Avis 2006 Annual Report Download - page 68

Table of Contents
During 2006 and 2005, the Company incurred costs of $574 and $15 million, respectively, in connection with executing the separation
plan. The 2006 costs are as follows:
Early extinguishment of corporate debt
$
313
Other separation costs:
Stock
-
based compensation
79
Severance and retention
70
Legal, accounting and other professional fees
38
Reversal of receivables from Realogy and Wyndham
(*)
28
Asset write
-
offs
19
Insurance
14
Other
13
261
$
574
During 2006, the Company also incurred costs within discontinued operations of $239 million in connection with executing the separation
plan. Such costs are primarily related to the accelerated vesting of stock-based compensation awards, severance and retention and
professional and consulting fees.
In addition, pursuant to the Separation Agreement, Realogy, Wyndham and Travelport have agreed to assume and retain all of the
liabilities primarily related to each of their respective businesses and operations, including litigation primarily related to each of their
businesses where the Company is a named party. Realogy and Wyndham have also agreed to assume certain contingent and other
corporate liabilities of the Company or its subsidiaries, incurred prior to the disposition of Travelport (see Note 16—Commitments and
Contingencies).
Prior to the spin-offs of Realogy and Wyndham, the Company entered into a Transition Services Agreement with Realogy, Wyndham and
Travelport to provide for an orderly transition following the sale of Travelport and the spin-offs of Realogy and Wyndham. Under the
Transition Services Agreement, the Company provides Realogy, Wyndham and Travelport with various services, including services
relating to payroll, accounts payable, telecommunications services and information technology services in exchange for fees based on the
estimated cost of the services provided.
Also, in connection with its execution of the separation plan, the Company repaid certain corporate and other debt and entered into new
financing arrangements (see Note 14—Long-term Debt and Borrowing Arrangements).
CONSOLIDATION POLICY
In addition to consolidating entities in which the Company has a direct or indirect controlling financial interest, the Company evaluates the
consolidation of entities to which common conditions of consolidation, such as voting interests and board representation, do not apply. The
Company performs this evaluation pursuant to FASB Interpretation No. 46R, “Consolidation of Variable Interest Entities” (“FIN 46R”).
FIN 46R provides that, in the absence of clear control through voting interests, board representation or similar rights, a company’s
exposure, or variable interest, to the economic risks and potential rewards associated with its interest in the entity is the best evidence of
control.
F
-
11
(*)
Represents the reversal of receivables from Realogy and Wyndham due to the favorable resolution of certain tax related
contingencies, for which the Company is indemnified by Realogy and Wyndham. The benefit for income taxes includes a
corresponding credit resulting from the favorable resolution of such matters.
2. Summary of Significant Accounting Policies