2.2.0.25falsefalse0201 - Disclosure - Summary of Significant Accounting Policiestruefalsefalse1falsefalseUSDfalsefalse1/1/2010 - 12/31/2010 USD ($) / shares USD ($) $Jan-01-2010_Dec-31-2010http://www.sec.gov/CIK0001141982duration2010-01-01T00:00:002010-12-31T00:00:00PureStandardhttp://www.xbrl.org/2003/instancepurexbrli0USDEPSDividehttp://www.xbrl.org/2003/iso4217USDiso4217http://www.xbrl.org/2003/instancesharesxbrli0USDStandardhttp://www.xbrl.org/2003/iso4217USDiso42170SharesStandardhttp://www.xbrl.org/2003/instancesharesxbrli0USDUSD$2true0us-gaap_GeneralPoliciesAbstractus-gaaptruenadurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalse1falsefalsefalse00falsefalsefalsefalsefalseOtherxbrli:stringItemTypestringNo definition available.falsefalseSummary of Significant Accounting Policies [Abstract]3false0us-gaap_SignificantAccountingPoliciesTextBlockus-gaaptruenadurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1falsefalsefalse00  <div align="left" 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 was 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 asset or liability amounts resulted from this transaction. Cooper Industries plc has provided a guarantee of amounts due under certain borrowing arrangements as described in Notes 10 and 22. See Note 11 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. </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 highly liquid investments which are readily convertible to cash, present insignificant risk of changes in value due to interest rate fluctuations and have 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 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 $10.1 million and $13.2 million at December 31, 2010 and 2009, 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, 46% and 46% of inventories at December 31, 2010 and 2009, 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. </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>Investment in Apex Tool Group, LLC: </i></b>Cooper’s interest in the Apex Tool Group, LLC joint venture is accounted for using the equity method. Cooper recognizes its proportionate share of Apex’s operating results in the consolidated income statement and recognizes its proportionate share of movements in Apex’s other comprehensive income in other non-owner changes in equity. </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. Cooper recognizes acquisition-related costs in the period in which such costs are incurred. </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 three units in the Energy and Safety Solutions reportable operating segment, four units in the Electrical Products Group reportable operating segment and 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>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>  <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>Derivatives and Hedging Activities: </i></b>All derivatives are recognized as assets and liabilities and measured at fair value. For derivative instruments that are not designated as hedges, the gain or loss on the derivative is recognized in earnings currently. A derivative instrument may be designated as a hedge of the exposure to changes in the fair value of an asset or liability or variability in expected future cash flows if the hedging relationship is expected to be highly effective in offsetting changes in fair value or cash flows attributable to the hedged risk during the period of designation. If a derivative is designated as a fair value hedge, the gain or loss on the derivative and the offsetting loss or gain on the hedged asset, liability or firm commitment is recognized in earnings. For derivative instruments designated as a cash flow hedge, the effective portion of the gain or loss on the derivative instrument is reported as a component of accumulated nonowner changes in equity and reclassified into earnings in the same period that the hedged transaction affects earnings. The ineffective portion of the gain or loss is immediately recognized in earnings. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Hedge accounting is discontinued prospectively when (1) it is determined that a derivative is no longer effective in offsetting changes in the fair value or cash flows of a hedged item; (2) the derivative is sold, terminated or exercised; (3) the hedged item no longer meets the definition of a firm commitment; or (4) it is unlikely that a forecasted transaction will occur within two months of the originally specified time period. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     When hedge accounting is discontinued because it is determined that the derivative no longer qualifies as an effective fair-value hedge, the derivative will continue to be carried on the balance sheet at its fair value, and the hedged asset or liability will no longer be adjusted for changes in fair value. When hedge accounting is discontinued because a hedged item no longer meets the definition of a firm commitment, the derivative will continue to be carried on the balance sheet at its fair value, and any asset or liability that was recorded pursuant to recognition of the firm commitment will be removed from the balance sheet and recognized as a gain or loss currently in earnings. When hedge accounting is discontinued because it is probable that a forecasted transaction will not occur within two months of the originally specified time period, the derivative will continue to be carried on the balance sheet at its fair value, and gains and losses reported in accumulated nonowner changes in equity will be recognized immediately in earnings. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Fair Value of Financial Instruments: </i></b>Assets and liabilities measured at fair value are based on one or more of three valuation techniques. The valuation techniques are as follows: </div> <div style="margin-top: 6pt"> <table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left"> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="2%" style="background: transparent"> </td> <td width="3%" nowrap="nowrap" align="left">(a)</td> <td width="1%"> </td> <td>Market approach — Prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities;</td> </tr> <tr> <td style="font-size: 6pt"> </td> </tr> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="2%" style="background: transparent"> </td> <td width="3%" nowrap="nowrap" align="left">(b)</td> <td width="1%"> </td> <td>Income approach — Techniques to convert future amounts to a single present amount based on market expectations (including present value techniques, option-pricing and excess earnings models);</td> </tr> <tr> <td style="font-size: 6pt"> </td> </tr> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="2%" style="background: transparent"> </td> <td width="3%" nowrap="nowrap" align="left">(c)</td> <td width="1%"> </td> <td>Cost approach — Amount that would be required to replace the service capacity of an asset (replacement cost).</td> </tr> </table> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The inputs used in measuring fair value are prioritized using a three-tier fair value hierarchy as follows: (Level 1) observable inputs such as quoted prices in active markets; (Level 2) inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and (Level 3) unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. </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. Exchange rate adjustments resulting from translation of foreign currency financial statements are recorded in accumulated other nonowner changes in equity whereas exchange rate adjustments resulting from foreign currency transactions are recorded in income. </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>Treasury Stock: </i></b>Treasury stock is carried at cost. </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, adjustments to our allowances may be required. The accrual for sales returns and other allowances reported net in receivables was $59.1 million and $77.1 million at December 31, 2010 and 2009, respectively. Shipping and handling costs of $131.8 million, $121.0 million and $181.9 million in 2010, 2009 and 2008, 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, adjustments to our accruals may be required. The accrual for customer incentives reported in accrued liabilities was $77.0 million and $63.9 million at December 31, 2010 and 2009, 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 $149.7 million, $141.1 million and $141.8 million in 2010, 2009 and 2008, 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>Pension & Other Post Retirement Benefit Plans</i></b>: Cooper measures its pension and other post retirement benefit plans assets and related obligations that determine the respective plan’s funded status as of December 31 each year, and recognizes an asset for a plan’s over funded status or a liability for a plan’s underfunded status in the consolidated balance sheets. Changes in the funded status of the plans are recognized in the year in which the changes occur and reported in other nonowner changes in equity. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Reclassifications: </i></b>Other intangible assets in the December 31, 2009 consolidated balance sheet have been reclassified to conform to the 2010 presentation. As discussed in Note 2 of the Notes to Consolidated Financial Statements, the amounts related to the contribution of certain Tools business assets and liabilities to Apex Tool Group, LLC in July 2010 have been reclassified to separate lines in the December 31, 2009 consolidated balance sheet and related notes. </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>  <!-- Begin Block Tagged NotefalsefalsefalsefalsefalseOtherus-types:textBlockItemTypestringThis element may be used to describe all significant accounting policies of the reporting entity.Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Accounting Principles Board Opinion (APB) -Number 22 -Paragraph 8 falsefalseSUMMARY OF SIGNIFICANT ACCOUNTING POLICIES12Summary of Significant Accounting PoliciesUnKnownUnKnownUnKnownUnKnownfalsetrue