Sunbeam 2011 Annual Report Download - page 42

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40
Notes to Consolidated Financial Statements
Jarden Corporation Annual Report 2011 (Dollars in millions, except per share data and unless otherwise indicated)
Goodwill and Intangible Assets
Goodwill and certain intangibles (primarily trademarks and tradenames) are not amortized; however, they are subject to evaluation
for impairment using a fair value based test. This evaluation is performed annually, during the fourth quarter or more frequently if
facts and circumstances warrant. In 2011, the Company adopted authoritative accounting guidance that allows a company to use a
qualitative approach to test goodwill for impairment by first assessing qualitative factors to determine whether it is more-likely-than-
not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform
the two-step goodwill impairment test. The Company applied this qualitative approach to select reporting units.
For other reporting units, the Company proceeded directly to the first step of goodwill impairment testing. The first step in the
goodwill impairment test involves comparing the fair value of each of its reporting units to the carrying value of those reporting
units. If the carrying value of a reporting unit exceeds 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 (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 2011, 2010 and 2009 were $143, $129
and $108, 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 trade promotional programs to its reseller customers from time to time in
the normal course of business. These incentives and trade 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.