Avis 2009 Annual Report Download - page 71

Table of Contents
Avis Budget Group, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise noted, all dollar amounts are in millions, except per share amounts)
Avis Budget Group, Inc. provides car and truck rentals and ancillary services to businesses and consumers in the United States and
internationally. The accompanying Consolidated Financial Statements include the accounts and transactions of Avis Budget Group, Inc. and
its subsidiaries (“Avis Budget”), as well as entities in which Avis Budget directly or indirectly has a controlling financial interest
(collectively, the “Company”).
The Company operates in the following business segments:
In presenting the Consolidated Financial Statements in accordance with accounting principles generally accepted in the United States,
management makes estimates and assumptions that affect the amounts reported and related disclosures. Estimates, by their nature, are based
on judgment and available information. Accordingly, actual results could differ from those estimates.
Vehicle Programs. The Company presents separately the financial data of its vehicle programs. These programs are distinct from the
Company’
s other activities since the assets under vehicle programs are generally funded through the issuance of debt that is collateralized by
such assets. The income generated by these assets is used, in part, to repay the principal and interest associated with the debt. Cash inflows
and outflows relating to the generation or acquisition of such assets and the principal debt repayment or financing of such assets are
classified as activities of the Company’s vehicle programs. The Company believes it is appropriate to segregate the financial data of its
vehicle programs because, ultimately, the source of repayment of such debt is the realization of such assets.
Changes in Accounting Estimate . In fourth quarter 2008, the Company increased the assumed service lives of its Truck Rental segment’s
model year 2004 and later diesel trucks and model year 2005 and later gas trucks. This extension of service lives reflects the Company’s
expectation that it will purchase and dispose of fewer trucks each year than previously projected, thereby lengthening average hold periods
for its trucks. This change will also affect the value the Company realizes upon disposition of trucks. The change in estimate, effective as of
October 1, 2008, was accounted for prospectively and resulted in a decrease in depreciation expense of approximately $4 million, and
decreased net loss by approximately $3 million ($0.02 per diluted share), for the year ended December 31, 2008.
In fourth quarter 2007, the Company revised the assumed service lives of its truck fleet, for model years 2004 and later, to better reflect the
projected hold periods of these vehicles. The Company believes that its decision to retain these trucks longer than previously anticipated will
allow it to reduce cash outflow related to fleet costs. This change will also affect the value the Company realizes upon the disposition of
trucks. The change in estimate, effective as of October 1, 2007, was accounted for prospectively and resulted in a decrease in depreciation
expense of approximately $5 million, and decreased net loss by approximately $3 million ($0.03 per diluted share), for the year ended
December 31, 2007.
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1.
Basis of Presentation
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Domestic Car Rental
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provides car rentals and ancillary products and services in the United States.
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International Car Rental
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provides vehicle rentals and ancillary products and services primarily in Argentina, Australia, Canada,
New Zealand, Puerto Rico and the U.S. Virgin Islands.
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Truck Rental
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provides truck rentals and related services to consumers and light commercial users in the United States.