Avis 2012 Annual Report Download - page 67

F-11
The Company assesses goodwill for such impairment by comparing the carrying value of each reporting unit to its fair
value using the present value of expected future cash flows. When available and as appropriate, comparative market
multiples and other factors are used to corroborate the discounted cash flow results.
The Company also evaluates the recoverability of its other long-lived assets, including amortizable intangible assets, if
circumstances indicate impairment may have occurred. This analysis is performed by comparing the respective carrying
values of the assets to the 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.
Program Cash
Program cash primarily represents amounts specifically designated to purchase assets under vehicle programs and/or to
repay the related debt.
Vehicles
Vehicles are stated at cost, net of accumulated depreciation. The initial cost of the vehicles is recorded net of incentives
and allowances from manufacturers. The Company acquires many of its rental vehicles pursuant to repurchase and
guaranteed depreciation programs established by automobile manufacturers. Under these programs, the manufacturers
agree to repurchase vehicles at a specified price and date, or guarantee the depreciation rate for a specified period of
time, subject to certain eligibility criteria (such as car condition and mileage requirements). The Company depreciates
vehicles such that the net book value on the date of return to the manufacturers is intended to equal the contractual
guaranteed residual values, thereby minimizing any gain or loss.
Rental vehicles acquired outside of manufacturer repurchase and guaranteed depreciation programs are depreciated
based upon their estimated residual values at their expected dates of disposition, after giving effect to anticipated
conditions in the used car market, which are reviewed on a continuous basis. Any adjustments to depreciation are made
prospectively.
For 2012, 2011 and 2010, rental vehicles were depreciated at rates ranging from 1% to 43% per annum. Upon disposal of
the vehicles, depreciation expense is adjusted for any difference between the net sales proceeds and the remaining book
value. Vehicle-related interest expense amounts are net of vehicle-related interest income of $8 million, $8 million and
$11 million for 2012, 2011 and 2010, respectively.
Advertising Expenses
Advertising costs are generally expensed in the period incurred. Advertising expenses, recorded within selling, general
and administrative expense on our Consolidated Statements of Operations, include radio, television, “yellow pages” and
other advertising, travel partner rewards programs, internet advertising and other promotions and were approximately
$127 million, $107 million and $66 million in 2012, 2011 and 2010, respectively.
Taxes
The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred
tax assets and liabilities for the expected future tax consequences of events that have been included in the financial
statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the
financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized
in income in the period that includes the enactment date.
The Company records net deferred tax assets to the extent it believes that it is more likely than not that these assets will
be realized. In making such determination, the Company considers 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 the Company were to determine that it would be able to realize the deferred
income tax assets in the future in excess of their net recorded amount, the Company would adjust the valuation
allowance, which would reduce the provision for income taxes.
The Company reports revenues net of any tax assessed by a governmental authority that is both imposed on and
concurrent with a specific revenue-producing transaction between a seller and a customer.