Hertz 2007 Annual Report Download - page 135

HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
the underlying licensees’ revenue is earned (over the period the licensees’ revenue earning equipment
is rented).
Cash and Equivalents
We consider all highly liquid debt instruments purchased with an original maturity of three months or less
to be cash equivalents.
Restricted Cash
Restricted cash includes cash and equivalents that are not readily available for our normal
disbursements. Restricted cash and equivalents are restricted for the purchase of revenue earning
vehicles and other specified uses under our Fleet Debt facilities, our like-kind exchange programs and to
satisfy certain of our self insurance regulatory reserve requirements. As of December 31, 2007 and 2006,
the portion of total restricted cash that was associated with our Fleet Debt facilities was $573.1 million
and $487.0 million, respectively.
Depreciable Assets
The provisions for depreciation and amortization are computed on a straight-line basis over the
estimated useful lives of the respective assets, as follows:
Revenue Earning Equipment:
Cars .............................. 5 to 16 months
Other equipment ...................... 24 to 108 months
Buildings ............................. 20 to 50 years
Capitalized internal use software ............ 1 to 15 years
Service cars and service equipment ......... 1 to 25 years
Other intangible assets ................... 5 to 10 years
Leasehold improvements ................. The shorter of their economic lives or the lease
term.
We follow the practice of charging maintenance and repairs, including the cost of minor replacements, to
maintenance expense accounts. Costs of major replacements of units of property are capitalized to
property and equipment accounts and depreciated on the basis indicated above. Gains and losses on
dispositions of property and equipment are included in income as realized. When revenue earning
equipment is acquired, we estimate the period we will hold the asset. Depreciation is recorded on a
straight-line basis over the estimated holding period, with the objective of minimizing gain or loss on the
disposition of the revenue earning equipment. Depreciation rates are reviewed on an ongoing basis
based on management’s routine review of present and estimated future market conditions and their
effect on residual values at the time of disposal. Upon disposal of the revenue earning equipment,
depreciation expense is adjusted for the difference between the net proceeds received and the
remaining net book value.
Environmental Liabilities
The use of automobiles and other vehicles is subject to various governmental controls designed to limit
environmental damage, including that caused by emissions and noise. Generally, these controls are met
by the manufacturer, except in the case of occasional equipment failure requiring repair by us. To comply
with environmental regulations, measures are taken at certain locations to reduce the loss of vapor
115