Thrifty Car Rental 2009 Annual Report Download - page 58

received directly from auctions, with any shortfall in value being paid by the vehicle manufacturer.
With certain other vehicle manufacturers, the entire balance of proceeds from vehicle sales comes
directly from the manufacturer. In either case, the Company bears the risk of collectibility on the
receivable from the vehicle manufacturer. The Company monitors its vehicle manufacturer
receivables based on time outstanding, manufacturer strength and length of the relationship.
Property and Equipment – Property and equipment are recorded at cost and are depreciated using
principally the straight-line method over the estimated useful lives of the related assets. Estimated
useful lives generally range from ten to thirty years for buildings and improvements and three to
seven years for furniture and equipment. Leasehold improvements are amortized over the estimated
useful lives of the related assets or leases, whichever is shorter.
Intangible Assets – Software is recorded at cost and amortized using the straight-line method
primarily over five years. The remaining useful life of all intangible assets is evaluated annually to
assess whether events and circumstances warrant a revision to the remaining amortization period.
Reacquired franchise rights, established upon reacquiring a previously franchised location, are not
amortized as they have an indefinite life, rather they are tested annually for impairment (Note 8).
Website Development Costs – The Company capitalizes qualifying internal-use software
development, including Website development, incurred subsequent to the completion of the
preliminary project stage. Development costs are amortized over the shorter of the expected useful
life of the software or five years. Costs related to planning, maintenance, and minor upgrades are
expensed as incurred.
Goodwill – The excess of acquisition costs over the fair value of net assets acquired is recorded as
goodwill. Goodwill is tested for impairment at least annually (Note 9).
Long–Lived Assets – The Company reviews the value of long-lived assets, including software and
other intangible assets, for impairment whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable based upon estimated future cash flows.
Accounts Payable – Book overdrafts of $20.5 million and $7.6 million, which represent outstanding
checks not yet presented to the bank, are included in accounts payable at December 31, 2009 and
2008, respectively. These amounts do not represent bank overdrafts, which would constitute
checks presented in excess of cash on hand, and would be effectively a loan to the Company.
Derivative Instruments – The Company records all derivatives on the balance sheet as either
assets or liabilities measured at their fair value, and changes in the derivatives’ fair value are
recognized currently in earnings unless specific hedge accounting criteria are met. In 2005 and
2006, the Company entered into interest rate swap agreements, which do not qualify for hedge
accounting treatment; therefore, the changes in the interest rate swap agreements’ fair values have
been recognized as an (increase) decrease in fair value of derivatives in the consolidated statement
of operations. In May 2007, the Company entered into an interest rate swap agreement related to
the 2007 Series notes (hereinafter defined) which constitutes a cash flow hedge and qualifies for
hedge accounting treatment; therefore, changes in fair value are recorded in accumulated other
comprehensive loss (Note 11).
Vehicle Insurance Reserves – Provisions for public liability and property damage and
supplemental liability insurance (“SLI”) on self-insured claims are made by charges primarily to
direct vehicle and operating expense. Accruals for such charges are based upon actuarially
determined evaluations of estimated ultimate liabilities on reported and unreported claims, prepared
on at least an annual basis. Historical data related to the amount and timing of payments for self-
insured claims is utilized in preparing the actuarial evaluations. The accrual for public liability and
property damage claims is discounted based upon the actuarially determined estimated timing of
payments to be made in the future. Management reviews the actual timing of payments as
compared with the annual actuarial estimate of timing of payments and has determined that there
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