Sunbeam 2012 Annual Report Download - page 42

40 Jarden Corporation Annual Report 2012
Notes to Consolidated Financial Statements
Jarden Corporation Annual Report 2012 (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). In 2012, the Company adopted
authoritative accounting guidance that allows a company to use a qualitative approach to test indefinite-lived intangible assets for
impairment by first assessing qualitative factors to determine whether it is more-likely-than-not that the fair value of an indefinite-
lived intangible asset is impaired as a basis for determining whether it is necessary to perform quantitative impairment testing.
The Company applied this qualitative approach to select indefinite-lived intangible assets. For other indefinite-lived intangible
assets, the Company proceeded directly to quantitative impairment testing. The Company reviews amortizable intangible assets for
impairment whenever events or circumstances indicate that carrying amounts may not be recoverable through future undiscounted
cash flows. If the Company concludes that impairment exists, the carrying amount is reduced to fair value.
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 2012, 2011 and 2010 were $156, $143
and $129, respectively.
Product Liability Reserves
The Company has a self-insurance program for product liability that includes reserves for self-retained losses and certain excess
and aggregate risk transfer insurance. The estimated product liability reserve incorporates historical loss experience combined
with actuarial evaluation methods, review of significant individual files and the application of risk transfer programs. The Company’s
actuarial evaluation methods consider claims incurred but not reported when determining the product liability reserve.
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.