Avis 2008 Annual Report Download - page 78

IMPAIRMENT OF LONG-LIVED ASSETS
In connection with SFAS No. 142, “Goodwill and Other Intangible Assets” (“SFAS No. 142”), the Company is required to assess goodwill
and other indefinite-lived intangible assets for impairment annually, or more frequently if circumstances indicate impairment may have
occurred. The Company performs its annual impairment assessment in the fourth quarter of each year. Each of the Company’s operating
segments represents a reporting unit.
The Company assesses goodwill for such impairment by comparing the carrying value of each reporting units to its fair values using the
present value of expected future cash flows. If the first test required under SFAS No. 142 indicates a potential impairment, we perform a
second test for that reporting unit to determine the amount of impairment loss, if any. The Company determines the fair value of its reporting
units utilizing discounted cash flows and incorporates assumptions that it believes marketplace participants would utilize. When available
and as appropriate, comparative market multiples and other factors to corroborate the discounted cash flow results are used. Other indefinite-
lived intangible assets are tested for impairment and written down to fair value, as required by SFAS No. 142.
The Company also evaluates the recoverability of its other long-lived assets, including amortizable intangible assets, if circumstances
indicate impairment may have occurred, pursuant to SFAS No. 144. This analysis is performed by comparing the respective carrying values
of the assets to the current and expected future cash flows, on an undiscounted basis, to be generated from such assets. Property and
equipment is evaluated separately within each segment. If such analysis indicates that the carrying value of these assets is not recoverable,
the carrying value of such assets is reduced to fair value.
During 2008, the Company recorded a $1,262 million ($1,053 million after tax) charge to reflect (i) the impairment of goodwill, (ii) the
impairment of the Company’s tradenames assets and (iii) the impairment of its investment in Carey Holdings, Inc. (“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
recorded $882 million and International Car Rental recorded $275 million for goodwill and tradenames impairment, Truck Rental recorded
$87 million for goodwill impairment, and $18 million was recorded within Corporate and Other for the charge related to Carey.
In 2007, the Company recorded a $1,195 million ($1,073 million after tax) charge for the impairment of goodwill at each of the Company’s
reporting units to reflect the decline in their fair value as evidenced by a decline in the market value of the Company’s common stock.
Domestic Car Rental recorded $786 million of the goodwill impairment, International Car Rental recorded $268 million and Truck Rental
recorded $141 million. There was no impairment under SFAS No. 142 on indefinite lived assets or under SFAS No. 144 on long-lived
assets.
In 2006, there was no impairment of goodwill or other intangible assets within the Company’s continuing operations, however, the
Company recorded an impairment charge of approximately $1.3 billion within discontinued operations to reflect the difference between
Travelport’s carrying value and its estimated fair value, less costs to dispose.
PROGRAM CASH
Program cash primarily represents amounts specifically designated to purchase assets under vehicle programs and/or to repay the related
debt.
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