Hertz 2012 Annual Report Download - page 123

HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 2—Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of Hertz Holdings and our wholly owned and
majority owned domestic and international subsidiaries. In the event that Hertz Holdings is a primary
beneficiary of a variable interest entity, the assets, liabilities, and results of operations of the variable
interest entity will be included in our consolidated financial statements. All significant intercompany
transactions have been eliminated in consolidation.
Use of Estimates and Assumptions
The preparation of financial statements in conformity with accounting principles generally accepted in
the United States of America, or ‘‘GAAP,’’ requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and footnotes. Actual results could differ
materially from those estimates.
Significant estimates inherent in the preparation of the consolidated financial statements include
depreciation of revenue earning equipment, reserves for litigation and other contingencies, accounting
for income taxes and related uncertain tax positions, pension and postretirement benefit costs, the fair
value of assets and liabilities acquired in business combinations, the recoverability of long-lived assets,
useful lives and impairment of long-lived tangible and intangible assets including goodwill, valuation of
stock based compensation, public liability and property damage reserves, reserves for restructuring,
allowance for doubtful accounts, and fair value of derivatives, among others.
Reclassifications
Certain prior period amounts have been reclassified to conform with current year presentation.
Acquisition Accounting
We account for business combinations using the acquisition method, which requires an allocation of the
purchase price of an acquired entity to the assets acquired and liabilities assumed based on their
estimated fair values at the date of acquisition. Goodwill represents the excess of the purchase price
over the net tangible and intangible assets acquired.
Revenue Recognition
Rental and rental related revenue (including cost reimbursements from customers where we consider
ourselves to be the principal versus an agent) are recognized over the period the revenue earning
equipment is rented or leased based on the terms of the rental or leasing contract. Maintenance
management administrative fees are recognized monthly and maintenance management service
revenue is recognized when services are performed. 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). Certain truck
and equipment leases are originated with the intention of syndicating to banks, and upon the sale of
rights to these direct financing leases, the net gain is recorded in revenue.
Sales tax amounts collected from customers have been recorded on a net basis.
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