XML 19 R9.htm IDEA: XBRL DOCUMENT
v3.22.1

Significant Accounting Policies | 3 Months Ended
--- | ---
Mar. 31, 2022
Accounting Policies [Abstract] |
Significant Accounting Policies | Significant Accounting Policies Basis of presentation. The accompanying unaudited consolidated financial statements of Polaris Inc. (“Polaris” or the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States for interim financial statements and, therefore, do not include all information and disclosures of results of operations, financial position, and changes in cash flow in conformity with accounting principles generally accepted in the United States for complete financial statements. Accordingly, such statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 previously filed with the Securities and Exchange Commission (“SEC”). In the opinion of management, such statements reflect all adjustments (which include only normal recurring adjustments) necessary for a fair presentation of the financial position, results of operations, equity, and cash flows for the periods presented. Due to the seasonality trends for certain products and to certain changes in production and shipping cycles, results of such periods are not necessarily indicative of the results to be expected for the complete year. Reclassifications. Reclassifications of certain prior year segment results and account balances have been made to conform to the current-year presentation. The reclassifications had no impact on the consolidated balance sheets, statements of income (loss), comprehensive income (loss), equity, or cash flows, as previously reported. See further information in Note 10. Fair value measurements. Fair value is the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Assets and liabilities measured at fair value are classified using the following hierarchy, which is based upon the transparency of inputs to the valuation as of the measurement date: Level 1 — Quoted prices in active markets for identical assets or liabilities. Level 2 — Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. In making fair value measurements, observable market data must be used when available. When inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement. The Company utilizes the market approach to measure fair value for its non-qualified deferred compensation assets and liabilities, and the income approach for foreign currency contracts and interest rate contracts. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities, and for the income approach, the Company uses significant other observable inputs to value its derivative instruments used to hedge foreign currency and interest rate transactions. Assets and liabilities measured at fair value on a recurring basis are summarized below (in millions):
| Fair Value Measurements as of March 31, 2022
Asset (Liability) | Total |  | Level 1 |  | Level 2 |  | Level 3
Non-qualified deferred compensation assets | $ | 49.4 |  |  | $ | 49.4 |  |  | $ | — |  |  | $ | — |
Foreign exchange contracts, net | 4.3 |  |  | — |  |  | 4.3 |  |  | — |
Interest rate contracts, net | 0.9 |  |  | — |  |  | 0.9 |  |  | — |
Total assets at fair value | $ | 54.6 |  |  | $ | 49.4 |  |  | $ | 5.2 |  |  | $ | — |
Non-qualified deferred compensation liabilities | $ | (49.4) |  |  | $ | (49.4) |  |  | $ | — |  |  | $ | — |
Total liabilities at fair value | $ | (49.4) |  |  | $ | (49.4) |  |  | $ | — |  |  | $ | — |
| Fair Value Measurements as of December 31, 2021
Asset (Liability) | Total |  | Level 1 |  | Level 2 |  | Level 3
Non-qualified deferred compensation assets | $ | 52.4 |  |  | $ | 52.4 |  |  | $ | — |  |  | $ | — |
Foreign exchange contracts, net | 2.1 |  |  | — |  |  | 2.1 |  |  | — |
Total assets at fair value | $ | 54.5 |  |  | $ | 52.4 |  |  | $ | 2.1 |  |  | $ | — |
Non-qualified deferred compensation liabilities | $ | (52.4) |  |  | $ | (52.4) |  |  | $ | — |  |  | $ | — |
Interest rate contracts, net | (7.8) |  |  | — |  |  | (7.8) |  |  | — |
Total liabilities at fair value | $ | (60.2) |  |  | $ | (52.4) |  |  | $ | (7.8) |  |  | $ | — |
Fair value of other financial instruments. The carrying values of the Company’s short-term financial instruments, including cash and cash equivalents, trade receivables and short-term debt, including current maturities of long-term debt, finance lease obligations and notes payable, approximate their fair values. As of March 31, 2022 and December 31, 2021, the fair value of the Company’s long-term debt, finance lease obligations and notes payable was approximately $1,987.6 million and $1,870.0 million, respectively, and was determined primarily using Level 2 inputs, including quoted market prices or discounted cash flows based on quoted market rates for similar types of debt. The carrying value of long-term debt, finance lease obligations and notes payable including current maturities was $1,947.3 million and $1,800.7 million as of March 31, 2022 and December 31, 2021, respectively. Inventories. Inventory costs include material, labor and manufacturing overhead costs, including depreciation expense associated with the manufacture and distribution of the Company’s products. Inventories are stated at the lower of cost or net realizable value with substantially all inventories recorded using the first-in, first-out method. Finished goods include products that are completed and ready for sale or substantially completed as the product has gone through the primary manufacturing and assembly process. The major components of inventories are as follows (in millions):
