ACCOUNTING POLICIES

9 Months Ended

Sep. 30, 2011

ACCOUNTING POLICIES

ACCOUNTING POLICIES

2. ACCOUNTING POLICIES

Basis of Presentation—The Company prepared the accompanying unaudited consolidated financial statements in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X issued by the Securities and Exchange Commission (SEC). Under those rules, certain footnotes and other financial information that are normally required by GAAP for annual financial statements have been condensed or omitted. The Company is responsible for the financial statements included in Form 10-Q.

The consolidated financial statements include all of the normal and recurring adjustments necessary for the fair presentation of the Company’s financial position as of September 30, 2011, and December 31, 2010, the results of operations for the three and nine months ended September 30, 2011 and 2010, and its cash flows for the nine months ended September 30, 2011 and 2010. Material subsequent events are evaluated for disclosure up to the time of issuance of the financial statements. Intercompany balances and transactions have been eliminated. Revenues, expenses, assets and liabilities can vary during each quarter of the year. Accordingly, the results and trends in these unaudited consolidated financial statements may not be indicative of full year operating results or future performance.

The accounting policies used in preparing these consolidated financial statements are the same as those used to prepare the Company’s annual report on Form 10-K for the year ended December 31, 2010 (2010 Form 10-K). These unaudited consolidated financial statements and the related notes should be read in conjunction with the audited year end financial statements and accompanying notes included in the Company’s 2010 Form 10-K.

Use of Estimates—The preparation of financial statements in conformity with GAAP requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates are used in revenue recognition, including sales rebate and return accruals, goodwill, income tax assets and liabilities, income tax expense, and legal liabilities, as well as the accounting for stock-based compensation costs and retirement and post retirement benefits, including the actuarial assumptions. Actual results may or may not differ from estimated results.

Fair Value Measurements—The fair value of financial assets and liabilities are classified in the fair value hierarchy as follows: Level 1 — quoted prices in active markets for identical assets or liabilities, Level 2 — observable prices that are based on inputs not quoted on active markets, and Level 3 — unobservable inputs that reflect estimates about the assumptions market participants would use in pricing the asset or liability.

Recently Issued Accounting Standards—In May 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011- 04, Fair Value Measurement (Topic 820), clarifying the existing measurement and disclosure requirements and expanding the disclosure requirements for certain fair value measurements. ASU 2011- 04 is effective for the Company in the period beginning January 1, 2012. The adoption of this ASU will not affect the Company’s financial statements. The Company will provide enhanced disclosures as required upon the effective date.

In June 2011, the FASB issued ASU No. 2011- 05, Comprehensive Income (Topic 220), requiring entities to present net income and other comprehensive income in either a single continuous statement or in two consecutive statements of net income and other comprehensive income. Reclassification adjustments between net income and other comprehensive income must be shown on the face of the statement(s), with no resulting change in net earnings. ASU 2011- 05 is effective for the Company in the period beginning January 1, 2012. The Company will provide the required financial reporting presentation upon the effective date.

In September 2011, FASB issued ASU No. 2011- 08, Intangibles — Goodwill and Other (Topic 350), allowing entities the option to first assess qualitative factors to determine whether it is necessary to perform the current two-step impairment test. If, as a result of the qualitative assessment, it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount, the quantitative impairment test is required. Otherwise, no further testing is required. ASU 2011- 08 is effective for the Company in the period beginning January 1, 2012 and early adoption is permitted. The Company does not expect the adoption of this topic to have a material effect on the consolidated financial statements.