Dollar Rent A Car 2011 Annual Report Download - page 61

In some cases, the sales proceeds are received directly from auctions, with any shortfall in value being paid by the vehicle manufacturer. With certain
other vehicle manufacturers, the entire balance of proceeds from vehicle sales comes directly from the manufacturer. In either case, the Company bears
the risk of collectability on the receivable from the vehicle manufacturer. The Company monitors its vehicle manufacturer receivables based on time
outstanding, manufacturer strength and length of the relationship. Generally, the average holding term for Program Vehicles is approximately six to
eight months.
Property and Equipment – Property and equipment are recorded at cost and are depreciated using principally the straight-line method over the
estimated useful lives of the related assets. Estimated useful lives generally range from ten to 30 years for buildings and improvements and one to seven
years for furniture and equipment. Leasehold improvements are amortized over the estimated useful lives of the related assets or leases, whichever is
shorter.
Software – Software is recorded at cost and amortized using the straight-line method generally ranging from three to five years. The remaining useful
life of software is evaluated annually to assess whether events and circumstances warrant a revision to the remaining amortization period.
Website Development Costs – The Company capitalizes qualifying internal-use software development, including Website development, incurred
subsequent to the completion of the preliminary project stage. Development costs are amortized over the shorter of the expected useful life of the software
or five years. Costs related to planning, maintenance, and minor upgrades are expensed as incurred.
Long–Lived Assets – The Company reviews the value of long-lived assets for impairment whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable based upon estimated future cash flows and records an impairment charge, equaling the excess
of the carrying value over the estimated fair value, if the carrying value exceeds estimated future cash flows.
Accounts Payable – Book overdrafts of $19.0 million and $17.0 million, which represent outstanding checks not yet presented to the bank, are
included in accounts payable to reflect the Company’s outstanding obligations at December 31, 2011 and 2010, respectively. These amounts do not
represent bank overdrafts, which would constitute checks presented in excess of cash on hand, and would be effectively a loan to the Company.
Derivative Instruments – The Company records all derivatives on the balance sheet as either assets or liabilities measured at their fair value and
changes in the derivatives’ fair value are recognized currently in earnings unless specific hedge accounting criteria are met. The Company has entered
into interest rate swap and cap agreements, which do not qualify for hedge accounting treatment; therefore, the changes in the interest rate swap and cap
agreements’ fair values have been recognized as an (increase) decrease in fair value of derivatives in the consolidated statements of income. The
Company has also entered into interest rate swap agreements which constituted cash flow hedges and qualified for hedge accounting treatment;
therefore, changes in fair value are recorded in accumulated other comprehensive loss (Note 9). All cash flows associated with cash flow hedges are
classified in operating activities in the Consolidated Statements of Cash Flows.
Vehicle Insurance Reserves – Provisions for public liability and property damage and supplemental liability insurance (“SLI”) on self-insured
claims are made by charges to direct vehicle and operating expense. Accruals for such charges are based upon actuarially determined evaluations of
estimated ultimate liabilities on reported and unreported claims, prepared on a semi-annual basis. Historical data related to the amount and timing of
payments for self-insured claims is utilized in preparing the actuarial evaluations. The accrual for public liability and property damage claims is
discounted based upon the actuarially determined estimated timing of payments to be made in the future.
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