Dollar Rent A Car 2011 Annual Report Download - page 62

The Company records expense related to public liability and property damage and SLI on a monthly basis based on rental volume and projections of
ultimate losses, expenses, premiums and administrative costs that are derived from historical accident claim experience and trends. Management
reviews the actual timing of payments as compared with the semi-annual actuarial estimate of timing of payments and has determined that there has
been no material differences in the timing of payments for each of the three years in the period ended December 31, 2011. Because of less predictability
in the estimated timing of payments, self-insured reserves for SLI are not discounted.
Foreign Currency Translation – Foreign assets and liabilities are translated using the exchange rate in effect at the balance sheet date, and results of
operations are translated using an average rate for the period. Translation adjustments are accumulated and reported as a component of accumulated
other comprehensive loss.
Revenue Recognition – Revenues from vehicle rentals are recognized as earned on a daily basis under the related rental contracts with customers.
Revenues from leasing vehicles to franchisees are principally under operating leases with fixed monthly payments and are recognized ratably as earned
over the lease terms. Revenues from fees and services include providing sales and marketing, reservations, information systems and other services to
franchisees. Revenues from these services are generally based on a percentage of franchisee rental revenue or upon providing reservations and are
recognized as earned on a monthly basis. Initial franchise fees are recognized upon substantial completion of all material services and conditions of the
franchise sale, which coincides with the date of sale and commencement of operations by the franchisee.
Advertising Costs – Advertising costs are primarily expensed as incurred. The Company incurred advertising expense of $20.1 million, $20.9 million
and $21.2 million, for 2011, 2010 and 2009, respectively.
Environmental Costs – The Company’s operations include the storage of gasoline in underground storage tanks at certain company-owned stores.
Liabilities incurred in connection with the remediation of accidental fuel discharges are recorded when it is probable that obligations have been incurred
and the amounts can be reasonably estimated.
Operating Leases –
Contingent Rent – The Company recognizes contingent rent expense associated with certain airport concession agreements monthly as incurred
when the Company’s achievement of the annual targeted qualifying revenue is probable.
Scheduled Rent Increases – The Company recognizes scheduled rent increases on a straight-line basis over the remaining lease term.
Income Taxes – The Company has provided for income taxes on its separate taxable income or loss and other tax attributes. Deferred income taxes are
provided for the temporary differences between the financial reporting basis and the tax basis of the Company’s assets and liabilities. A valuation
allowance is recorded for deferred income tax assets when management determines it is more likely than not that such assets will not be realized. The
Company has established a valuation allowance related to DTG Canada and a portion of the Company’s net operating losses for state tax
purposes. The Company evaluates its tax policies quarterly to identify uncertain tax positions.
Earnings Per Share – Basic earnings per share (“EPS”) is computed by dividing net income by the weighted average number of common shares
outstanding during the period. Diluted EPS is based on the combined weighted average number of common shares and dilutive potential common
shares outstanding which include, where appropriate, the assumed exercise of options. In computing diluted EPS, the Company utilizes the treasury
stock method.
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