U-Haul 2007 Annual Report Download - page 27

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Starting in fiscal 2006 the Company acquired a significant number of moving trucks via purchase rather than
lease. Management performed an analysis of the expected economic value of new rental trucks and determined that
additions to the fleet resulting from purchase should be depreciated on an accelerated method based upon a declining
formula. The salvage value and useful life assumptions of the rental truck fleet remain unchanged. Under the
declining balances method (2.4 times declining balance) the book value of a rental truck is reduced 16%, 13%, 11%,
9%, 8%, 7%, and 6% during years one through seven, respectively and then reduced on a straight line basis an
additional 10% by the end of year fifteen. Whereas, a standard straight line approach would reduce the book value
by approximately 5.3% per year over the life of the truck. For the affected equipment, the accelerated depreciation
was $33.2 million greater than w
21
hat it would have been if calculated under a straight line approach for fiscal 2007
an
et, the age and condition of the vehicle at
l and depreciation rates with respect to the vehicle.
In
. Liabilities for annuity contracts consist of contract account balances that accrue to the
b
ely paid to settle liabilities cannot be precisely determined and may vary significantly from the estimated
li
at were written by RepWest is that it takes a number of years for claims to be fully reported and finally
Im
n other-than-temporary impairments for fiscal 2007, $5.3 million for fiscal
illion for fiscal 2005.
In
se changes that could materially impact
our financial results. Our current effective tax rate is approximately 37.9%.
d $4.0 million for fiscal 2006.
We typically sell our used vehicles at one of our sales centers throughout North America, on our web site at
trucksales.uhaul.com or by phone at 1-866-404-0355. Although we intend to sell our used vehicles for prices
approximating book value, the extent to which we realize a gain or loss on the sale of used vehicles is dependent
upon various factors including the general state of the used vehicle mark
the time of its disposa
surance Reserves
Liabilities for life insurance and certain annuity and health policies are established to meet the estimated future
obligations of policies in force, and are based on mortality, morbidity and withdrawal assumptions from recognized
actuarial tables which contain margins for adverse deviation. In addition, liabilities for health, disability and other
policies include estimates of payments to be made on insurance claims for reported losses and estimates of losses
incurred, but not yet reported
enefit of the policyholders.
Insurance reserves for RepWest and U-Haul take into account losses incurred based upon actuarial estimates.
These estimates are based on past claims experience and current claim trends as well as social and economic
conditions such as changes in legal theories and inflation. Due to the nature of underlying risks and the high degree
of uncertainty associated with the determination of the liability for future policy benefits and claims, the amounts to
be ultimat
ability.
A consequence of the long tail nature of the assumed reinsurance and the excess workers compensation lines of
insurance th
settled.
pairment of Investments
For investments accounted for under SFAS No. 115, in determining if and when a decline in market value below
amortized cost is other-than-temporary, management makes certain assumptions or judgments in its assessment
including but not limited to: ability and intent to hold the security, quoted market prices, dealer quotes or discounted
cash flows, industry factors, financial factors, and issuer specific information such as credit strength. Other-than-
temporary impairment in value is recognized in the current period operating results. The Company’ s insurance
subsidiaries recognized $1.4 million i
2006 and $4.3 m
come Taxes
The Company’ s tax returns are periodically reviewed by various taxing authorities. Despite our belief that all of
our tax treatments are supportable, the final outcome of these audits may cau