Summary Of Significant Accounting Policies

12 Months Ended

Jul. 03, 2011

Summary Of Significant Accounting Policies

Summary Of Significant Accounting Policies

(2) Summary of Significant Accounting Policies:

Fiscal Year: The Company's fiscal year consists of 52 or 53 weeks, ending on the Sunday nearest the last day of June in each year. Therefore, the 2011 fiscal year was 53 weeks long and the 2010 and 2009 fiscal years were 52 weeks long. All references to years relate to fiscal years rather than calendar years.

Principles of Consolidation: The consolidated financial statements include the accounts of the Company and its majority owned domestic and foreign subsidiaries after elimination of intercompany accounts and transactions. Investments in companies that are owned 20% to 50% or are less than 20% owned and for which we have significant influence are accounted for by the equity method.

Accounting Estimates: The preparation of financial statements in conformity with accounting principles generally accepted 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 may differ from those estimates.

Cash and Cash Equivalents: This caption includes cash, commercial paper and certificates of deposit. The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.

Receivables: Receivables are recorded at their original carrying value less reserves for estimated uncollectible accounts.

Inventories: Inventories are stated at cost, which does not exceed market. The last-in, first-out (LIFO) method was used for determining the cost of approximately 41% of total inventories at each of July 3, 2011 and June 27, 2010. The cost for the remaining inventories was determined using the first-in, first-out (FIFO) method. If the FIFO inventory valuation method had been used exclusively, inventories would have been $64.5 million and $57.6 million higher in fiscal 2011 and 2010, respectively. The LIFO inventory adjustment was determined on an overall basis, and accordingly, each class of inventory reflects an allocation based on the FIFO amounts. During 2010 and 2009, liquidation of LIFO layers generated income of $1.7 million and $9.3 million, respectively. There were no liquidations of LIFO layers in 2011.

Goodwill and Other Intangible Assets: Goodwill reflects the cost of acquisitions in excess of the fair values assigned to identifiable net assets acquired. Goodwill is assigned to reporting units based upon the expected benefit of the synergies of the acquisition. The reporting units are Engines and Power Products. Other Intangible Assets reflect identifiable intangible assets that arose from purchase acquisitions. Other Intangible Assets are comprised of trademarks, patents and customer relationships. Goodwill and trademarks, which are considered to have indefinite lives are not amortized; however, both must be tested for impairment annually. Amortization is recorded on a straight-line basis for other intangible assets with finite lives. Patents have been assigned an estimated weighted average useful life of thirteen years. The customer relationships have been assigned an estimated useful life of twenty-five years. The Company is subject to financial statement risk in the event that goodwill and intangible assets become impaired. The Company performed the required impairment tests in fiscal 2011, 2010 and 2009. Refer to Note 5 for discussion of a non-cash goodwill impairment charge recorded in fiscal 2011.

Investments: This caption represents the Company's investments in unconsolidated affiliated companies consisting of its 30% and 50% owned joint ventures. Combined financial information of the unconsolidated affiliated companies accounted for by the equity method, generally on a lag of 3 months or less, was as follows (in thousands):

Results of operations of unconsolidated affiliated companies for the fiscal year:


	2011		2010		2009
Results of Operations:
Sales	$	120,614	$	104,140	$	110,688
Cost of Goods Sold		95,048		86,959		93,465

Gross Profit	$	25,566	$	17,181	$	17,223

Net Income	$	11,412	$	7,113	$	5,492

Balance sheets of unconsolidated affiliated companies as of fiscal year-end:


	2011		2010
Financial Position:
Assets:
Current Assets	$	51,838	$	58,950
Noncurrent Assets		18,292		17,573

		70,130		76,523

Liabilities:
Current Liabilities	$	15,809	$	20,829
Noncurrent Liabilities		5,749		6,925

		21,558		27,754

Equity	$	48,572	$	48,769

Net sales to equity method investees were approximately $4.7 million, $10.4 million and $11.3 million in 2011, 2010, and 2009, respectively. Purchases of finished products from equity method investees were approximately $115.7 million, $93.2 million and $102.5 million in 2011, 2010, and 2009, respectively.

