Avis 2009 Annual Report Download - page 57

Table of Contents
We record net deferred tax assets to the extent we believe these assets will more likely than not be realized. In making such determination, we
consider all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income,
tax planning strategies and recent results of operations. In the event we were to determine that we would be able to realize deferred income tax
assets in the future in excess of their net recorded amount, we would make an adjustment to the valuation allowance which would reduce the
provision for income taxes. Currently the Company does not record valuation allowances on the majority of its tax loss carryforwards as there
are adequate deferred tax liabilities that could be realized within the carryforward period.
See Notes 2 and 10 to our Consolidated Financial Statements for more information regarding income taxes.
Financial Instruments.
We estimate fair values for each of our financial instruments, including derivative instruments. Most of these financial
instruments are not publicly traded on an organized exchange. In the absence of quoted market prices, we must develop an estimate of fair value
using dealer quotes, present value cash flow models, option pricing models or other conventional valuation methods, as appropriate. The use of
these fair value techniques involves significant judgments and assumptions, including estimates of future interest rate levels based on interest
rate yield curves, credit spreads of the Company and counterparties, volatility factors, and an estimation of the timing of future cash flows. The
use of different assumptions may have a material effect on the estimated fair value amounts recorded in the financial statements, which are
disclosed in Note 23 to our Consolidated Financial Statements. In addition, hedge accounting requires that at the beginning of each hedge period,
we justify an expectation that the relationship between the changes in fair value of derivatives designated as hedges compared to changes in the
fair value of the underlying hedged items will be highly effective. This effectiveness assessment, which is performed at least quarterly, involves
an estimation of changes in fair value resulting from changes in interest rates, as well as the probability of the occurrence of transactions for cash
flow hedges. The use of different assumptions and changing market conditions may impact the results of the effectiveness assessment and
ultimately the timing of when changes in derivative fair values and the underlying hedged items are recorded in earnings. See “Item 7A.
Quantitative and Qualitative Disclosures about Market Risk” for a discussion of the effect of hypothetical changes to these assumptions.
Public Liability, Property Damage and Other Insurance Liabilities.
Insurance liabilities on our Consolidated Balance Sheets include additional
liability insurance, personal effects protection insurance, public liability, property damage and personal accident insurance claims for which we
are self-insured. We estimate the required liability of such claims on an undiscounted basis utilizing an actuarial method that is based upon
various assumptions which include, but are not limited to, our historical loss experience and projected loss development factors. The required
liability is also subject to adjustment in the future based upon changes in claims experience, including changes in the number of incidents and
changes in the ultimate cost per incident.
Adoption of New Accounting Pronouncements
During 2009, we adopted the following standards as a result of the issuance of new accounting pronouncements:
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• SFAS No. 141(R), “Business Combinations” and FASB Staff Position FAS 141(R)-1, “
Accounting for Assets Acquired and Liabilities
Assumed in a Business Combination That Arise from Contingencies
”
,
as codified in ASC topic 805,
Business Combinations
• SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51”, as codified in ASC
topic 810,
Consolidation
•
SFAS No. 161,
“
Disclosures about Derivative Instruments and Hedging Activities
–
an amendment of FASB Statement No. 133
”
,
as
codified in ASC topic 815,
Derivatives and Hedging
•
FSP No. FAS 142
-
3
“
Determination of the Useful Life of Intangible Assets
”
,
as codified in ASC topic 350,
Intangibles
—
Goodwill and
Other
• FSP No. FAS 115-2 and FAS 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments”,
as codified in ASC topic
320,
Investments
—
Debt and Equity Securities