Hertz 2013 Annual Report Download - page 85

Table of Contents
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Concentration of Credit Risk
Our cash and cash equivalents are invested in various investment grade institutional money market accounts and bank term deposits.
Deposits held at banks may exceed the amount of insurance provided on such deposits. Generally, these deposits may be redeemed upon
demand and are maintained with financial institutions with reputable credit and therefore bear minimal credit risk. We seek to mitigate such
risks by spreading the risk across multiple counterparties and monitoring the risk profiles of these counterparties. In addition, we have credit
risk from derivative financial instruments used in hedging activities. We limit our exposure relating to derivative financial instruments by
diversifying the financial instruments among various counterparties, which consist of major financial institutions.
Receivables
Receivables are stated net of allowances for doubtful accounts and represent credit extended to manufacturers and customers that satisfy
defined credit criteria. The estimate of the allowance for doubtful accounts is based on our historical experience and our judgment as to the
likelihood of ultimate payment. Actual receivables are written-off against the allowance for doubtful accounts when we determine the balance
will not be collected. Bad debt expense is reflected as a component of "Selling, general and administrative" in our consolidated statements of
operations.
Property and Equipment
Property and equipment are stated at cost and are depreciated utilizing the straight-line method over the estimated useful lives of the related
assets. Leasehold improvements are amortized over the estimated useful lives of the related assets or leases, whichever is shorter. Useful
lives are as follows:
Buildings 5 to 50 years
Furniture and fixtures 1 to 15 years
Capitalized internal use software 1 to 10 years
Service cars and service equipment 1 to 13 years
Other intangible assets 3 to 10 years
Leasehold improvements The shorter of their economic lives or the lease term
We follow the practice of charging maintenance and repairs, including the cost of minor replacements, to maintenance expense accounts.
Costs of major replacements of units of property are capitalized to property and equipment accounts and depreciated on the basis indicated
above. Gains and losses on dispositions of property and equipment are included in income as realized. During the years ended
December 31, 2013 and 2012, gains from the dispositions of property and equipment of $3.9 million and $8.3 million, respectively, were
included in our consolidated statements of operations.
Revenue Earning Equipment
Revenue earning equipment is stated at cost, net of related discounts. Holding periods are as follows:
Cars 4 to 36 months
Other equipment 24 to 108 months
Generally, when revenue earning equipment is acquired, we estimate the period that we will hold the asset, primarily based on historical
measures of the amount of rental activity (e.g., automobile mileage and equipment usage) and the targeted age of equipment at the time of
disposal. We also estimate the residual value of the applicable revenue earning equipment at the expected time of disposal. The residual
values for rental vehicles are affected by many factors, including make, model and options, age, physical condition, mileage, sale location,
time of the year and channel of disposition (e.g., auction, retail, dealer direct). The residual value for rental equipment is affected by factors
which include equipment age and amount of usage. Depreciation is recorded on a straight-line basis over the estimated holding period.
Depreciation rates are reviewed on a quarterly basis based on management's ongoing assessment of present and estimated future market
conditions, their effect on residual values at the time of disposal and the estimated holding periods. Market conditions for used vehicle and
equipment sales can also be affected by external factors such as the economy, natural disasters, fuel prices and incentives offered by
manufacturers of new cars. These key factors are considered when estimating future residual values and assessing depreciation rates. As a
result of this ongoing assessment, we make periodic adjustments to depreciation rates of revenue earning equipment in response to
changing
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Source: HERTZ CORP, 10-K, March 31, 2014 Powered by Morningstar® Document Research℠
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