Rayovac 2014 Annual Report Download - page 94

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SPECTRUM BRANDS HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
(Amounts in thousands, except per share figures)
Plant and equipment held under capital leases are amortized on a straight-line basis over the shorter of the
lease term or estimated useful life of the asset; such amortization is included in depreciation expense.
The Company reviews long-lived assets for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. The Company evaluates recoverability of
assets to be held and used by comparing the carrying amount of an asset to future net cash flows expected to be
generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured
by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be
disposed of are reported at the lower of the carrying amount or fair value less costs to sell.
(i) Intangible Assets
Intangible assets are recorded at cost or at fair value if acquired in a purchase business combination. Customer
lists, proprietary technology and certain trade name intangibles are amortized, using the straight-line method,
over their estimated useful lives of up to 20 years. The excess of the fair value of the consideration transferred in
a business combination over the fair value of net assets acquired (goodwill) and indefinite-lived intangible assets
(certain trade name intangibles) are not amortized. Goodwill is tested for impairment at least annually at the
reporting unit level, with such groupings being consistent with the Company’s reportable segments. If
impairment is indicated, a write-down to fair value (normally measured by discounting estimated future cash
flows) is recorded. Indefinite-lived trade name 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 2014, Fiscal 2013 and Fiscal 2012, 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.
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 2014, Fiscal 2013 and Fiscal 2012, 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
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