Hertz 2009 Annual Report Download - page 124

HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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
during the fueling process and to maintain, upgrade and replace underground fuel storage tanks. We
also incur and provide for expenses for the cleanup of petroleum discharges and other alleged violations
of environmental laws arising from the disposition of waste products. We do not believe that we will be
required to make any material capital expenditures for environmental control facilities or to make any
other material expenditures to meet the requirements of governmental authorities in this area. Liabilities
for these expenditures are recorded at undiscounted amounts when it is probable that obligations have
been incurred and the amounts can be reasonably estimated.
Public Liability and Property Damage
The obligation for public liability and property damage on self-insured U.S. and international vehicles
and equipment represents an estimate for both reported accident claims not yet paid, and claims
incurred but not yet reported. The related liabilities are recorded on a non-discounted basis. Reserve
requirements are based on actuarial evaluations of historical accident claim experience and trends, as
well as future projections of ultimate losses, expenses, premiums and administrative costs. The
adequacy of the liability is regularly monitored based on evolving accident claim history and insurance
related state legislation changes. If our estimates change or if actual results differ from these
assumptions, the amount of the recorded liability is adjusted to reflect these results.
Pensions
Our employee pension costs and obligations are dependent on our assumptions used by actuaries in
calculating such amounts. These assumptions include discount rates, salary growth, long-term return
on plan assets, retirement rates, mortality rates and other factors. Actual results that differ from our
assumptions are accumulated and amortized over future periods and, therefore, generally affect our
recognized expense in such future periods. While we believe that the assumptions used are appropriate,
significant differences in actual experience or significant changes in assumptions would affect our
pension costs and obligations.
Foreign Currency Translation and Transactions
Assets and liabilities of international subsidiaries are translated at the rate of exchange in effect on the
balance sheet date; income and expenses are translated at the average rate of exchange prevailing
during the year. The related translation adjustments are reflected in ‘‘Accumulated other comprehensive
loss’’ in the equity section of our consolidated balance sheet. As of December 31, 2009 and 2008, the
accumulated foreign currency translation gain was $132.1 million and $54.5 million, respectively.
Foreign currency gains and losses resulting from transactions are included in earnings.
Derivative Instruments
We are exposed to a variety of market risks, including the effects of changes in interest rates, fuel prices
and foreign currency exchange rates. We manage our exposure to these market risks through our
regular operating and financing activities and, when deemed appropriate, through the use of derivative
financial instruments. Derivative financial instruments are viewed as risk management tools and have not
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