Avis 2009 Annual Report Download - page 77

Table of Contents
current fair value with unrealized gains or losses reported net of taxes as a separate component of stockholders’ equity. Trading securities
are recorded at fair value with realized and unrealized gains and losses reported currently in earnings.
During 2009, the Company recorded a $33 million ($20 million, net of tax) charge primarily to reflect the impairment of its investment in
Carey Holdings, Inc. (“Carey”) (see Note 14—Equity Investment). In 2008, the Company recorded an $18 million ($11 million, net of tax)
charge to reflect impairment of its investment in Carey.
Aggregate realized gains and losses on investments and preferred dividend income are recorded within other revenues on the Consolidated
Statements of Operations. There were no net realized gains or losses in continuing operations in 2009, 2008 and 2007.
Affinion Group Holdings, Inc. The Company’s former investment in Affinion Group Holdings, Inc. (“Affinion”) was received in
connection with the October 2005 sale of its former Marketing Services division, along with cash proceeds approximating $1.7 billion. This
investment represented preferred stock with a carrying value of $95 million, including accrued dividends (face value of $125 million)
maturing in October 2017, and warrants with a carrying value of $3 million that were exercisable into 7.5% of the common equity of
Affinion upon the earlier of four years or the achievement of specified investment hurdles.
Pursuant to the Separation Agreement, the Company was obligated to distribute all proceeds received on the sale of its investments in
Affinion to Realogy and Wyndham. Accordingly, following the spin-offs of Realogy and Wyndham on July 31, 2006, the Company began
to recognize a charge on its Consolidated Statements of Operations equal to the dividend and accretion income on the preferred stock of
Affinion. In 2007, the Company sold the majority of its preferred stock investment in Affinion and distributed the proceeds and the
remaining investment to Realogy and Wyndham.
SELF-INSURANCE RESERVES
The Consolidated Balance Sheets include $308 million and $325 million of liabilities with respect to self-insured public liability and
property damage as of December 31, 2009 and 2008, respectively. Such liabilities relate to excess liability insurance, personal effects
protection insurance, public liability, property damage and personal accident insurance claims for which the Company is self-insured. These
obligations represent an estimate for both reported claims not yet paid and claims incurred but not yet reported. The Company estimates the
required reserve for such claims on an undiscounted basis utilizing an actuarial method that is based upon various assumptions which
include, but are not limited to, the Company’
s historical loss experience and projected loss development factors. The required liability is also
subject to adjustment in the future based upon the changes in claims experience, including changes in the number of incidents and changes
in the ultimate cost per incident. These amounts are included within accounts payable and other current liabilities and other non-current
liabilities.
The Consolidated Balance Sheets also include liabilities of approximately $65 million and $71 million as of December 31, 2009 and 2008,
respectively, related to health and welfare, workers’
compensation and other benefits the Company provides to its employees. The Company
estimates the liability required for such benefits based on actual claims outstanding and the estimated cost of claims incurred as of the
balance sheet date. These amounts are included within accounts payable and other current liabilities.
ADOPTION OF NEW ACCOUNTING STANDARDS DURING 2009
In December 2007 and April 2009, the Financial Accounting Standards Board (“FASB”) issued new guidance related to FASB Accounting
Standards Codification (“ASC”) topic 805, Business Combinations . The objective of this guidance is to enhance the information that an
entity provides in its financial reports
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