| March 31, 2022 |  | December 31, 2021
Raw materials and purchased components | $ | 851.2 |  |  | $ | 720.2 |
Service parts, garments and accessories | 481.8 |  |  | 417.7 |
Finished goods | 627.9 |  |  | 588.2 |
Less: reserves | (81.2) |  |  | (81.3) |
Inventories, net | $ | 1,879.7 |  |  | $ | 1,644.8 |
Property and equipment. Property and equipment is stated at cost. Depreciation is determined using the straight-line method over the estimated useful life of the respective assets, ranging from 10-40 years for buildings and improvements and from 1-7 years for equipment and tooling. Depreciation of assets recorded under finance leases is included within depreciation expense. Fully-depreciated tooling is eliminated from the accounting records annually. The Company recorded $54.4 million and $49.2 million of depreciation expense for the three months ended March 31, 2022 and 2021, respectively. The major components of property and equipment are as follows (in millions):
| March 31, 2022 |  | December 31, 2021
Land, buildings and improvements | $ | 535.2 |  |  | $ | 532.2 |
Equipment and tooling | 1,720.9 |  |  | 1,672.2 |
| 2,256.1 |  |  | 2,204.4 |
Less: accumulated depreciation | (1,277.9) |  |  | (1,229.0) |
Property and equipment, net | $ | 978.2 |  |  | $ | 975.4 |
Substantially all of the Company’s property and equipment is located in North America. Product warranties. The Company typically provides a limited warranty for its vehicles and boats for a period of six months to ten years, depending on the product. The Company provides longer warranties in certain geographical markets as determined by local regulations and customary practice and may also provide longer warranties related to certain promotional programs. The Company’s standard warranties require the Company, generally through its dealer network, to repair or replace defective products during such warranty periods. The warranty reserve is established at the time of sale to the dealer or distributor based on management’s best estimate using historical rates and trends. The Company records these amounts as a liability in the consolidated balance sheet until they are ultimately paid. Adjustments to the warranty reserve are made based on actual claims experience in order to properly estimate the amounts necessary to settle future and existing claims on products sold as of the balance sheet date. The warranty reserve includes the estimated costs related to recalls, which are accrued when probable and estimable. Factors that could have an impact on the warranty reserve include the following: changes in manufacturing quality, shifts in product mix, changes in warranty coverage periods, impacts on product usage (including weather), product recalls, and changes in sales volume. The activity in the warranty reserve during the periods presented was as follows (in millions):
|  |  | Three months ended March 31,
|  |  |  |  | 2022 |  | 2021
Balance at beginning of period |  |  |  |  | $ | 135.1 |  |  | $ | 140.8 |
Additions charged to expense |  |  |  |  | 27.1 |  |  | 34.6 |
Warranty claims paid, net |  |  |  |  | (33.9) |  |  | (35.5) |
Balance at end of period |  |  |  |  | $ | 128.3 |  |  | $ | 139.9 |
Divestitures. On October 26, 2021, the Company announced plans to divest its Global Electric Motorcar (GEM) and Taylor-Dunn businesses in an effort to more strategically allocate the Company’s resources. The Company completed the sale on December 31, 2021. The sale resulted in a loss of $36.8 million. The 2021 financial results of these businesses are reflected in the Corporate segment. New accounting pronouncements. Reference Rate Reform. In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This ASU provides practical expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. The FASB also issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope in January 2021, which adds implementation guidance to clarify which optional expedients in Topic 848 may be applied to derivative instruments that do not reference LIBOR or a reference rate that is expected to be discontinued, but that are being modified as a result of the discounting transition. The Company adopted ASU 2020-04 and ASU 2021-01 on January 1, 2022. The adoption of the ASUs did not have a material impact on the Company’s consolidated financial position, results of operations, equity or cash flows. There are no other new accounting pronouncements that are expected to have a significant impact on the Company’s consolidated financial statements.

X
- References No definition available. + Details
Name: | us-gaap_AccountingPoliciesAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for all significant accounting policies of the reporting entity. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=123372394&loc=d3e18726-107790 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -URI http://asc.fasb.org/topic&trid=2122369 + Details
Name: | us-gaap_SignificantAccountingPoliciesTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration