Avis 2009 Annual Report Download - page 108

Table of Contents
on significant unobservable inputs. See Note 2—Summary of Significant Accounting Policies for the Plan’s valuation methodology used to
measure fair value. The following table presents the defined benefit pension plans’ assets measured at fair value, as of December 31, 2009:
The Company estimates that future benefit payments from plan assets will be $11 million, $11 million, $11 million, $12 million, $13 million
and $73 million for 2010, 2011, 2012, 2013, 2014 and 2015 to 2019, respectively.
Risk Management
Foreign Currency Risk . The Company uses foreign exchange forward contracts to manage its exposure to changes in foreign currency
exchange rates associated with its foreign currency denominated receivables and forecasted royalties, forecasted earnings of foreign
subsidiaries and forecasted foreign currency denominated acquisitions. The Company primarily hedges its foreign currency exposure to the
Canadian dollar, Australian dollar and New Zealand dollar. The majority of forward contracts do not qualify for hedge accounting treatment.
The fluctuations in the value of these forward contracts do, however, largely offset the impact of changes in the value of the underlying risk
they economically hedge. Forward contracts used to hedge forecasted third party receipts and disbursements up to 12 months are designated
and do qualify as cash flow hedges. The amount of gains or losses reclassified from other comprehensive income to earnings resulting from
ineffectiveness or from excluding a component of the forward contracts’
gain or loss from the effectiveness calculation for cash flow hedges
during 2009, 2008 and 2007 was not material, nor is the amount of gains or losses the Company expects to reclassify from other
comprehensive income to earnings over the next 12 months.
Interest Rate Risk . The Company uses various hedging strategies including interest rate swaps and interest rate caps to create an
appropriate mix of fixed and floating rate assets and liabilities. During 2009, the Company recorded a net unrealized gain on all cash flow
hedges of $43 million, net of tax, to other comprehensive income. The after-tax amount of gains or losses reclassified from accumulated
other comprehensive income (loss) to earnings resulting from ineffectiveness for 2009, 2008 and 2007 was not material to the Company’s
results of operations. The Company estimates that approximately $124 million of losses deferred in accumulated other comprehensive
income will be recognized in earnings in 2010, which is expected to be offset in earnings by the impact of the underlying hedged items.
The Company used interest rate swaps, designated as cash flow hedges, to manage the risk related to its floating rate corporate debt. In
connection with such cash flow hedges, the Company recorded net unrealized losses of $4 million, $1 million and $13 million, net of tax,
during 2009, 2008 and 2007, respectively, to other comprehensive income.
F
-
46
Asset Class
Level 2
Cash equivalents
$
2
Short term investments
3
Domestic stock
66
International stock
26
Real estate investment trusts
5
U.S. Government securities
11
Non
-
U.S. government securities
3
Corporate bonds
38
Other assets
2
Total assets
$
156
23.
Financial Instruments