U-Haul 2006 Annual Report Download - page 103

Critical Accounting Policies and Estimates
The Company’ s financial statements have been prepared in accordance with the United States generally accepted
accounting principles. The methods, estimates and judgments we use in applying our accounting policies can have a
significant impact on the results we report in our financial statements. Note 3 to our Consolidated Financial
Statements in Item 8 of this Form 10-K summarizes the significant accounting policies and methods used in the
preparation of our consolidated financial statements and related disclosures. Certain accounting policies require us
to make difficult and subjective judgments, often as a result of the need to make estimates of matters that are
inherently uncertain.
The accounting policies that we deem most critical to us and that require management’ s most difficult and
subjective judgments includes our principles of consolidation, the recoverability of property, plant and equipment,
the adequacy of insurance reserves, the recognition and measurement of impairment for investments, and the
recognition and measurement of income tax assets and liabilities. These estimates are based on historical
experience, observance of trends in particular areas, information and valuations available from outside sources and
on various other assumptions that are believed to be reasonable under the circumstances and which form the basis
for making judgments about the carrying values of assets and liabilities that are not readily apparent from other
sources. Actual amounts may differ from these estimates under different assumptions and conditions; such
differences may be material.
We also have other policies that we consider key accounting policies, such as revenue recognition; however, these
policies do not meet the definition of critical accounting estimates, because they do not generally require us to make
estimates or judgments that are difficult or subjective. The accounting policies that we deem most critical to us, and
involve the most difficult, subjective or complex judgments include the following:
Principles of Consolidation
The Company applies FIN 46(R), “Consolidation of Variable Interest Entities” and ARB 51 in its principles of
consolidation. ARB 51 addresses the policy when the company owns a majority of the voting or similar rights and
exercises effective control. FIN 46(R) addresses arrangements where the company does not hold a majority of the
voting or similar interests or a variable interest entity (VIE). The company is required to consolidate a VIE if it is
determined it is the primary beneficiary.
As promulgated by FIN 46(R), a VIE is not self-supportive by having one or both of the following conditions: a)
it has an insufficient amount of equity for it to finance its activities without receiving additional subordinated
financial support or b) its owners do not hold the typical risks and rights of equity owners. This determination is
made upon the creation of a variable interest and can be re-assessed should certain changes in the operations of a
VIE, or its relationship with the primary beneficiary trigger a reconsideration under the provisions of FIN 46(R).
After a triggering event occurs the most recent facts and circumstances are utilized in determining whether or not a
company is a variable interest entity, which other company(s) have a variable interest in the entity, and whether or
not the company’ s interest is such that it is the primary beneficiary.
The fiscal 2006 and fiscal 2005 consolidated financial statements include the accounts of AMERCO, its wholly-
owned subsidiaries, and SAC Holding II. The 2004 statements of operations, comprehensive income, and cash flows
include all of those entities plus SAC Holding Corporation and its subsidiaries.
In fiscal 2003 and fiscal 2002, SAC Holding Corporation and SAC Holding II (together, “SAC Holdings”) were
considered special purpose entities and were consolidated based on the provisions of Emerging Issues Task Force
(EITF) Issue No. 90-15. In fiscal 2004, the Company applied FIN 46(R) to its interests in SAC Holdings. Initially,
the Company concluded that SAC Holdings were variable interest entities (VIE’ s) and that the Company was the
primary beneficiary. Accordingly, the Company continued to include SAC Holdings in its consolidated financial
statements.
In February, 2004, SAC Holding Corporation restructured the indebtedness of three subsidiaries and then
distributed its interest in those subsidiaries to its sole shareholder. This triggered a requirement to reassess
AMERCO’ s involvement with those subsidiaries, which led to the conclusion that based on current contractual and
ownership interests between AMERCO and this entity, AMERCO ceased to have a variable interest in those three
subsidiaries at that date.
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