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Goodwill and Intangibles, including DAC and VOBA | 9 Months Ended
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Jun. 30, 2014
Goodwill and Intangible Assets Disclosure [Abstract] |
Goodwill and Intangibles, including DAC and VOBA | Goodwill and Intangibles, including deferred acquisition costs and value of business acquired, net A summary of the changes in the carrying amounts of goodwill and intangible assets, including FGL’s DAC and VOBA balances, are as follows:
|  |  | Intangible Assets
| Goodwill |  | Indefinite Lived |  | Definite Lived |  | VOBA |  | DAC |  | Total
Balance at September 30, 2013 | $ | 1,476.7 |  |  | $ | 1,178.1 |  |  | $ | 985.1 |  |  | $ | 225.3 |  |  | $ | 340.6 |  |  | $ | 2,729.1 |
Acquisitions (Note 3) | 65.2 |  |  | 46.8 |  |  | 22.0 |  |  | — |  |  | — |  |  | 68.8 |
Deferrals | — |  |  | — |  |  | — |  |  | — |  |  | 172.5 |  |  | 172.5 |
Less: Components of amortization - |  |  |  |  |  |  |  |  |  |  |
Periodic amortization | — |  |  | — |  |  | (61.2 | ) |  | (67.7 | ) |  | (38.9 | ) |  | (167.8 | )
Interest | — |  |  | — |  |  | — |  |  | 11.0 |  |  | 10.1 |  |  | 21.1 |
Unlocking | — |  |  | — |  |  | — |  |  | 21.8 |  |  | 3.4 |  |  | 25.2 |
Adjustment for unrealized investment (gains), net | — |  |  | — |  |  | — |  |  | (108.2 | ) |  | (83.0 | ) |  | (191.2 | )
Effect of translation | (2.8 | ) |  | 6.0 |  |  | 1.1 |  |  | — |  |  | — |  |  | 7.1 |
Balance at June 30, 2014 | $ | 1,539.1 |  |  | $ | 1,230.9 |  |  | $ | 947.0 |  |  | $ | 82.2 |  |  | $ | 404.7 |  |  | $ | 2,664.8 |
Intangible assets are recorded at cost or at fair value if acquired in a purchase business combination. Definite lived intangible assets include customer relationships, proprietary technology intangibles and certain trade names that are amortized using the straight-line method over their estimated useful lives of ranging from one to twenty years. Goodwill and indefinite lived trade name intangibles are not amortized and are tested for impairment at least annually at the Company’s August financial period end, or more frequently if an event or circumstance indicates that an impairment loss may have been incurred between annual impairment tests. During the nine months ended June 30, 2014, Spectrum Brands recorded an adjustment of $3.5 to goodwill to finalize the purchase accounting for the acquisition of the HHI Business from Stanley Black & Decker. The adjustment related to changes in the valuation of working capital accounts and deferred taxes based on the final determination of fair value. These adjustments were not retrospectively applied to the opening balance sheet as the amounts were deemed immaterial. During the nine month period ended June 30, 2014, the Company recorded additions to goodwill and intangible assets related to the acquisitions of Liquid Fence, FOH and CorAmerica. See Note 3, Acquisitions, for further detail. Amortization of DAC and VOBA is based on the amount of gross margins or profits recognized, including investment gains and losses. The adjustment for unrealized net investment losses represents the amount of DAC and VOBA that would have been amortized if such unrealized gains and losses had been recognized. This is referred to as the “shadow adjustments” as the additional amortization is reflected in other comprehensive income rather than the statement of operations. As of June 30, 2014 and September 30, 2013, the VOBA balance included cumulative adjustments for net unrealized investment (gains) of $(189.7) and $(81.4), respectively, and the DAC balances included cumulative adjustments for net unrealized investment (gains) losses of $(64.4) and $18.6, respectively. Amortization of VOBA and DAC for the three months ended June 30, 2014 and June 30, 2013 was $10.8 and $37.3, and $9.4 and $27.4, respectively. Amortization of VOBA and DAC for the nine months ended June 30, 2014 and June 30, 2013 was $34.9 and $113.0, and $25.4 and $50.1, respectively. The above DAC balances include $29.8 and $26.2 of deferred sales inducements (“DSI”), net of shadow adjustments, as of June 30, 2014 and September 30, 2013, respectively. Definite lived intangible assets are summarized as follows:
| June 30, 2014 |  | September 30, 2013 |  |
| Cost |  | Accumulated Amortization |  | Net |  | Cost |  | Accumulated Amortization |  | Net |  | Amortizable Life
Customer relationships | $ | 889.6 |  |  | $ | (196.3 | ) |  | $ | 693.3 |  |  | $ | 885.9 |  |  | $ | (160.8 | ) |  | $ | 725.1 |  |  | 15 to 20 years
Trade names | 171.4 |  |  | (57.0 | ) |  | 114.4 |  |  | 171.6 |  |  | (44.7 | ) |  | 126.9 |  |  | 1 to 12 years
Technology assets | 192.2 |  |  | (52.9 | ) |  | 139.3 |  |  | 172.1 |  |  | (39.0 | ) |  | 133.1 |  |  | 4 to 17 years
| $ | 1,253.2 |  |  | $ | (306.2 | ) |  | $ | 947.0 |  |  | $ | 1,229.6 |  |  | $ | (244.5 | ) |  | $ | 985.1 |  |  |
Amortization expense for definite lived intangible assets is as follows:
| Three months ended June 30, |  | Nine months ended June 30,
| 2014 |  | 2013 |  | 2014 |  | 2013
Customer relationships | $ | 11.7 |  |  | $ | 11.6 |  |  | $ | 35.0 |  |  | $ | 33.3 |
Trade names | 4.1 |  |  | 4.3 |  |  | 12.3 |  |  | 12.2 |
Technology assets | 4.7 |  |  | 4.4 |  |  | 13.9 |  |  | 12.0 |
| $ | 20.5 |  |  | $ | 20.3 |  |  | $ | 61.2 |  |  | $ | 57.5 |
The Company estimates annual amortization expense of amortizable intangible assets for the next five fiscal years will approximate $77.5 per year. The weighted average amortization period for VOBA is approximately 5.0 years. Estimated amortization expense for VOBA in future fiscal periods is as follows:
|  | Estimated Amortization Expense
Fiscal Year |  | VOBA
2014 |  | $ | 7.9 |
2015 |  | 42.1 |
2016 |  | 38.4 |
2017 |  | 31.7 |
2018 |  | 25.8 |
2019 and thereafter |  | 126.0 |

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- Definition The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 350 -SubTopic 30 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=26713463&loc=d3e16323-109275 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 350 -SubTopic 20 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=35741047&loc=d3e13816-109267 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 350 -SubTopic 30 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=26713463&loc=d3e16265-109275 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 350 -SubTopic 30 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=26713463&loc=d3e16373-109275 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 350 -SubTopic 20 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=35741047&loc=d3e13854-109267 + Details
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