1.0.0.3 false Summary of Significant Accounting Policies false 1 $ false false USD Standard http://www.xbrl.org/2003/iso4217 USD iso4217 0 USDEPS Divide http://www.xbrl.org/2003/iso4217 USD iso4217 http://www.xbrl.org/2003/instance shares xbrli 0 2 Summary of Significant Accounting Policies [Abstract] 0 us-gaap_GeneralPoliciesAbstract us-gaap true na duration string No definition available. false false false false false true false false false 1 false false 0 0 false false No definition available. false 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 1 us-gaap_SignificantAccountingPoliciesTextBlock us-gaap true na duration string No definition available. false false false false false false false false false 1 false false 0 0   <div style="font-family: 'Times New Roman',Times,serif">  <div align="left"> </div> <div align="center" style="font-size: 10pt; margin-top: 0pt"><b> </b> </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b>NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Basis of Presentation: </i></b>The consolidated financial statements of Cooper Industries plc (formerly Cooper Industries, Ltd.), an Irish company (“Cooper”), have been prepared in accordance with generally accepted accounting principles in the United States. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     In June 2009, our Board of Directors approved moving Cooper’s place of incorporation from Bermuda to Ireland. This move is part of a reorganization that created a newly formed Irish company, Cooper Industries plc. We completed the first step in this reorganization by establishing our tax residency in Ireland in December 2008. At a Special Shareholders’ Meeting on August 31, 2009, shareholders voted in favor of completing the reorganization pursuant to which all Cooper Industries, Ltd. Class A common shares held by public shareholders would be cancelled and all holders of such shares would receive ordinary shares of Cooper Industries plc on a one-for-one basis. The reorganization transaction was completed on September 8, 2009, following approval from the Supreme Court of Bermuda, at which time Cooper Industries plc replaced Cooper Industries, Ltd. as the ultimate parent company. Shares of the Irish company, Cooper Industries plc, began trading on the New York Stock Exchange on September 9, 2009 under the symbol CBE, the same symbol under which Cooper Industries, Ltd. shares were previously traded. This transaction was accounted for as a merger between entities under common control; accordingly, the historical financial statements of Cooper Industries, Ltd. for periods prior to this transaction are considered to be the historical financial statements of Cooper Industries plc. No changes in assets or liabilities resulted from this transaction, other than Cooper Industries plc has provided a guarantee of amounts due under certain borrowing arrangements as described in Notes 9 and 20. See Note 10 for a discussion of the capital structure of Cooper Industries plc. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Principles of Consolidation: </i></b>The consolidated financial statements include the accounts of Cooper and its majority-owned subsidiaries or affiliated companies where Cooper has the ability to control the entity through voting or similar rights. All intercompany transactions have been eliminated. The results of companies acquired or disposed of are included in the financial statements from the effective date of acquisition or up to the date of disposal. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Use of Estimates: </i></b>The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. These financial statements were issued on February 19, 2010 and subsequent events have been evaluated through that date. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Cash Equivalents: </i></b>For purposes of the consolidated statements of cash flows, Cooper considers all investments purchased with original maturities of three months or less to be cash equivalents. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Restricted Cash: </i></b>For purposes of the 2007 and 2008 statement of cash flows, Cooper recorded cash held at December 31, 2007 in an account for the irrevocable tender offer to purchase all outstanding shares of MTL Instruments Group plc, a publicly-traded company based in the United Kingdom, as restricted cash until consummation of the transaction in 2008. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Accounts Receivable: </i></b>Cooper provides an allowance for doubtful trade accounts receivable, determined under the specific identification method. The allowance was $14.8 million and $12.7 million at December 31, 2009 and 2008, respectively. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Inventories: </i></b>Inventories are carried at cost or, if lower, net realizable value. On the basis of current costs, 48% and 51% of inventories at December 31, 2009 and 2008, respectively, were carried on the last-in, first-out (LIFO) method. The remaining inventories are carried on the first-in, first-out (FIFO) method. Allowances for excess and obsolete inventory are provided based on current assessments about future demands, market conditions and related management initiatives. If market conditions are less favorable than those projected by management, additional inventory allowances may be required. The allowance for excess and obsolete inventory was $83.7 million at December 31, 2009 and $77.0 million at December 31, 2008. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Property, Plant and Equipment: </i></b>Property, plant and equipment are stated at cost. Depreciation is provided using primarily the straight-line method over the estimated useful lives of the related assets, which in general have the following lives: buildings — 10 to 40 years; machinery and equipment — 3 to 18 years; computer hardware and software — 1 to 12 years; and tooling, dies, patterns and other — 3 to 10 years. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Business Combinations: </i></b>Cooper makes an allocation of the purchase price based on its estimate of the fair value of the assets acquired, including identified intangible assets, and liabilities assumed as of the date of acquisition. Cooper allocates any excess purchase price over the fair value of the net tangible and intangible assets acquired to goodwill. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Goodwill: </i></b>Goodwill is subject to an annual impairment test and Cooper has designated January 1 as the date of this test. Cooper has identified eight reporting units, consisting of seven units in the Electrical Products reportable operating segment plus the Tools reportable operating segment, for which goodwill is tested for impairment. If an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value, an interim impairment test would be performed between annual tests. Goodwill impairment is evaluated using a two-step process. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The first step of the goodwill impairment test compares the fair value of a reporting unit with its carrying value. If the carrying amount of a reporting unit exceeds its fair value, the second step of the goodwill impairment test shall be performed. The second step compares the implied fair value of the reporting unit’s goodwill to the carrying amount of its goodwill to measure the amount of impairment loss. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination (e.g., the fair value of the reporting unit is allocated to all of the assets and liabilities, including any unrecognized intangible assets, as if the reporting unit had been acquired in a business combination and the fair value of the reporting unit was the purchase price paid to acquire the reporting unit). </div> <div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Intangible Assets: </i></b>Intangible assets are stated at cost. Certain intangible assets are amortized over the estimated useful lives of the related assets using primarily the straight-line method. Intangible assets subject to amortization primarily include, with related estimated useful lives: customer relationships – 3 to 30 years; technology – 5 to 20 years; and trademarks – 15 to 40 years. Certain trademarks with an indefinite useful life are not amortized and are instead tested for impairment on an annual basis. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Income Taxes: </i></b>Cooper uses the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based upon differences between the book basis of assets and liabilities and their respective tax basis as measured by the enacted tax rates that Cooper expects will be in effect when these differences reverse. In addition to estimating the future applicable tax rates, Cooper must also make certain assumptions regarding whether tax differences are permanent or temporary and whether taxable operating income in future periods will be sufficient to fully recognize any gross deferred tax assets. Cooper has established valuation allowances when it is more likely than not that some portion or all of the deferred tax assets will not be realized. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Foreign Currency Translation: </i></b>Financial statements for international subsidiaries are translated into U.S. dollars using the exchange rate at each balance sheet date for assets and liabilities and the exchange rates in effect during the respective period for revenues, expenses, gains and losses. Where the local currency is the functional currency, translation adjustments are recorded in accumulated other nonowner changes in equity. Where the U.S. dollar is the functional currency, translation adjustments are recorded in income. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Treasury Stock: </i></b>Treasury stock is carried at cost. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="center" style="font-size: 10pt; margin-top: 0pt"> <b> </b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Revenue Recognition: </i></b>Cooper recognizes revenues when products are shipped. Accruals for sales returns and other allowances are provided at the time of shipment based upon past experience. If actual future returns and allowances differ from past experience, additional allowances may be required. The accrual for sales returns and other allowances reported net in receivables was $77.9 million and $89.8 million at December 31, 2009 and 2008, respectively. Shipping and handling costs of $121.0 million, $181.9 million and $174.3 million in 2009, 2008 and 2007, respectively, are reported as a reduction of revenues in the consolidated income statements. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Customer Incentives: </i></b>Customer incentives primarily consist of volume discounts and other short-term discount and promotion programs. Cooper recognizes these incentives as a reduction in reported revenues at the time of the qualifying sale based on our estimate of the ultimate incentive amount to be earned using historical experience and known trends. If actual customer incentives differ from our estimates, additional accruals may be required. The accrual for customer incentives reported in accrued liabilities was $70.2 million and $108.9 million at December 31, 2009 and 2008, respectively. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Research and Development Expenditures: </i></b>Research and development expenditures are charged to earnings as incurred. Research and development expenses were $141.1 million, $141.8 million and $105.7 million in 2009, 2008 and 2007, respectively. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Stock Based Compensation: </i></b>Cooper recognizes stock-based compensation expense based on the fair value of the award at the grant date with expense recognized over the service period, which is usually the vesting period. Cooper uses the Black-Scholes-Merton formula to estimate the value of stock options granted to employees, as well as the straight-line recognition method for awards subject to graded vesting. The fair value of restricted stock and performance-based awards granted are measured at the market price on the grant date. Cooper recognizes an estimate for forfeitures of awards of stock options, performance-based shares and restricted stock units. These estimates are adjusted as actual forfeitures differ from the estimate. