U-Haul 2011 Annual Report Download - page 65

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AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Cash and Cash Equivalents
The Company considers cash equivalents to be highly liquid debt securities with insignificant interest rate
risk with original maturities from the date of purchase of three months or less.
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally
of cash deposits. Accounts at each United States financial institution are insured by the Federal Deposit
Insurance Corporation (“FDIC”) up to $250,000. Accounts at each Canadian financial institution are insured by
the Canada Deposit Insurance Corporation (“CDIC”) up to $100,000 CAD per account. At March 31, 2011 and
March 31, 2010, the Company had $309.2 million and $204.4 million, respectively, in excess of FDIC and CDIC
insured limits. To mitigate this risk, the Company selects financial institutions based on their credit ratings and
financial strength.
Investments
Fixed Maturities and Marketable Equities. Fixed maturity investments consist of either marketable debt,
equity or redeemable preferred stocks. As of the balance sheet dates, all of the Company’s investments in these
securities are classified as available-for-sale. Available-for-sale investments are reported at fair value, with
unrealized gains or losses recorded net of taxes and applicable adjustments to deferred policy acquisition costs
in stockholders’ equity. Fair value for these investments is based on quoted market prices, dealer quotes or
discounted cash flows. The cost of investments sold is based on the specific identification method.
In determining if and when a decline in market value below carrying value is an other-than-temporary
impairment, management makes certain assumptions or judgments in its assessment including but not limited
to: ability to hold the security, quoted market prices, dealer quotes, discounted cash flows, industry factors,
financial factors, and issuer specific information. Other-than-temporary impairments, to the extent of the decline,
as well as realized gains or losses on the sale or exchange of investments are recognized in the current period
operating results.
Mortgage Loans and Notes on Real Estate. Mortgage loans and notes on real estate are reported at their
unpaid balance, net of any allowance for possible losses and any unamortized premium or discount.
Recognition of Investment Income. Interest income from bonds and mortgage notes is recognized when
earned. Dividends on common and preferred stocks are recognized on the ex-dividend dates. Realized gains
and losses on the sale or exchange of investments are recognized at the trade date.
Fair Values
Fair values of cash equivalents approximate carrying value due to the short period of time to maturity. Fair
values of short-term investments, investments available-for-sale, long-term investments, mortgage loans and
notes on real estate, and interest rate swap contracts are based on quoted market prices, dealer quotes or
discounted cash flows. Fair values of trade receivables approximate their recorded value.
The Company’s financial instruments that are exposed to concentrations of credit risk consist primarily of
temporary cash investments, trade receivables, reinsurance recoverables and notes receivable. Limited credit
risk exists on trade receivables due to the diversity of our customer base and their dispersion across broad
geographic markets. The Company places its temporary cash investments with financial institutions and limits
the amount of credit exposure to any one financial institution.
The Company has mortgage receivables, which potentially expose the Company to credit risk. The portfolio
of notes is principally collateralized by self-storage facilities and commercial properties. The Company has not
experienced any material losses related to the notes from individual notes or groups of notes in any particular
industry or geographic area. The estimated fair values were determined using the discounted cash flow method
and using interest rates currently offered for similar loans to borrowers with similar credit ratings.
The carrying amount of long-term debt and short-term borrowings are estimated to approximate fair value as
the actual interest rate is consistent with the rate estimated to be currently available for debt of similar term and
remaining maturity.
Other investments including short-term investments are substantially current or bear reasonable interest
rates. As a result, the carrying values of these financial instruments approximate fair value.
F-9