Sunbeam 2008 Annual Report Download - page 41

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that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full
term of the assets or liabilities.
Level 3: Unobservable inputs that are not corroborated by observable market data.
The following table summarizes assets and liabilities that are measured at fair value on a recurring basis at December 31, 2008:
December 31, 2008
Fair Value Asset (Liability)
(In millions) Level 1 Level 2 Total
Derivatives:
Assets $— $ 7.8 $ 7.8
Liabilities — (33.8) (33.8)
Available for sale securities 14.8 — 14.8
Derivative assets and liabilities relate to interest rate swaps, foreign currency contracts and commodity contracts. Fair values are
determined by the Company using market prices obtained from independent brokers or determined using valuation models that use as
their basis readily observable market data that is actively quoted and can be validated through external sources, including independent
pricing services, brokers and market transactions. Available for sale securities are valued based on quoted market prices in actively
traded markets.
Stock-Based Compensation
The Companyestimates the fair value of share-based awards on the date of grant, which is generally the date the award is approved
by the Board of Directors. The fair value of stock options is determined using the Black-Scholes option-pricing model. The fair value of the
market-based restricted stock awards is determined using a Monte Carlo simulation embedded in a lattice model, and for all other restricted
stock awards based on the closing price of the Company’s common stock on the date of grant. The determination of the fair value of the
Company’s stock option awards and restricted stock awards is based on a variety of factors including, but not limited to, the Company’s
common stock price, expected stock price volatility over the expected life of awards, and actual and projected exercise behavior (see Note
13). Additionally the Companyhas estimated forfeitures for share-based awards at the dates of grant based on historical experience. The
forfeiture estimate is revised as necessary if actual forfeitures differ from these estimates.
The Company issues restricted share awards whose restrictions lapse upon either the passage of time (service vesting), achieving
performance targets, attaining Company common stock price thresholds, or some combination of these restrictions. For those restricted
share awards with common stock price thresholds, the fair values were determined using a Monte Carlo simulation embedded in a lattice
model.The fair value for all other restricted share awards were based on the closing price of the Company’s common stock on the dates of
grant. For those restricted share awards with only service conditions, the Company recognizes compensation cost on a straight-line basis
over the explicit service period. For those restricted share awards with market conditions, the Company recognizes compensation cost on a
straight-line basis over the derived service period unless the market condition is satisfied prior to the end of the derived service period. For
performance only awards, the Company recognizes compensation cost on a straight-line basis over the implicit service period which repre-
sents the Company’s best estimates for when the target will be achieved. If it becomes apparent the original service periods are no longer
accurate, the remaining unrecognized compensation cost will be recognized over the revised service periods. For restricted share awards
that contain both service and market or performance vesting conditions, compensation cost is recognized over the shorter of the two
conditions if only one of the conditions must be met or the longer of the two conditions if both must be met.
For restricted awards that contain performance or market vesting conditions, the Company excludes these awards from diluted
earning per share computations until the contingency is met as of the end of that reporting period.
Pension and Postretirement Plans
The Company records annual amounts relating toits pension and postretirement plans based on calculations which include various
actuarial assumptions, including discount rates, assumed rates of return, compensation increases, turnover rates and healthcare cost trend
rates. The Company reviews its actuarial assumptions on an annual basis and makes modifications to the assumptions based on current
rates and trends when it is deemed appropriate to do so. The effect of modifications is generally recorded or amortized over future service
periods. The assumptions utilized in recording its obligations under its plans are based on its experience, market conditions and input from
its actuaries and investment advisors.
Notes to Consolidated Financial Statements
Jarden Corporation Annual Report 2008 (Dollars in millions, except per share data and unless otherwise indicated)
39