American Home Shield 2008 Annual Report Download - page 81

Table of Contents
Notes to the Consolidated Financial Statements (Continued)
Note 1. Significant Accounting Policies (Continued)
additional trade name impairments. Management has no reason to believe that any one reporting unit is more likely than any other to incur further
impairments of its trade names. It is possible that such impairments, if required, could be material and may need to be recorded prior to the fourth quarter of
2009 (i.e., during an interim period) if the Company's results of operations or other factors require such assets to be tested for impairment at an interim date.
Fair Value of Financial Instruments and Credit Risk: The year-end carrying amounts of receivables, accounts payable, and accrued liabilities
approximate fair value because of the short maturity of these instruments. The year-end carrying amounts of long-term notes receivables approximate fair
value as the effective interest rates for these instruments are comparable to market rates at year-end. The year-end carrying amounts of current and long-term
marketable securities also approximate fair value, with unrealized gains and losses reported net-of-tax as a component of accumulated comprehensive income
(loss), or, for certain unrealized losses, reported in interest and net investment income in the statements of operations if the decline in value is other than
temporary. The carrying amount of total debt was $4,266 million and $4,131 million and the estimated fair value was approximately $2,166 million and
$3,922 million at December 31, 2008 and 2007, respectively. The fair values of the Company's financial instruments reflect the amounts that would be
received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The fair value
estimates presented in this report are based on information available to the Company as of December 31, 2008 and December 31, 2007.
The Company does not hold or issue derivative financial instruments for trading or speculative purposes. The Company has entered into specific
financial arrangements in the normal course of business to manage certain market risks, with a policy of matching positions and limiting the terms of contracts
to relatively short durations.
The Company has historically hedged approximately two-thirds of its annual fuel consumption of approximately 28 million gallons. The Company has
also hedged the interest payments on a portion of its variable rate debt through the use of interest rate swap agreements. In accordance with SFAS 133,
"Accounting for Derivative Instruments and Hedging Activities", the Company's fuel hedges and interest rate swap agreements are classified as cash flow
hedges and as such, the hedging instruments are recorded on the balance sheet as either an asset or liability at fair value, with the effective portion of changes
in the fair value attributable to the hedged risks recorded in other comprehensive income.
Financial instruments, which potentially subject the Company to financial and credit risk, consist principally of investments and receivables. Investments
consist primarily of publicly traded debt and common equity securities. The Company periodically reviews its portfolio of investments to determine whether
there has been an other than temporary decline in the value of the investments from factors such as deterioration in the financial condition of the issuer or the
market(s) in which it competes. The majority of the Company's receivables have little concentration of credit risk due to the large number of customers with
relatively small balances and their dispersion across geographical areas. The Company maintains an allowance for losses based upon the expected
collectibility of receivables.
Income Taxes: The Company is included in the consolidated U.S. federal income tax return of Holdings. State and local returns are filed both on a
separate company basis and on a combined
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