Debt Issuance Costs: Direct and incremental costs incurred in obtaining loans or in connection with the issuance of long-term debt are capitalized and amortized to interest expense over the terms of the related credit agreements. Debt discounts incurred in connection with the issuance of the 8.875% Senior Notes were capitalized and amortized to interest expense using the effective interest method until the redemption during fiscal 2011. Approximately $1.2 million, $1.5 million and $1.6 million of debt issuance costs and original issue discounts were amortized to interest expense during the fiscal years 2011, 2010 and 2009, respectively.

Plant and Equipment and Depreciation: Plant and equipment are stated at cost and depreciation is computed using the straight-line method at rates based upon the estimated useful lives of the assets, as follows:


		Useful Life Range (In Years)
Software		3 - 10

Land Improvements		20 - 40

Buildings		20 - 50

Machinery & Equipment		3 - 20

Expenditures for repairs and maintenance are charged to expense as incurred. Expenditures for major renewals and betterments, which significantly extend the useful lives of existing plant and equipment, are capitalized and depreciated. Upon retirement or disposition of plant and equipment, the cost and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is recognized in cost of goods sold.

Impairment of Property, Plant and Equipment: Property, plant and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If the sum of the expected undiscounted cash flows is less than the carrying value of the related asset or group of assets, a loss is recognized for the difference between the fair value and carrying value of the asset or group of assets. There were no adjustments to the carrying value of property, plant and equipment in fiscal 2011 and 2010. Refer to Note 19 of the Notes to Consolidated Financial Statements for an impairment charge recognized in fiscal 2009.

Warranty: The Company recognizes the cost associated with its standard warranty on engines and power products at the time of sale. The amount recognized is based on historical failure rates and current claim cost experience. The following is a reconciliation of the changes in accrued warranty costs for the reporting period (in thousands):


	2011			2010
Balance, Beginning of Period	$	41,945		$	42,044

Payments		(28,599	)		(31,015	)

Provision for Current Year Warranties		35,273			32,089

Changes in Estimates		(2,624	)		(1,173	)


Balance, End of Period	$	45,995		$	41,945

Revenue Recognition: Net sales include sales of engines, power products, and related service parts and accessories, net of allowances for cash discounts, customer volume rebates and discounts, floor plan interest and advertising allowances. The Company recognizes revenue when all of the following criteria are met: persuasive evidence of an arrangement exists, delivery has occurred, the price is fixed or determinable, and collectibility is reasonably assured. This is generally upon shipment, except for certain international shipments, where revenue is recognized when the customer receives the product.

Included in net sales are costs associated with programs under which the Company shares the expense of financing certain dealer and distributor inventories, referred to as floor plan expense. This represents interest for a pre-established length of time based on a variable rate from a contract with a third party financing source for dealer and distributor inventory purchases. Sharing the cost of these financing arrangements is used by Briggs & Stratton as a marketing incentive for customers to buy inventory. The financing costs included in net sales in fiscal 2011, 2010 and 2009 were $6.6 million, $6.4 million and $6.2 million, respectively.

The Company also offers a variety of customer rebates and sales incentives. The Company records estimates for rebates and incentives at the time of sale, as a reduction in net sales.

Income Taxes: The Provision for Income Taxes includes federal, state and foreign income taxes currently payable and those deferred because of temporary differences between the financial statement and tax bases of assets and liabilities. The Deferred Income Tax Asset represents temporary differences relating to current assets and current liabilities, and the Long-Term Deferred Income Tax Asset represents temporary differences related to noncurrent assets and liabilities. A valuation allowance is recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized.

Retirement Plans: The Company has noncontributory, defined benefit retirement plans and postretirement benefit plans covering certain employees. Retirement benefits represent a form of deferred compensation, which are subject to change due to changes in assumptions. Management reviews underlying assumptions on an annual basis. Refer to Note 15 of the Notes to Consolidated Financial Statements.

