AutoNation 2000 Annual Report Download - page 49

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business combination transactions and would require that intangible assets in
excess of the fair value of net assets, goodwill, not be amortized. Goodwill
would be reduced only if found to be impaired or if associated with assets to
be sold or otherwise disposed. The FASB is expected to issue a final statement
in 2001. During 2000, the Company recorded amortization expense of
approximately $73.7 million relating to goodwill. This statement, if issued as
proposed, would preclude future amortization of existing and any future
goodwill on a prospective basis from the date of issuance.
Other Assets
Other assets consist primarily of megastore and other properties held for
sale. As described in Note 10, Restructuring and Impairment Charges
(Recoveries), Net, the Company recognized an impairment charge in 1999 to
write-down the carrying value of properties held for sale to fair value. Assets
held for sale totaled approximately $138.8 million and $212.0 million at
December 31, 2000 and December 31, 1999, respectively.
48
AUTONATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (Continued)
Insurance
Under self-insurance programs, the Company retains various levels of
aggregate loss limits, per claim deductibles and claims handling expenses as
part of its various insurance programs, including property and casualty and
employee medical benefits. Costs in excess of this retained risk per claim are
insured under various contracts with third party insurance carriers. The
ultimate costs of these retained insurance risks are estimated by management
and by actuarial evaluation based on historical claims experience, adjusted for
current trends and changes in claims-handling procedures.
Revenue Recognition
Revenue consists of sales of new and used vehicles and related finance and
insurance ("F&I") products, sales from fixed operations (parts, service and
body shop), sales of other products including wholesale units and retail
financing. The Company recognizes revenue in the period in which products are
sold or services are provided. Revenue on finance products represents fees
earned by the Company for notes placed with financial institutions in
connection with customer vehicle purchases financed and is recognized upon
acceptance of credit by the financial institution. Revenue on insurance
products sold on behalf of third party insurance companies in connection with
vehicle sales is recognized upon sale. An estimated allowance for chargebacks
against revenue recognized from sales of F&I products is established during the
period in which the related revenue is recognized. Revenue from retail
financing and certain loan origination costs are recognized over the term of
the contract using the interest method until the Company securitizes its
installment loans.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements"
("SAB 101"). SAB 101 provides guidance on the recognition, presentation and
disclosure of revenue in financial statements. The Company's revenue
recognition policy is in accordance with the provisions of SAB 101. Adoption of
the provisions of SAB 101 did not have a material impact on the Company's