Avis 2007 Annual Report Download - page 75

Table of Contents
ACCOUNTING PRINCIPLES
The Company’s Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the
United States of America (“GAAP”).
PRINCIPLES OF CONSOLIDATION
The Consolidated Financial Statements include the accounts of Avis Budget and all entities in which the Company has a direct or indirect
controlling financial interest and variable interest entities (“VIEs”) where the Company is determined to be the primary beneficiary. The
Company is deemed to be the primary beneficiary if it bears a majority of the risk to the entities’ potential losses or stands to gain from a
majority of the entities’ expected returns. Significant intercompany transactions have been eliminated in consolidation.
USE OF ESTIMATES AND ASSUMPTIONS
The use of estimates and assumptions as determined by management are required in the preparation of the Consolidated Financial
Statements in conformity with GAAP. These estimates are based on management’s evaluation of historical trends and other information
available when the Consolidated Financial Statements are prepared. Changes in estimates are recognized in accordance with the accounting
rules for the estimate. Actual results could differ from those estimates.
REVENUE RECOGNITION
The Company derives revenue through the operation and franchising of the Avis and Budget rental systems, providing vehicle rentals and
other services to business and leisure travelers and others. Other revenue includes rentals of GPS navigational units, sales of loss damage
waivers and insurance products, and other items. Revenue is recognized when persuasive evidence of an arrangement exists, the services
have been rendered to customers, the pricing is fixed or determinable and collection is reasonably assured.
Vehicle rental and rental-related revenue is recognized over the period the vehicle is rented. Franchise revenue principally consists of
royalties and is recorded as the franchisee revenue is earned (generally over the rental period of a vehicle). Revenue and expenses
associated with gasoline, vehicle licensing and airport concessions are recorded on a gross basis within revenue and operating expenses.
FOREIGN CURRENCY TRANSLATION
Assets and liabilities of foreign operations are translated at the rate of exchange in effect on the balance sheet date; income and expenses
are translated at the weighted average rate of exchange prevailing during the year. The related translation adjustments are reflected in
“Accumulated other comprehensive income” in the stockholders’ equity section of the Consolidated Balance Sheet. The accumulated
foreign currency translation adjustment as of December 31, 2007 and December 31, 2006 was $117 million and $67 million, respectively.
Foreign currency gains and losses resulting from transactions are included in earnings.
CASH AND CASH EQUIVALENTS
The Company considers highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.
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Summary of Significant Accounting Policies