Research and Development Costs: Expenditures relating to the development of new products and processes, including significant improvements and refinements to existing products, are expensed as incurred. The amounts charged against income were $19.5 million in fiscal 2011, $22.3 million in fiscal 2010 and $23.0 million in fiscal 2009.

Advertising Costs: Advertising costs, included in Engineering, Selling, General and Administrative Expenses in the accompanying Consolidated Statements of Earnings, are expensed as incurred. These expenses totaled $24.3 million in fiscal 2011, $25.1 million in fiscal 2010 and $19.2 million in fiscal 2009.

The Company reports co-op advertising expense as a reduction in net sales. Co-op advertising expense reported as a reduction in net sales totaled $0.2 million in fiscal 2011, $0.3 million in fiscal 2010 and $1.4 million in fiscal 2009.

Shipping and Handling Fees: Revenue received from shipping and handling fees is reflected in net sales and related shipping costs are recorded in cost of goods sold. Shipping fee revenue for fiscal 2011, 2010 and 2009 was $5.3 million, $4.1 million and $4.3 million, respectively.

Foreign Currency Translation: Foreign currency balance sheet accounts are translated into dollars at the rates of exchange in effect at fiscal year-end. Income and expenses incurred in a foreign currency are translated at the average rates of exchange in effect during the year. The related translation adjustments are made directly to a separate component of Shareholders' Investment.

Earnings Per Share: The Company computes earnings per share using the two-class method, an earnings allocation formula that determines earnings per share for each class of common stock and participating security according to dividends declared and participation rights in undistributed earnings. The Company's unvested grants of restricted stock and deferred stock awards contain non-forfeitable rights to dividends (whether paid or unpaid), which are required to be treated as participating securities and included in the computation of basic earnings per share.

Information on earnings per share is as follows (in thousands except per share data):


	Fiscal Year Ended
	July 3, 2011			June 27, 2010			June 28, 2009
Net Income	$	24,355		$	36,615		$	31,972
Less: Dividends Attributable to Unvested Shares		(181	)		(296	)		(300	)

Net Income available to Common Shareholders	$	24,174		$	36,319		$	31,672


Average Shares of Common Stock Outstanding		49,677			49,668			49,572
Incremental Common Shares Applicable to Common Stock Options Based on the Common Stock Average Market Price During the Period		-			-			-
Incremental Common Shares Applicable to Deferred and Restricted Common Stock Based on the Common Stock Average Market Price During the Period		732			396			153

Diluted Average Shares of Common Stock Outstanding		50,409			50,064			49,725


Basic Earnings Per Share	$	0.49		$	0.73		$	0.64
Diluted Earnings Per Share	$	0.48		$	0.73		$	0.64

The dilutive effect of the potential exercise of outstanding stock-based awards to acquire common shares is calculated using the treasury stock method. The following options to purchase shares of common stock were excluded from the calculation of diluted earnings per share as the exercise prices were greater than the average market price of the common shares, and their inclusion in the computation would be antidilutive:


	Fiscal Year Ended
	July 3, 2011		June 27, 2010		June 28, 2009
Options to Purchase Shares of Common Stock (in thousands)		4,049		3,796		4,306
Weighted Average Exercise Price of Options Excluded	$	28.17	$	30.68	$	29.53

Comprehensive Income (Loss): Comprehensive Income (Loss) is a more inclusive financial reporting method that includes disclosure of financial information that historically has not been recognized in the calculation of net income. The Company has chosen to report Comprehensive Income (Loss) and Accumulated Other Comprehensive Income (Loss) which encompasses net income, cumulative translation adjustments, unrealized gain (loss) on derivatives and unrecognized pension and postretirement obligations in the Consolidated Statements of Shareholders' Investment. Information on Accumulated Other Comprehensive Income (Loss) is as follows (in thousands):


