Hertz 2008 Annual Report Download - page 155

HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 2—Goodwill and Other Intangible Assets
We account for our goodwill and indefinite-lived intangible assets under SFAS No. 142, ‘‘Goodwill and
Other Intangible Assets,’’ or ‘‘SFAS No. 142.’’ Under SFAS No. 142, goodwill impairment is deemed to
exist if the carrying value of goodwill exceeds its fair value. In addition, SFAS No. 142 requires that
goodwill be tested at least annually using a two-step process. The first step is to identify any potential
impairment by comparing the carrying value of the reporting unit to its fair value. We estimate the fair
value of our reporting units using a discounted cash flow methodology. The cash flows represent
management’s most recent planning assumptions. These assumptions are based on a combination of
industry outlooks, views on general economic conditions, our expected pricing plans and expected
future savings generated by our ongoing restructuring activities. If a potential impairment is identified,
the second step is to compare the implied fair value of goodwill with its carrying amount to measure the
impairment loss.
Those intangible assets considered to have indefinite useful lives, including our trade name, are
evaluated for impairment on an annual basis, by comparing the fair value of the intangible assets to their
carrying value. In addition, whenever events or changes in circumstances indicate that the carrying
value of intangible assets might not be recoverable, we will perform an impairment review. We estimate
the fair value of our indefinite lived intangible assets using the relief from royalty method. Intangible
assets with finite useful lives are amortized over their respective estimated useful lives and reviewed for
impairment in accordance with SFAS No. 144, ‘‘Accounting for Impairment or Disposal of Long-Lived
Assets.’’
We conducted the impairment review during the fourth quarter of 2008 and recorded non-cash
impairment charges of $694.9 million related to our goodwill and $451.0 million related to our other
intangible assets. The car rental and equipment rental segments recorded non-cash impairment
charges related to their goodwill of $43.0 million and $651.9 million, respectively, and to their other
intangible assets of $377.0 million and $74.0 million, respectively. These impairment charges were a
result of a decline in the economy and fourth quarter 2008 operating results, and a significant decline in
both the fair value of debt and our stock price.
The following summarizes the changes in our goodwill, by segment, for the period presented (in
thousands of dollars):
Equipment
Car Rental Rental Total
Balance as of December 31, 2007 ..................... $318,134 $ 641,859 $ 959,993
Acquisitions ...................................... 4,730 23,723 28,453
Impairment charges ................................ (43,035) (651,865) (694,900)
Other changes(1) .................................. (15,768) (13,717) (29,485)
Balance as of December 31, 2008 ..................... $264,061 $ — $ 264,061
(1) Consists of changes resulting from the translation of foreign currencies at different exchange rates from the beginning of the
period to the end of the period and pre-Acquisition tax adjustments.
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