Hertz 2014 Annual Report Download - page 105

Table of Contents
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incentives (reduced pre-tax income by $2 million in 2012) which had been accounted for as a reduction of marketing expenses instead of reducing
the cost of revenue earning equipment, charges related to certain assets and allowances for doubtful accounts in Brazil (reduced pre-tax income
by $4 million in 2012), as well as other immaterial misstatements (reduced pre-tax income by $3 million in 2012).
The column in the tables below labeled "As Previously Reported" reflects the revised numbers that include the effects of these out of period
misstatements. Certain prior period amounts have been reclassified to conform with current period presentation.
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As discussed in the  to this Annual Report on Form 10-K, this Note 2 to the consolidated financial statements discloses the
nature of the restatement matters and adjustments and shows the impact of the restatement matters on revenues, expenses, income, assets,
liabilities, equity, and cash flows from operating activities, investing activities, and financing activities, and the cumulative effects of these
adjustments on the consolidated statement of operations, balance sheet, and cash flows for 2012 and 2013. In addition, this Note shows the
effects of the adjustment to opening retained earnings as of January 1, 2012, which adjustment reflects the impact of the restatement on periods
prior to 2012. The cumulative impact of the out of period misstatements for all previously reported periods through December 31, 2013, including
amounts associated with the revision previously reported in the 2013 Form 10-K/A, was approximately a $349 million reduction in pre-tax income
and $231 million reduction in net income. The cumulative annual impact on 2012 and 2013 was a reduction in pre-tax income and net income of
$90 million and $62 million for 2012 and $72 million and $51 million for 2013. Excluding the revision included in the 2013 Form 10-K/A of $26
million on a pre-tax basis and $17 million on an after-tax basis, approximately $160 million on a pre-tax basis and $100 million on an after-tax basis
is included as a reduction to opening retained earnings as of January 1, 2012. For information on the impact of the restatement on the year 2011,
reference is made to  of this Annual Report on Form 10-K.
Restatement Background
During the preparation of the Company's Form 10-Q for the first quarter of 2014, misstatements were identified in the previous financial statements
relating to the capitalization and timing of depreciation for certain non-fleet assets, allowances for doubtful accounts in Brazil, as well as other
items. These misstatements, in combination with misstatements previously identified in the revision included in the Company's 2013 Form 10-K/A
related to vehicle vendor allowances for marketing and misstatements related to the Brazil operations, resulted in the Audit Committee, in
consultation with the Company's management, concluding on June 3, 2014 that the Company's financial statements for 2011 should no longer be
relied upon, and would require restatement.
In light of the above, in June 2014, the Audit Committee directed that two complementary processes be undertaken. First, the Audit Committee
directed management to conduct a thorough review of the Company's financial records for fiscal years 2011, 2012 and 2013 to determine whether
further adjustments were necessary. This review, which was conducted with the assistance of outside consultants, identified additional
misstatements, including misstatements related to:
• capitalization and timing of depreciation for non-fleet capital and information technology expenditures;
• accruals for uninvoiced non-fleet vendor obligations;
• accrual for salvage vehicles;
• the amortization period associated with vehicle registration and license fees;
• reserve estimates associated with allowances for uncollectible amounts receivable for renter obligations related to damaged
vehicles;
• reserve estimates associated with allowances for doubtful accounts, including credit memos;
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Source: HERTZ GLOBAL HOLDINGS INC, 10-K, July 16, 2015 Powered by Morningstar® Document Research℠
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