Hertz 2007 Annual Report Download - page 138

HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
long-lived assets may not be recoverable. The carrying amounts of the assets are based upon our
estimates of the undiscounted cash flows that are expected to result from the use and eventual
disposition of the assets. An impairment charge is recognized for the amount, if any, by which the
carrying value of an asset exceeds its fair value.
Stock-Based Compensation
In December 2004, the FASB, revised SFAS No. 123, with SFAS No. 123R, ‘‘Share-Based Payment,’’ or
‘‘SFAS No. 123R.’’ The revised statement requires a public entity to measure the cost of employee
services received in exchange for an award of equity instruments based on the grant-date fair value of
the award. That cost is to be recognized over the period during which the employee is required to
provide service in exchange for the award. Beginning January 1, 2006, we accounted for our employee
stock-based compensation awards in accordance with SFAS No. 123R. We have estimated the fair value
of options issued at the date of grant using a Black-Scholes option-pricing model, which includes
assumptions related to volatility, expected life, dividend yield, risk-free interest rate and forfeiture rate.
See Note 5—Hertz Holdings Stock Incentive Plan.
Use of Estimates and Assumptions
Use of estimates and assumptions as determined by management are required in the preparation of
consolidated financial statements in conformity with accounting principles generally accepted in the
United States of America, or ‘‘GAAP.’’ Actual results could differ materially from those estimates and
assumptions.
Reclassifications
Certain prior year amounts have been reclassified to conform with current reporting. Total
comprehensive income for the year ended December 31, 2006 has been revised to exclude the impact
of the adoption of SFAS No. 158, ‘‘Employers’ Accounting for Defined Benefit Pension and Other
Postretirement Plans as amended of FASB Statements No. 87, 88, 106 and 132(R)’’ in the amount of
$6.4 million.
Recent Accounting Pronouncements
In September 2006, the FASB issued SFAS No. 157, ‘‘Fair Value Measurements,’’ or ‘‘SFAS No. 157.’’
SFAS No. 157 defines fair value, establishes a framework for measuring fair value in accordance with
GAAP and expands disclosures about fair value measurements. The provisions of SFAS No. 157 are
effective for us for financial instruments beginning in January 2008 and non-financial instruments
beginning in January 2009. We are currently reviewing SFAS No. 157 to determine its impact, if any, on
our financial position or results of operations. In 2008, we anticipate an impact on only our financial
statement disclosures.
In February 2007, the FASB issued SFAS No. 159, ‘‘The Fair Value Option for Financial Assets and
Financial Liabilities,’’ or ‘‘SFAS No. 159.’’ SFAS No. 159 permits entities to choose to measure many
financial instruments and certain other items at fair value. The provisions of SFAS No. 159 are effective
for us beginning in January 2008. We do not believe the adoption of SFAS No. 159 will have any impact
on our financial position or results of operations.
In December 2007, the FASB issued SFAS No. 141(revised 2007), ‘‘Business Combinations,’’ or ‘‘SFAS
No. 141(R).’’ The new standard requires the acquiring entity that gains control in a business combination
to recognize 100% of the fair value of the assets acquired and liabilities assumed in the transaction;
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