Sunbeam 2010 Annual Report Download - page 35

Notes to Consolidated Financial Statements
Jarden Corporation Annual Report 2010 (Dollars in millions, except per share data and unless otherwise indicated)
the fair value of the reporting unit, the Company is required to proceed to the second step. In the second step, the fair value of
the reporting unit would be allocated to the assets (including unrecognized intangibles) and liabilities of the reporting unit, with
any residual representing the implied fair value of goodwill. An impairment loss would be recognized if, and to the extent that, the
carrying value of goodwill exceeded the implied value. During 2010, 2009 and 2008, the Company recorded impairment charges of
$19.7, $22.9 and $283, respectively, for goodwill and intangibles (see Note 6).
Amortization
Deferred debt issue costs are amortized over the term of the related debt. Identifiable intangible assets are recognized apart from
goodwill and are amortized over their estimated, useful lives, except for identifiable intangible assets with indefinite lives, which are
not amortized.
Revenue Recognition
The Company recognizes revenues at the time of product shipment or delivery, depending upon when title and risk of loss
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 and title and risk of loss has passed. Revenue is recognized as the net
amount estimated to be received after deducting estimated amounts for product returns, discounts and allowances. The Company
estimates future product returns, discounts and allowances based upon historical return rates and its reasonable judgment.
Cost of Sales
The Company’s cost of sales includes the costs of raw materials and finished goods purchases, manufacturing costs and warehouse
and distribution costs.
Advertising Costs
Advertising costs consist primarily of ad demo, media placement and promotions, and are expensed as incurred. The amounts
charged to advertising and included in SG&A in the consolidated statements of operations for 2010, 2009 and 2008 were $129, $108
and $124, respectively.
Product Warranty Costs
The Company recognizes warranty costs based on an estimate of amounts required to meet future warranty obligations arising as
a cost of the sale of its products. The Company accrues an estimated liability at the time of a product sale based on historical claim
rates applied to current period sales, as well as any information applicable to current product sales that may indicate a deviation
from such historical claim rate trends. Warranty reserves are included within “Other current liabilities” and “Other non-current
liabilities” in the Company’s consolidated balance sheets.
Sales Incentives and Trade Promotion Allowances
The Company offers various sales incentives and promotional programs to its reseller customers from time to time in the normal
course of business. These incentives and promotions typically include arrangements known as slotting fees, cooperative advertising
and buydowns. These arrangements are recorded as a reduction to net sales in the Company’s consolidated statements of operations.
Income Taxes
Deferred taxes are provided for differences between the financial statement and tax basis of assets and liabilities using enacted tax
rates. The Company established a valuation allowance against a portion of the net tax benefit associated with all carryforwards and
temporary differences in a prior year, as it was more likely than not that these would not be fully utilized in the available carryforward
period. A portion of this valuation allowance remained as of December 31, 2010 and 2009 (see Note 12).
Components of accumulated other comprehensive income (loss) (“AOCI”) are presented net of tax at the applicable statutory rates
and are primarily generated domestically.
Disclosures about Fair Value of Financial Instruments and Credit Risk
The carrying values of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate their
fair market values due to the short-term maturities of these instruments. The fair market value of the Company’s 8% senior notes due
2016, the 6 1/8% senior notes due 2022, the 7 1/2% senior subordinated notes due 2017 and the 7 1/2% senior subordinated notes
due 2020 are based upon quoted market prices. The fair market value of the Company’s other long-term debt was estimated using
interest rates currently available to the Company for debt with similar terms and maturities (see Note 9).
Unless otherwise disclosed in the notes to the consolidated financial statements, the estimated fair value of financial assets and
liabilities approximates carrying value.
Financial instruments that potentially subject the Company to credit risk consist primarily of trade receivables and interest-bearing
investments. Trade receivable credit risk is limited due to the diversity of the Company’s customers and the Company’s ongoing 33