	Cumulative Translation Adjustments			Unrealized Gain (Loss) on Derivatives			Unrecognized Pension and Postretirement Obligation			Accumulated Other Comprehensive Income (Loss)
Balance at June 29, 2008	$	22,645		$	4,449		$	(137,328	)	$	(110,234	)
Fiscal Year Change		(13,684	)		(7,576	)		(118,779	)		(140,039	)

Balance at June 28, 2009		8,961			(3,127	)		(256,107	)		(250,273	)
Fiscal Year Change		(4,989	)		11,626			(75,073	)		(68,436	)

Balance at June 27, 2010		3,972			8,499			(331,180	)		(318,709	)
Fiscal Year Change		22,017			(10,742	)		63,936			75,211

Balance at July 3, 2011	$	25,989		$	(2,243	)	$	(267,244	)	$	(243,498	)

Derivative Instruments & Hedging Activity: The Company enters into derivative contracts designated as cash flow hedges to manage certain foreign currency and commodity exposures. Company policy allows derivatives to be used only for identifiable exposures and, therefore, the Company does not enter into hedges for trading purposes where the sole objective is to generate profits.

The Company formally designates the financial instrument as a hedge of a specific underlying exposure and documents both the risk management objectives and strategies for undertaking the hedge. The Company formally assesses, both at the inception and at least quarterly thereafter, whether the financial instruments that are used in hedging transactions are effective at offsetting changes in the forecasted cash flows of the related underlying exposure. Because of the high degree of effectiveness between the hedging instrument and the underlying exposure being hedged, fluctuations in the value of the derivative instruments are generally offset by changes in the forecasted cash flows of the underlying exposures being hedged. Derivative financial instruments are recorded on the Consolidated Balance Sheets as assets or liabilities, measured at fair value. The effective portion of gains or losses on the derivative designated as cash flow hedges are reported as a component of Accumulated Other Comprehensive Loss (AOCI) and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Any ineffective portion of a financial instrument's change in fair value is immediately recognized in earnings.

The Company periodically enters into forward foreign currency contracts to hedge the risk from forecasted third party and intercompany sales or payments denominated in foreign currencies. These obligations generally require the Company to exchange foreign currencies for U.S. Dollars, Euros, Australian Dollars, Canadian Dollars or Japanese Yen. These contracts generally do not have a maturity of more than twenty-four months.

The Company uses raw materials that are subject to price volatility. The Company hedges a portion of its exposure to the variability of cash flows associated with commodities used in the manufacturing process by entering into forward purchase contracts or commodity swaps. Derivative contracts designated as cash flow hedges are used by the Company to reduce exposure to variability in cash flows associated with future purchases of natural gas, aluminum, steel and copper. These contracts generally do not have a maturity of more than twenty-four months.

The Company has considered the counterparty credit risk related to all its foreign currency and commodity derivative contracts and does not deem any counterparty credit risk material at this time.

The notional amount of derivative contracts outstanding at the end of the period is indicative of the level of the Company's derivative activity during the period. As of July 3, 2011 and June 27, 2010, the Company had the following outstanding derivative contracts (in thousands):


Contract		Notional Amount
		July 3, 2011	June 27, 2010
Foreign Currency:
Australian Dollar	Sell	34,295	19,636
Australian Dollar	Buy	-	4,500
Canadian Dollar	Sell	10,700	12,100
Euro	Sell	41,500	91,609
Japanese Yen	Buy	-	650,000
Commodity:
Copper (Pounds)	Buy	-	350
Natural Gas (Therms)	Buy	11,187	16,547
Aluminum (Metric Tons)	Buy	8	-
Steel (Metric Tons)	Buy	1	-

The location and fair value of derivative instruments reported in the Consolidated Balance Sheets are as follows (in thousands):


Balance Sheet Location	Asset (Liability) Fair Value
	July 3, 2011			June 27, 2010
Foreign currency contracts:
Other Current Assets	$	108		$	16,440
Other Long-Term Assets, Net		-			1,478
Accrued Liabilities		(3,550	)		(296	)
Other Long-Term Liabilities		(280	)		-
Commodity contracts:
Other Current Assets		26			34
Other Long-Term Assets, Net		-			-
Accrued Liabilities		(1,937	)		(1,377	)
Other Long-Term Liabilities		(91	)		(728	)

