Bausch & Lomb 1999 Annual Report

Notes To Financial Statements
Dollar Amounts In Millions – Except Per Share Data
1. Accounting Policies
Principles Of Consolidation The financial statements include all
majority-owned U.S. and non-U.S. subsidiaries. Intercompany
accounts, transactions and profits are eliminated. The fiscal year
is the 52- or 53-week period ending the last Saturday in
December.
Segment Reporting In accordance with Statement of Financial
Accounting Standards (SFAS) No. 131, Disclosures about Segments
of an Enterprise and Related Information, the company split the
pharmaceuticals/surgical segment into two separate segments in
1999 to reflect changes in the manner in which financial information
is viewed by management for decision-making purposes.
The company now reports its operating results in three segments:
vision care, pharmaceuticals and surgical. Prior year amounts
have been restated to conform with the 1999 presentation.
Use Of Estimates The financial statements have been prepared
in conformity with generally accepted accounting principles and,
as such, include amounts based on informed estimates and judgments
of management with consideration given to materiality.
For example, estimates are used in determining valuation
allowances for uncollectible trade receivables, obsolete inventory
and deferred income taxes. Actual results could differ from those
estimates.
Cash Equivalents Cash equivalents include time deposits and
highly liquid investments with original maturities of three months
or less.
Inventories Inventories are valued at the lower of cost or market
using the first-in, first-out (FIFO) method.
Property, Plant And Equipment Property, plant and equipment,
including improvements that significantly add to productive
capacity or extend useful life, are recorded at cost, while maintenance
and repairs are expensed as incurred. Depreciation is
calculated for financial reporting purposes using the straight-line
method based on the estimated useful lives of the assets as follows:
buildings, 30 to 40 years; machinery and equipment, two to ten
years; and leasehold improvements, the shorter of the estimated
useful life or the lease periods. In accordance with SFAS
No. 121, Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed of, the company assesses all
long-lived assets, including property, plant and equipment, for
impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable.
See the future 23 Bausch & Lomb
Goodwill And Other Intangibles Goodwill and other intangibles
are amortized on a straight-line basis over periods of up to 40 years.
In accordance with SFAS 121, the company assesses intangible
assets for impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable.
In completing this evaluation, the company compares its best
estimate of undiscounted future cash flows, excluding interest
costs, with the carrying value of the assets. If undiscounted cash
flows do not exceed the recorded value, an impairment is recognized
to reduce the carrying value based on the expected
discounted cash flows of the business unit. Expected cash flows
are discounted at a rate commensurate with the risk involved.
Revenue Recognition Revenues are generally recognized when
products are shipped to the customer. The company has established
programs which, under specified conditions, enable
customers to return product. The company establishes liabilities
for estimated returns and allowances at the time of shipment. In
addition, accruals for customer discounts and rebates are recorded
when revenues are recognized.
Advertising Expense External costs incurred in producing media
advertising are expensed the first time the advertising takes place.
Promotional or advertising costs associated with customer support
programs are accrued when the related revenues are
recognized. At December 25, 1999 and December 26, 1998,
$3.3 and $4.0 of deferred advertising costs representing primarily
production and design costs for advertising to be run in the subsequent
fiscal year, were reported as other current assets.
Advertising expenses for continuing operations of $181.2, $180.5
and $148.8 were included in selling, administrative and general
expenses for 1999, 1998 and 1997, respectively.
Comprehensive Income As it relates to the company, comprehensive
income is defined as net earnings plus the sum of currency
translation adjustments and unrealized holding gains/losses on
securities (collectively “other comprehensive income”), and is presented
in the Statements of Changes in Shareholders’ Equity. A
change in unrealized holding gains was reported net of an income
tax benefit of $11.8 in 1997.
Investments In Debt And Equity Securities In 1997, certain of
the company’s other investments were classified as availablefor-sale
under the terms of SFAS No. 115, Accounting for Certain
Investments in Debt and Equity Securities, and accordingly, unrealized
holding gains and losses, net of taxes, were excluded from