Hertz 2008 Annual Report Download - page 150

HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
equipment is rented based on the terms of the rental or leasing contract. Revenue related to new
equipment sales and consumables is recognized at the time of delivery to, or pick-up by, the customer
and when collectability is reasonably assured. Fees from our licensees are recognized over the period
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, for our like-kind exchange programs
and to satisfy certain of our self-insurance regulatory reserve requirements. As of December 31, 2008
and 2007, the portion of total restricted cash that was associated with our Fleet Debt facilities was
$557.2 million and $573.1 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 ............................. 15 to 50 years
Capitalized internal use software ............ 1 to 15 years
Service cars and service equipment ......... 1 to 25 years
Other intangible assets ................... 3 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 that we will hold the asset, primarily based on historical
measures of the amount of rental activity (e.g., automobile mileage and equipment usage) and the
targeted age of equipment at the time of disposal. We also estimate the residual value of the applicable
revenue earning equipment at the expected time of disposal. The residual values for rental vehicles are
affected by many factors, including make, model and options, age, physical condition, mileage, sale
location, time of the year and channel of disposition (e.g., auction, retail, dealer direct). The residual
value for rental equipment is affected by factors which include equipment age and amount of usage.
Depreciation is recorded on a straight-line basis over the estimated holding period. Depreciation rates
are reviewed on a quarterly basis based on management’s ongoing assessment of present and
estimated future market conditions, their effect on residual values at the time of disposal and the
estimated holding periods. Market conditions for used vehicle and equipment sales can also be affected
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