	$	(5,724	)	$	15,551

The effect of derivatives designated as hedging instruments on the Consolidated Statements of Earnings is as follows:


	Twelve months ended July 3, 2011
	Recognized in Earnings
	Amount of Gain (Loss) Recognized in Other Comprehensive Income on Derivatives, Net of Taxes (Effective Portion)			Classification of Gain (Loss)	Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Loss into Income (Effective Portion)			Recognized in Earnings (Ineffective Portion)
Foreign currency contracts – sell	$	(10,760	)	Net Sales	$	972		$	-
Foreign currency contracts – buy		(29	)	Cost of Goods Sold		(286	)		-
Commodity contracts		47		Cost of Goods Sold		(2,564	)		(2	)

	$	(10,742	)		$	(1,878	)	$	(2	)


	Twelve months ended June 27, 2010
	Recognized in Earnings
	Amount of Gain (Loss) Recognized in Other Comprehensive Income on Derivatives, Net of Taxes (Effective Portion)			Classification of Gain (Loss)	Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Loss into Income (Effective Portion)			Recognized in Earnings (Ineffective Portion)
Foreign currency contracts – sell	$	10,873		Net Sales	$	(750	)	$	-
Foreign currency contracts – buy		(120	)	Cost of Goods Sold		187			-
Commodity contracts		873		Cost of Goods Sold		2,978			2

	$	11,626			$	2,415		$	2

During the next twelve months, the amount of the July 3, 2011 Accumulated Other Comprehensive Loss balance that is expected to be reclassified into earnings is $2.2 million.

New Accounting Pronouncements:

In June 2011, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2011-05, "Comprehensive Income: Presentation of Comprehensive Income," which amends current comprehensive income guidance. This ASU eliminates the option to present the components of other comprehensive income as part of the statement of shareholders' equity. Instead, it requires entities to report components of comprehensive income in either (1) a continuous statement of comprehensive income or (2) two separate but consecutive statements. Under the two-statement approach, the first statement would include components of net income, which is consistent with the income statement format used today, and the second statement would include components of other comprehensive income ("OCI"). The ASU does not change the items that must be reported in OCI. ASU 2011-05 will be effective for public companies for fiscal years, and interim periods within those years, beginning after December 15, 2011 with early adoption permitted. Management does not expect adoption of this ASU to have a material impact on the Company's results of operations, financial position or cash flow.

In May, 2011, the FASB issued ASU 2011-04 "Fair Value Measurement: Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS." The ASU is the result of joint efforts by the FASB and the International Accounting Standards Board ("IASB") to develop a single, converged fair value framework. While the ASU is largely consistent with existing fair value measurement principles in U.S. GAAP, it expands existing disclosure requirements for fair value measurements and makes other amendments. Key additional disclosures include quantitative disclosures about unobservable inputs in Level 3 measures, qualitative information about sensitivity of Level 3 measures and valuation process, and classification within the fair value hierarchy for instruments where fair value is only disclosed in the footnotes but carrying amount is on some other basis. For public companies, the ASU is effective for interim and annual periods beginning after December 15, 2011. Management does not expect adoption of this ASU to have a material impact on the Company's results of operations, financial position or cash flow

In June 2009, the FASB issued new guidance that changes the approach to determining the primary beneficiary of a variable interest entity (VIE) and requires companies to more frequently assess whether they must consolidate VIEs. This standard was effective for the Company's first quarter of fiscal 2011. As of June 28, 2010 and subsequently, the Company evaluated all entities that fall within the scope of this new guidance, including the Company's investments in joint ventures, to determine whether consolidation of these entities was required. The adoption of this guidance did not have a material impact on the Company's consolidated financial statements.

Reclassification: Certain amounts in prior year financial statements have been reclassified to conform to current year presentation.

- Definition

The entire disclosure for all significant accounting policies of the reporting entity.

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