Rayovac 2014 Annual Report Download - page 95

SPECTRUM BRANDS HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
(Amounts in thousands, except per share figures)
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 are:
(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 2014, Fiscal
2013 and Fiscal 2012, 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 2014, Fiscal 2013 and Fiscal 2012, the Company concluded that the fair value of its intangible
assets exceeded their carrying value.
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.
The fair values of our Global Batteries & Appliances, Hardware & Home Improvement, Global Pet Supplies
and the Home and Garden Business exceeded their carrying values by 87%, 47%, 80% and 146%, respectively,
as of the date of the Company’s latest annual impairment testing.
(j) 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.
(k) 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.
(l) 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
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