U-Haul 2007 Annual Report Download - page 79

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AMERCO AND CONSOLIDATED ENTITIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
RepWest’ s liability for reported and unreported losses is based on RepWest’ s historical data along with industry
averages. The liability for unpaid loss adjustment expenses is based on historical ratios of loss adjustment expenses paid to
losses paid. Amounts recoverable from re-insurers on unpaid losses are estimated in a manner consistent with the claim
liability associated with the re-insured policy. Adjustments to the liability for unpaid losses and loss expenses as well as
amounts recoverable from re-insurers on unpaid losses are charged or credited to expense in the periods in which they are
made.
Self-Insurance Reserves
U-Haul retains the risk for certain public liability and property damage programs related to the rental equipment. The
consolidated balance sheets include $330.6 million and $295.6 million of liabilities related to these programs as of March
31, 2007 and 2006, respectively. Such liabilities are recorded within policy benefits and losses payable. Management takes
into account losses incurred based upon actuarial estimates, past experience, current claim trends, as well as social and
economic conditions. This liability is subject to change in the future based upon changes in the underlying assumptions
including claims experience, frequency of incidents, and severity of incidents.
Additionally, as of March 31, 2007 and 2006 the consolidated balance sheets include liabilities of $3.9 million and $4.9
million for fiscal 2007 and 2006, respectively, related to Company provided medical plan benefits for eligible employees.
The Company estimates this liability based on actual claims outstanding as of the balance sheet date as well as an actuarial
estimate of claims incurred but not reported. This liability is reported net of estimated recoveries from excess loss
reinsurance policies with unaffiliated insurers of $0.8 million and $0.0 million in fiscal 2007 and 2006, respectively. These
amounts are recorded in accounts payable on the consolidated balance sheet.
Revenue Recognition
Self-moving rentals are recognized for the period that trucks and moving equipment are rented. Self-storage revenues,
based upon the number of paid storage contract days, are recognized as earned during the period. Sales of self-moving and
self-storage related products are recognized at the time that title passes and the customer accepts delivery. Insurance
premiums are recognized over the policy periods. Interest and investment income are recognized as earned.
Advertising
All advertising costs are expensed as incurred. Advertising expense was $31.5 million in fiscal 2007, $31.3 million in
fiscal 2006 and $32.9 million in fiscal 2005.
Deferred Policy Acquisition Costs
Commissions and other costs that fluctuate with, and are primarily related to the acquisition or renewal of certain
insurance premiums, are deferred. For Oxford, these costs are amortized in relation to revenue such that costs are realized
as a constant percentage of revenue. For RepWest, these costs are amortized over the related contract periods, which
generally do not exceed one year.
Environmental Costs
Liabilities are recorded when environmental assessments and remedial efforts, if applicable, are probable and the costs
can be reasonably estimated. The amount of the liability is based on management’ s best estimate of undiscounted future
costs. Certain recoverable environmental costs related to the removal of underground storage tanks or related contamination
are capitalized and amortized over the estimated useful lives of the properties. These costs improve the safety or efficiency
of the property or are incurred in preparing the property for sale.
Income Taxes
AMERCO files a consolidated tax return with all of its legal subsidiaries, except for DGLIC, which will file on a stand
alone basis. SAC Holding Corporation and its legal subsidiaries and SAC Holding II Corporation and its legal subsidiaries
file consolidated tax returns, which are in no way associated with AMERCO’ s consolidated returns. In accordance with
SFAS No. 109, the provision for income taxes reflects deferred income taxes resulting from changes in temporary
differences between the tax basis of assets and liabilities and their reported amounts in the financial statements.
Comprehensive Income (Loss)
Comprehensive income (loss) consists of net earnings, foreign currency translation adjustments, unrealized gains and
losses on investments and the change in fair value of cash flow hedges.
F-14