AutoNation 2005 Annual Report Download - page 49

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Table of Contents
AUTONATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All tables in millions, except per share data)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Business
AutoNation, Inc. (the “Company”), through its subsidiaries, is the largest automotive retailer in the United States. As of December 31,
2005, the Company owned and operated 346 new vehicle franchises from 269 stores located in major metropolitan markets in 17 states,
predominantly in the Sunbelt region of the United States. The Company offers a diversified range of automotive products and services,
including new vehicles, used vehicles, vehicle maintenance and repair services, vehicle parts, extended service contracts, vehicle protection
products and other aftermarket products. The Company also arranges financing for vehicle purchases through third-party finance sources.
Basis of Presentation
The accompanying Consolidated Financial Statements include the accounts of AutoNation, Inc. and its subsidiaries. All of the Company’s
automotive dealership subsidiaries are indirectly wholly owned by the parent company, AutoNation, Inc. The Company operates in a single
industry segment, automotive retailing. The Company sells new and used vehicles, vehicle maintenance and repair services, vehicle parts,
and financing and insurance products. All intercompany accounts and transactions have been eliminated.
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Significant estimates made
by the Company in the accompanying Consolidated Financial Statements include allowances for doubtful accounts, accruals for chargebacks
against revenue recognized from the sale of finance and insurance products, certain assumptions related to intangible and long-lived assets,
and for accruals related to self-insurance programs, certain legal proceedings and estimated tax liabilities.
Certain reclassifications of amounts previously reported have been made to the accompanying Consolidated Financial Statements in
order to maintain consistency and comparability between periods presented.
Restatement and Revision
The Company has restated certain amounts in the 2004 and 2003 Consolidated Statements of Cash Flows from operating activities to
financing activities to comply with Statement of Financial Accounting Standards (“SFAS”) 95, “Statement of Cash Flows,” as a result of
recent comments to the Company from the Securities and Exchange Commission. Amounts that were previously reported as operating
activities have been restated as a component of financing activities to reflect the net cash flow uses for floorplan facilities with lenders other
than the automotive manufacturers’ captive finance subsidiaries for that franchise (“non-trade lenders”). This change had the effect of
increasing net cash from operating activities with the related offset in net cash from financing activities.
Additionally, the Company has revised its 2004 and 2003 Consolidated Statements of Cash Flows as a result of recent guidance given by
the Securities and Exchange Commission to separately disclose the operating, investing and financing cash flows attributable to the
Company’s discontinued operations. The Company had previously reported these amounts on a combined basis.
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