Avis 2008 Annual Report Download - page 56

(c)
Operating lease obligations are presented net of sublease rentals to be received (see Note 18 to our Consolidated Financial Statements).
(d)
Represents commitments to purchase vehicles, the majority of which are from General Motors Corporation, Ford Motor Company, Hyundai
Motor America or Chrysler LLC. These commitments are subject to the vehicle manufacturers satisfying their obligations under the
repurchase and guaranteed depreciation agreements. The purchase of such vehicles is financed through the issuance of debt under vehicle
programs in addition to cash received upon the sale of vehicles, many of which are under repurchase and guaranteed depreciation programs
(see Note 18 to our Consolidated Financial Statements).
(e)
Primarily represents income tax uncertainties related to FIN 48, “Accounting for Uncertainty in Income Taxes—an interpretation of FASB
Statement No. 109”, substantially all of which are subject to indemnification by Realogy and Wyndham.
For more information regarding guarantees and indemnifications, see Note 18 to our Consolidated Financial Statements.
ACCOUNTING POLICIES
Critical Accounting Policies
In presenting our financial statements in conformity with generally accepted accounting principles, we are required to make estimates and
assumptions that affect the amounts reported therein. Several of the estimates and assumptions we are required to make relate to matters that are
inherently uncertain as they pertain to future events and/or events that are outside of our control. If there is a significant unfavorable change to
current conditions, it could result in a material adverse impact to our consolidated results of operations, financial position and liquidity. We
believe that the estimates and assumptions we used when preparing our financial statements were the most appropriate at that time. Presented
below are those accounting policies that we believe require subjective and complex judgments that could potentially affect reported results.
However, our businesses operate in environments where we are paid a fee for a service performed, and therefore the results of the majority of
our recurring operations are recorded in our financial statements using accounting policies that are not particularly subjective, nor complex.
Goodwill and Other Indefinite-lived Intangible Assets. We have reviewed the carrying value of our goodwill and other indefinite-lived
intangible assets as required by Statements of Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets.” In performing
this review, we are required to make an assessment of fair value for our goodwill and other indefinite-lived intangible assets. When determining
fair value, we utilize various assumptions, including the fair market trading price of our common stock and management’s projections of future
cash flows. A change in these underlying assumptions will cause a change in the results of the tests and, as such, could cause the fair value to be
less than the respective carrying amount. In such event, we would then be required to record a charge, which would impact earnings. We review
the carrying value of goodwill and other indefinite-lived intangible assets for impairment annually, or more frequently if circumstances indicate
impairment may have occurred.
Our goodwill and other indefinite-lived intangible assets are allocated among three reporting units. During 2008, a $1,262 million ($1,053
million, net of tax) charge was recorded to reflect (i) the impairment of goodwill, (ii) the impairment of our tradenames assets and (iii) the
impairment of our investment in Carey. These charges reflect the decline in their fair value below their carrying value, primarily as a result of
reduced market valuations for vehicle services and other companies, as well as reduced profit forecasts due to soft economic conditions and
increased financing costs. Domestic Car Rental operations recorded $882 million and International Car Rental recorded $275 million, for
goodwill and tradename impairment, Truck Rental recorded $87 million for goodwill impairment and Corporate and Other recorded $18 million
for the charge related to our investment in Carey. The aggregate carrying value of our goodwill and other indefinite-lived intangible assets was
approximately $75 million and $402 million, respectively, at December 31, 2008.
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(f)
Primarily represents commitments under service contracts for information technology and telecommunications.