Thrifty Car Rental 2010 Annual Report Download - page 65

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. The Company records
expense related to public liability and property damage and SLI on a monthly basis based on
rental volume and projections of ultimate losses, expenses, premiums and administrative costs
that are derived from historical accident claim experience and trends. Management reviews the
actual timing of payments as compared with the annual actuarial estimate of timing of
payments and has determined that there has been no material differences in the timing of
payments for each of the three years in the period ended December 31, 2010. Because of less
predictability in the estimated timing of payments, self-insured reserves for SLI are not
discounted.
Foreign Currency Translation – Foreign assets and liabilities are translated using the
exchange rate in effect at the balance sheet date, and results of operations are translated using
an average rate for the period. Translation adjustments are accumulated and reported as a
component of accumulated other comprehensive loss.
Revenue Recognition – Revenues from vehicle rentals are recognized as earned on a daily
basis under the related rental contracts with customers. Revenues from leasing vehicles to
franchisees are principally under operating leases with fixed monthly payments and are
recognized as earned over the lease terms. Revenues from fees and services include providing
sales and marketing, reservations, information systems and other services to franchisees.
Revenues from these services are generally based on a percentage of franchisee rental
revenue or upon providing reservations and are recognized as earned on a monthly basis.
Initial franchise fees, which are recorded to other revenues, are recognized upon substantial
completion of all material services and conditions of the franchise sale, which coincides with the
date of sale and commencement of operations by the franchisee.
Advertising Costs – Advertising costs are primarily expensed as incurred. The Company
incurred advertising expense of $20.9 million, $21.2 million and $29.5 million, for 2010, 2009
and 2008, respectively.
Environmental Costs – The Company’s operations include the storage of gasoline in
underground storage tanks at certain company-owned stores. Liabilities incurred in connection
with the remediation of accidental fuel discharges are recorded when it is probable that
obligations have been incurred and the amounts can be reasonably estimated.
Operating Leases –
Contingent Rent – The Company recognizes contingent rent expense associated with
certain airport concession agreements monthly as incurred when the Company’s
achievement of the annual targeted qualifying revenue is probable.
Scheduled Rent Increases – The Company recognizes scheduled rent increases on a
straight-line basis over the remaining lease term.
Income Taxes – The Company has provided for income taxes on its separate taxable income
or loss and other tax attributes. Deferred income taxes are provided for the temporary
differences between the financial reporting basis and the tax basis of the Company’s assets
64