Rayovac 2014 Annual Report Download - page 77

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New Accounting Pronouncements
Revenue recognition
In May 2014, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”)
No. 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition
requirements in ASC 605, Revenue Recognition. This ASU requires revenue recognition to depict the transfer of
goods or services to customers in an amount that reflects the consideration to which the entity expects to be
entitled in exchange for those goods or services. The new revenue recognition model requires identifying the
contract, identifying the performance obligations, determining the transaction price, allocating the transaction
price to performance obligations and recognizing the revenue upon satisfaction of performance obligations. This
ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash
flows arising from customer contracts, including significant judgments and changes in judgments, and assets
recognized from costs incurred to obtain or fulfill a contract. This ASU can be applied either retrospectively to
each prior reporting period presented or retrospectively with the cumulative effect of initially applying the update
recognized at the date of the initial application along with additional disclosures. This ASU will become effective
for us beginning in the first quarter of our fiscal year ending September 30, 2018. We have not selected a method
for adoption nor determined the potential effects on our consolidated financial statements.
Presentation of Unrecognized Tax Benefit
In July 2013, the FASB issued new accounting guidance which requires entities to present unrecognized tax
benefits as a reduction of a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax
credit carryforward, except to the extent the net operating loss carryforwards or tax credit carryforwards are not
available to be used at the reporting date to settle additional income taxes, and the entity does not intend to use
them for this purpose. The new accounting guidance is consistent with how we historically accounted for
unrecognized tax benefits in our Consolidated Statements of Financial Position, and therefore, we do not expect
the adoption of this guidance to have a significant impact on our consolidated financial statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market Risk Factors
We have market risk exposure from changes in interest rates, foreign currency exchange rates and
commodity prices. We, when appropriate, use derivative financial instruments to mitigate the risk from such
exposures.
A discussion of our accounting policies for derivative financial instruments is included in Note 7, “Derivative
Financial Instruments,” to our Consolidated Financial Statements included in this Annual Report on Form 10-K.
Interest Rate Risk
A substantial portion of our debt bears interest at variable rates. If market interest rates increase, the interest
rate on our variable rate debt will increase and will create higher debt service requirements, which would
adversely affect our cash flow and could adversely impact our results of operations. We also have bank lines of
credit at variable interest rates. The general level of U.S. and Canadian interest rates, LIBOR, CDOR and Euro
LIBOR affect interest expense. We periodically use interest rate swaps to manage such risk. The net amounts to
be paid or received under interest rate swap agreements are accrued as interest rates change, and are recognized
over the life of the swap agreements as an adjustment to interest expense from the underlying debt to which the
swap is designated. The related amounts payable to, or receivable from, the contract counter-parties are included
in accrued liabilities or accounts receivable.
Foreign Exchange Risk
We are subject to risk from sales and loans to and from our subsidiaries as well as sales to, purchases from
and bank lines of credit with third-party customers, suppliers and creditors denominated in foreign currencies.
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