Sunbeam 2006 Annual Report Download - page 37

SIGNIFICANT ACCOUNTING POLICIES AND CRITICAL ESTIMATES
The Company’s financial statements are prepared in accordance with accounting principles generally accepted in the United
States of America, which require us to make judgments, estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. The following list of critical accounting policies is not intended to be a compre-
hensive list of all its accounting policies. The Company’s significant accounting policies are more fully described in Note 1—
Significant Accounting Policies to Item 8.—Financial Statements and Supplementary Data. The following represents a summary
of its critical accounting policies, defined as those policies that the Company believes are the most important to the portrayal of
its financial condition and results of operations, and/or require management’s significant judgments and estimates.
Revenue recognition and allowance for product returns
The Company recognizes revenues at the time of product shipment or delivery, depending upon when title passes, to
unaffiliated customers, and when all of the following have occurred: a firm sales agreement is in place, pricing is fixed or
determinable, and collection is reasonably assured. Revenue is recognized as the net amount estimated to be received after
deducting estimated amounts for product returns, discounts and allowances (collectively “returns”). The Company estimates
future product returns based upon historical return rates and its reasonable judgment.
Allowance for accounts receivable
The Company maintains an allowance for doubtful accounts for estimated losses that may result from the inability of its
customers to make required payments. That estimate is based on historical collection experience, current economic and market
conditions, and a review of the current status of each customer’s trade accounts receivable. If the financial condition of its cus-
tomers were to deteriorate or its judgment regarding their financial condition was to change negatively, additional allowances
may be required resulting in a charge to income in the period such determination was made. Conversely, if the financial condi-
tion of its customers were to improve or its judgment regarding their financial condition was to change positively, a reduction in
the allowances may be required resulting in an increase in income in the period such determination was made.
Allowance for inventory obsolescence
The Company writes down its inventory for estimated obsolescence or unmarketable inventory equal to the difference
between the cost of the inventory and the estimated market value based upon assumptions about future demand and market
conditions. If actual market conditions are less favorable than those projected by us, additional inventory write-downs may be
required resulting in a charge to income in the period such determination was made. Conversely, if actual market conditions
aremore favorable than those projected by us, a reduction in the write down may be required resulting in an increase in
income in the period such determination was made.
Deferred tax assets
The Company records a valuation allowance to reduce its deferred tax assets to the amount that the Company believes is
morelikely than not to be realized. While the Company has considered future taxable income and ongoing prudent and feasi-
ble tax planning strategies in assessing the need for the valuation allowance, in the event the Company wereto determine that
it would not be able to realize all or part of its net deferred tax assets in the future, an adjustment to the deferred tax assets
would be charged to income in the period such determination was made. Likewise, should the Company determine that it
would be able to realize its deferred tax assets in the future in excess of its net recorded amount, an adjustment to the deferred
tax assets would increase income in the period such determination was made.
Intangible assets
The Company has significant intangible assets on its balance sheet that include goodwill, trademarks and other intangibles
fair valued in conjunction with acquisitions. The valuation and classification of these assets and the assignment of amortizable
lives involves significant judgments and the use of estimates. The testing of these intangibles under established guidelines for
impairment also requires significant use of judgment and assumptions (such as cash flows, terminal values and discount rates).
Our assets are tested and reviewed for impairment on an ongoing basis under the established accounting guidelines. Changes
in business conditions could potentially requireadjustments to these asset valuations.
Management’s Discussion and Analysis
Jarden Corporation 2006 Annual Report
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