Hertz 2014 Annual Report Download - page 119

Table of Contents
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

The consolidated financial statements include the accounts of Hertz Holdings and its wholly owned and majority owned U.S. and international
subsidiaries. In the event that the Company is a primary beneficiary of a variable interest entity, the assets, liabilities, and results of operations of
the variable interest entity are included in the Company's consolidated financial statements. The Company accounts for its investment in CAR,
Inc. and other immaterial investments in joint ventures using the equity method when it has significant influence but not control and is not the
primary beneficiary. All significant intercompany transactions have been eliminated in consolidation.

The preparation of financial statements in conformity with U.S.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 financial instruments, among others

Acquisitions
The Company records acquisitions resulting in the consolidation of an enterprise using the acquisition method of accounting. Under this method,
the acquiring company records the assets acquired, including intangible assets that can be identified and named, and liabilities assumed based on
their estimated fair values at the date of acquisition. The purchase price in excess of the fair value of the identifiable assets acquired and liabilities
assumed is recorded as goodwill. If the assets acquired, net of liabilities assumed, are greater than the purchase price paid then a bargain
purchase has occurred and the Company will recognize the gain immediately in earnings. Among other sources of relevant information, the
Company may use independent appraisals and actuarial or other valuations to assist in determining the estimated fair values of the assets and
liabilities. Various assumptions are used in the determination of these estimated fair values including discount rates, market and volume growth
rates, expected royalty rates, EBITDA margins and other prospective financial information. Transaction costs associated with acquisitions are
expensed as incurred.
Revenue Earning Equipment
Revenue earning equipment is stated at cost, net of related discounts. Generally, holding periods are as follows:
Rental cars 6 to 36 months
Other equipment 24 to 108 months
Generally, when revenue earning equipment is acquired outside of a car repurchase program, the Company estimates the period that the Company
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. The Company also estimates 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 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
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Source: HERTZ GLOBAL HOLDINGS INC, 10-K, July 16, 2015 Powered by Morningstar® Document Research℠
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