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Summary of Significant Accounting Policies
9 Months Ended
Sep. 30, 2012
Summary of Significant Accounting Policies [Abstract]  
Summary of Significant Accounting Policies [Text Block]

Note 1 – Basis of presentation

 

The Brink's Company (along with its subsidiaries, “Brink's” or “we”) has two reportable segments:

 

       International

       North America

 

Our unaudited interim consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial reporting and applicable quarterly reporting regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, the unaudited consolidated financial statements do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for interim periods are not necessarily indicative of the results that may be expected for the full year. These unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and notes in our Annual Report on Form 10-K for the year ended December 31, 2011.

 

We have made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these consolidated financial statements. Actual results could differ materially from these estimates. The most significant estimates are related to goodwill and other long-lived assets, pension and other retirement benefit obligations, legal contingencies, foreign currency translation and deferred tax assets.

 

The consolidated financial statements include all of the assets, liabilities, revenues, expenses and cash flows of Brink's and all entities in which Brink's has a controlling voting interest. Intercompany accounts and transactions between consolidated companies have been eliminated in consolidation.

 

Certain prior year amounts related to the statement of cash flows have been reclassified to conform to the 2012 presentation.

 

Foreign Currency Translation

Our consolidated financial statements are reported in U.S. dollars. Our foreign subsidiaries maintain their records primarily in the currency of the country in which they operate.

 

The method of translating local currency financial information into U.S. dollars depends on whether the economy in which our foreign subsidiary operates has been designated as highly inflationary or not.  Economies with a three-year cumulative inflation rate of more than 100% are considered highly inflationary.

 

Assets and liabilities of foreign subsidiaries in non-highly inflationary economies are translated into U.S. dollars using rates of exchange at the balance sheet date.  Translation adjustments are recorded in other comprehensive income (loss).  Revenues and expenses are translated at rates of exchange in effect during the year.  Transaction gains and losses are recorded in net income.

 

Foreign subsidiaries that operate in highly inflationary countries use the U.S. dollar as their functional currency.  Local-currency monetary assets and liabilities are remeasured into U.S. dollars using rates of exchange as of each balance sheet date, with remeasurement adjustments and other transaction gains and losses recognized in earnings.  Non-monetary assets and liabilities do not fluctuate with changes in local currency exchange rates to the dollar.

 

Venezuela

Our Venezuelan operations accounted for $235.1 million or 8% of total Brink's revenues in the nine months ended September 30, 2012. Our operating margins in Venezuela have varied depending on the mix of business during any year and have been up to three times our overall international segment operating margin rate.

 

The economy in Venezuela has had significant inflation in the last several years. Beginning January 1, 2010, we designated Venezuela's economy as highly inflationary for accounting purposes, and we consolidated our Venezuelan results using our accounting policy for subsidiaries operating in highly inflationary economies. In June 2010, the Venezuelan government established an exchange process that requires each transaction be approved by the government's central bank (the “SITME” rate). On a daily basis, the central bank publishes ranges of prices at which it may approve transactions to purchase dollar-denominated bonds, resulting in an exchange rate range of 4.3 to 5.3 bolivar fuertes to the U.S. dollar. To date, approved transactions have been at the upper end of the range. To the extent we need to obtain U.S. dollars, we currently expect our U.S. dollar-denominated transactions to be settled at a rate of 5.3 bolivar fuertes to the U.S. dollar. We have used this rate to remeasure our bolivar fuerte-denominated monetary assets and liabilities into U.S. dollars at September 30, 2012, resulting in bolivar fuerte-denominated net monetary assets at September 30, 2012, of $65.7 million. For the nine months ended September 30, 2012 and for the year ended December 31, 2011, we did not recognize any remeasurement gains or losses because the SITME rate did not change.

 

Under the SITME process, approved transactions may not exceed $350,000 per legal entity per month. We have obtained sufficient U.S. dollars to purchase imported supplies and fixed assets to operate our business in Venezuela but our continued ability to do this is less certain. Although we believe the repatriation of cash invested in Venezuela will be limited in the future, we have been successful at converting a small amount of bolivar fuertes to U.S. dollars through other legal channels at a rate not as favorable as the SITME rate.

 

At September 30, 2012, our Venezuelan subsidiaries held $0.4 million of cash and short-term investments denominated in U.S. dollars and $34.2 million of cash denominated in bolivar fuertes. On an equity-method basis, we had investments in our Venezuelan operations of $84.4 million at September 30, 2012.

 

Recently Adopted Accounting Standards

In May 2011, the Financial Accounting Standards Board (“FASB”) issued ASU 2011-04, Fair Value Measurement: Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS. ASU 2011-04 changes how fair value guidance is applied in certain circumstances and expands the disclosure requirements around fair value measurements.  For entities with fair value measurements classified as Level 3, required disclosures include a quantitative disclosure of the unobservable inputs and assumptions used in the measurement, a description of the valuation processes in place, a narrative description of the sensitivity of the fair value to changes in unobservable inputs and interrelationships between those inputs, and quantitative disclosures about unobservable inputs used in fair value measurements other than those valuations that use net asset value as a practical expedient.  We adopted the guidance effective January 1, 2012. The adoption of this guidance did not have a material effect on our financial statements.

 

In June 2011, the FASB issued ASU 2011-05, Presentation of Comprehensive Income. For annual periods, an entity has the option to present the components of comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. For interim periods, total comprehensive income is required to be disclosed either below net income on the income statement or as a separate statement. The ASU does not change the items that must be reported as other comprehensive income.  Whether presenting two separate statements or one continuous statement in annual periods, the ASU required entities to present reclassifications from other comprehensive income in the statement reporting net income. In December 2011, however, the FASB deferred this requirement when it issued ASU 2011-12, Deferral of the Effective Date for Amendments to the Presentation of Reclassification of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05, which has the same effective date as ASU 2011-05. Companies must continue to disclose reclassifications from other comprehensive income on the statement that reports other comprehensive income, or in the notes to the financial statements. We adopted this guidance effective January 1, 2012, and included a statement of comprehensive income in our interim financial statements. The adoption of this guidance did not have a material effect on our financial statements.

 

Standards Not Yet Adopted

In July 2012, the FASB issued ASU 2012-02, Intangibles — Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment. Under the revised guidance, entities testing indefinite-lived intangible assets for impairment have the option of performing a qualitative assessment before calculating fair value. If entities determine, on the basis of qualitative factors, that it is more likely than not that the fair value of the indefinite-lived intangible is less than the carrying amount, the fair value calculation would be required. The ASU also requires that the same qualitative factors be considered when determining whether an interim impairment evaluation is necessary. Although the ASU is effective for fiscal years beginning after September 15, 2012, we will adopt this guidance for the 2012 reporting year for our annual October 1 indefinite-lived intangible impairment evaluation. The adoption of this guidance is not expected to have a material effect on our financial statements.