Hertz 2008 Annual Report Download - page 153

HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
separation from Ford, we cannot offer assurance that payments in respect of the indemnification
agreement will be available.
See Note 7—Taxes on Income.
Advertising
Advertising and sales promotion costs are expensed as incurred.
Legal Fees
We accrue for legal fees and other directly related costs of third parties when it is probable that such fees
and costs will be incurred and the amounts can be reasonably estimated.
Impairment of Long-Lived Assets and Intangibles
We review goodwill and indefinite-lived intangible assets for impairment whenever events or changes in
circumstances indicate that the carrying amount of the goodwill may not be recoverable, and also review
goodwill annually, using a two-step process, in accordance with SFAS No. 142, ‘‘Goodwill and Other
Intangible Assets.’’ See Note 2—Goodwill and Other Intangible Assets. The carrying amounts of the
assets are based upon our estimates of the discounted cash flows. An impairment charge is recognized
for the amount, if any, by which the carrying value of an asset exceeds its fair value. Long-lived assets,
other than goodwill and indefinite-lived intangible assets, are reviewed for impairment in accordance
with SFAS No. 144, ‘‘Accounting for the Impairment or Disposal of Long-Lived Assets.’’ Under SFAS
No. 144, these assets are tested for impairment whenever events or changes in circumstances indicate
that the carrying amounts of 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. During the fourth quarter of 2008, we recorded
non-cash impairment charges totaling $1,168.9 million ($989.0 million, net of tax) related to our goodwill
($694.9 million), other intangible assets ($451.0 million) and property and equipment ($23.0 million).
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.
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