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Impact of New Accounting Standards: </i></b>In June 2009, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 168 – <i>The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles, a replacement of FASB Statement No. 162</i>. SFAS No. 168 made the FASB Accounting Standards Codification (“ASC” or the “Codification”) the single source of U.S. GAAP used by nongovernmental entities in the preparation of financial statements, except for rules and interpretive releases of the SEC under authority of federal securities laws, which are sources of authoritative accounting guidance for SEC registrants. The Codification was developed to organize GAAP pronouncements by accounting topics within a consistent structure so that users can more easily access authoritative accounting guidance; its purpose is not to create new accounting and reporting guidance. The Codification was effective July 1, 2009. All accounting references have therefore been updated and SFAS references have been replaced with ASC references. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     In June 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No.48, Accounting for Uncertainty in Income Taxes (the “Interpretation”) as codified in ASC Topic 740, <i>Income Taxes</i>. This Interpretation clarifies the accounting for uncertainty in income taxes recognized in accordance with ASC Topic 740. This Interpretation prescribes a more-likely-than not recognition threshold that a tax position will be sustained upon examination and a measurement attribute for the financial statement recognition of a tax position taken or expected to be taken in a tax return. This Interpretation also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. Cooper adopted the provisions of the Interpretation on January 1, 2007. As a result of the implementation of the Interpretation, Cooper recognized a $27.2 million increase in the liability for unrecognized tax benefits, which was accounted for as a reduction of the January 1, 2007 beginning retained earnings balance. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     ASC Topic 820, <i>Fair Value Measurements and Disclosures</i>, was revised to provide enhanced guidance for using fair value to measure assets and liabilities. ASC Topic 820 clarifies the principle that fair value should be based on the assumptions market participants would use when pricing assets or liabilities and establishes a hierarchy that prioritizes the information used to develop those assumptions. ASC Topic 820 applies whenever other standards require (or permit) assets or liabilities to be measured at fair value. On February 12, 2008, the FASB delayed the effective date of ASC Topic 820 for nonfinancial assets and nonfinancial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). Cooper implemented the provisions of ASC Topic 820 as of January 1, 2008 for those assets and liabilities not subject to the deferral described above. The implementation of ASC Topic 820 as of January 1, 2009 for assets and liabilities previously subject to the deferral described above did not have a material impact on Cooper’s results of operations, financial position or cash flows. See Note 17 of the Notes to the Consolidated Financial Statements. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Effective prospectively for business combinations completed on or after January 1, 2009, ASC Topic 805, <i>Business Combinations</i>, was revised to provide enhanced guidance related to the measurement of identifiable assets acquired, liabilities assumed and disclosure of information related to business combinations. This guidance, together with the International Accounting Standards Board’s (“IASB”) IFRS 3, <i>Business Combinations</i>, completed a joint effort by the FASB and IASB to improve financial reporting about business combinations and promotes the international convergence of accounting standards. Cooper implemented the revised guidance prospectively for business combinations completed on or after January 1, 2009. Cooper recognizes acquisition-related costs in the period in which such costs are incurred as required by the guidance. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Effective January 1, 2009, ASC Topic 810, <i>Consolidation</i>, was revised to provide enhanced guidance related to the disclosure of information regarding noncontrolling interests in a subsidiary. This guidance, together with the IASB’s IAS 27, <i>Consolidated and Separate Financial Statements</i>, concluded a joint effort by the FASB and IASB to improve the accounting for and reporting of noncontrolling interests in consolidated financial statements and promotes international convergence of accounting standards. Cooper did not apply the disclosure provisions of ASC Topic 810 regarding noncontrolling interests in a subsidiary as the information is immaterial to the consolidated financial statements. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Effective January 1, 2009, the disclosure provisions of ASC Topic 815, <i>Derivatives and Hedging</i>, were revised to provide greater transparency about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under Topic 815, and (c) how derivative instruments and related hedged items affect an entity’s financial position, results of operations, and cash flows. Cooper implemented the revised guidance as of January 1, 2009 and has provided the additional disclosures required. See Note 17 of the Notes to the Consolidated Financial Statements. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Effective for fiscal years ending after December 15, 2009, ASC Topic 715, <i>Compensation – Retirement Benefits</i>, was revised to require additional disclosures about assets held in an employer’s defined benefit pension or other postretirement plan, primarily related to categories and fair value measurements of plan assets. Cooper implemented the revised guidance for its 2009 year end and has provided the additional disclosures related to Cooper’s pension assets. See Note 14 of the Notes to the Consolidated Financial Statements. </div> </div>  <!-- Begin Block Tagged Note false false No definition available. No authoritative reference available. false false 1 2 false UnKnown UnKnown UnKnown false true