Hertz 2014 Annual Report Download - page 192

Table of Contents
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(l) Internal Use Software reclassification (All Segments) - The Company reclassified all internal use software asset balances, including
accumulated depreciation on these assets, to intangible assets. Previously, these assets were reported in property and equipment.
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(m) Accrued Unbilled Accounts Receivable (U.S. Car Rental) - The Company over accrued revenue on open rental agreements related to the U.S.
Car Rental business at period end because its calculation methodology was based on too limited a sample of open rental agreements. Also,
vehicles that had been returned before period end, but that had not been processed as returned until after the look back period used in the
calculation methodology, were treated as rented to customers at period end. Further, the rates utilized for certain types of transactions in the
computation for the unbilled receivables were erroneous.
(n) Vehicle License Fees (U.S. Car Rental) - This restatement matter relates to vehicle registration cost amortization in the U.S. Car Rental
business. The Company inappropriately changed its amortization period for vehicle registration cost to the life of the vehicle instead of the life of
the registration or license. Inappropriate tone at the top, among other factors, may have contributed to this restatement matter.
(o) Hertz #1 Gold Points Liability (U.S. Car Rental) - The Company has made adjustments to the reserves established for the liability associated
with the redemption of points earned by customers enrolled in the Hertz Gold Plus Rewards Program. The Company determined that these
reserves were understated in 2011, 2012, and 2013 for a variety of reasons. These reasons included: (1) a miscalculation of the rate at which
customers would redeem points, (2) the use of incorrect income statement accounts in calculating the incremental costs associated with
customers’ use of points, (3) the failure to reconcile the account from 2011 through 2013 and (4) a systems issue that prevented certain customer
points from expiring as they should have when the Company modified its Gold Points expiration policy in 2011.
(p) Accounts payable (All Segments) - The accruals for expenses paid utilizing credit cards did not include amounts which have been incurred and
are in the process of being billed to the Company. In addition, the manual process and lack of automated interface controls with legacy systems
and the failure to complete sufficient personnel training on the accounts payable Oracle ERP system module, among other factors, resulted in
erroneous accruals including purchase orders, marketing and consulting spending.
(q) Asset Retirement Obligation (All Segments) - This restatement matter relates to asset restoration costs associated with contractual obligations
included in lease agreements. The Company failed to account for global contractual restoration costs on certain of its leased facilities, including its
European headquarters at Uxbridge, United Kingdom. Inappropriate tone at the top, among other factors, may have contributed to this restatement
matter.
(r) Other Restatement Adjustments(All Segments) - There are certain other restatement matters not otherwise described in items (a) through (q) of
this Note the adjustments of which are individually insignificant but, in aggregate with all the restatement matters, are significant to the financial
statements.
(s) Taxes on income (loss) - There was a reduction in the amount of tax provision recognized as a result of the restatement adjustments identified
above.
(t) Change in Accounting Principle - In 2014, the Company changed its method of calculating the market-related value of pension assets for
purposes of determining the expected return on plan assets and accounting for asset gains and losses.
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Source: HERTZ GLOBAL HOLDINGS INC, 10-K, July 16, 2015 Powered by Morningstar® Document Research℠
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