Hertz 2010 Annual Report Download - page 115

HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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 GAAP. We conducted the impairment review during the fourth quarter of
2010 and concluded that there was no impairment related to our goodwill and our other intangible
assets. See Note 3—Goodwill and Other Intangible Assets.
Stock-Based Compensation
We 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. 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 and risk-free interest rate. See Note 6—
Stock-Based Compensation.
We are using equity accounting for restricted stock unit and performance stock unit awards. For
restricted stock units the expense is based on the grant-date fair value of the stock and the number of
shares that vest, recognized over the service period. For performance stock units the expense is based
on the grant-date fair value of the stock, recognized over a two or three year service period depending
upon a performance condition. For performance stock units, we re-assess the probability of
achievement at each reporting period and adjust the recognition of expense accordingly. The
performance condition is not considered in determining the grant date fair value.
Other
In February 2010, Hertz Equipment Rental Corporation, or ‘‘HERC,’’ entered into a joint venture with
Saudi Arabia based Dayim Holdings Company Ltd. to set up equipment operations in the Kingdom of
Saudi Arabia. During 2010, HERC invested $0.7 million under this agreement, which represents a 51%
ownership interest. The investment (included in ‘‘Prepaid expense and other assets’’ in the consolidated
balance sheet) is accounted for using the equity method of accounting.
Recent Accounting Pronouncements
In June 2009, the Financial Accounting Standards Board, or ‘‘FASB,’’ issued guidance, which contains
amendments to Accounting Standards Codification 810, ‘‘Consolidation,’’ relating to how a company
determines when an entity that is insufficiently capitalized or is not controlled through voting (or similar
rights) should be consolidated. The determination of whether a company is required to consolidate an
entity is based on, among other things, an entity’s purpose and design and a company’s ability to direct
the activities of the entity that most significantly impact the entity’s economic performance. These
provisions became effective for us on January 1, 2010, but did not have a material impact on our financial
position or results of operations.
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