figures)
amounts of those assets. As a result, during Fiscal 2011 the Company recorded a non-cash pretax intangible asset
impairment charge of approximately $32,450 which was equal to the excess of the carrying amounts of the
intangible assets over the fair value of such assets. This non-cash impairment of trade name intangible assets has
been recorded as a separate component of Operating expenses. This impairment of trade name intangible assets
was primarily attributed to lower forecasted profits, reflecting more conservative growth rates versus those
originally assumed by the Company at the time of acquisition or upon adoption of fresh start reporting.
A triggering event occurred in Fiscal 2011 which required the Company to test its indefinite-lived intangible
assets for impairment between annual impairment dates. On October 1, 2010, the Company realigned its
operating segments, which constituted a triggering event for impairment testing. In connection with this interim
test, the Company compared the fair value of its reporting segments to their carrying amounts both before and
after the change in segment composition, and determined the fair values were in excess of their carrying amounts
and, accordingly, no further testing of goodwill was required. The Company also tested the recoverability of its
identified indefinite-lived intangibles in connection with the realignment of its operating segments and concluded
that the fair values of these assets exceeded their carrying values.
Intangibles with Definite or Estimable Useful Lives
The Company assesses the recoverability of intangible assets with definite or estimable useful lives
whenever an event or circumstance occurs that indicates an impairment loss may have been incurred. The
Company assesses the recoverability of these intangible assets by determining whether their carrying value can
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.
(k) 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.
(l) 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.
(m) 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
carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to
88