AutoNation 2006 Annual Report Download - page 23

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Table of Contents
assets held for sale are appropriately valued, the assumptions and estimates used may change and we may be required to record
impairment charges to reduce the value of these assets.
Revenue Recognition — Revenue consists of the sales of new and used vehicles and commissions from related finance and
insurance products and sales of parts and services. We recognize revenue in the period in which products are sold or services are
provided. We recognize vehicle and finance and insurance revenue when a sales contract has been executed, the vehicle has been delivered
and payment has been received or financing has been arranged. Revenue on finance and insurance products represents commissions
earned by us for: (i) loans and leases placed with financial institutions in connection with customer vehicle purchases financed and
(ii) vehicle protection products sold. An estimated liability for chargebacks against revenue recognized from sales of finance and vehicle
protection products is established during the period in which the related revenue is recognized. We primarily sell these products on a
straight commission basis; however we also participate in future underwriting profit on certain extended service contracts pursuant to
retrospective commission arrangements, which are recognized as earned over the life of the contracts. Rebates, holdbacks, floorplan
assistance and certain other dealer credits received from manufacturers are recorded as offsets to the cost of the vehicle and recognized into
income upon the sale of the vehicle or when earned under a specific manufacturer program, whichever is later.
Other — Additionally, significant estimates have been made by us in the accompanying Consolidated Financial Statements
including allowances for doubtful accounts, accruals for chargebacks against revenue recognized from the sale of finance, insurance and
other protection products, certain assumptions related to goodwill and other intangible long-lived assets and accruals related to self-
insurance programs, certain legal proceedings, estimated tax liabilities, estimated losses from disposals of discontinued operations and
certain assumptions related to determining stock option compensation.
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