Avis 2013 Annual Report Download - page 112

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F-40
respectively. The Company recorded losses of $1 million, $3 million and $2 million related to freestanding
derivatives during 2013, 2012 and 2011, respectively.
Commodity Risk. The Company periodically enters into derivative commodity contracts to manage its
exposure to changes in the price of gasoline. These instruments were designated as freestanding
derivatives and the changes in fair value are recorded in the Company’s consolidated results of operations.
These derivatives resulted in a gain of $1 million in 2013, a gain of $3 million in 2012 and a loss of less than
$1 million in 2011.
Credit Risk and Exposure. The Company is exposed to counterparty credit risks in the event of
nonperformance by counterparties to various agreements and sales transactions. The Company manages
such risk by evaluating the financial position and creditworthiness of such counterparties and by requiring
collateral in certain instances in which financing is provided. The Company mitigates counterparty credit risk
associated with its derivative contracts by monitoring the amount for which it is at risk with each
counterparty, periodically evaluating counterparty creditworthiness and financial position, and where
possible, dispersing its risk among multiple counterparties.
There were no significant concentrations of credit risk with any individual counterparties or groups of
counterparties at December 31, 2013 or 2012, other than (i) risks related to the Company’s repurchase and
guaranteed depreciation agreements with domestic and foreign car manufacturers, including Ford, General
Motors, Chrysler, Peugeot, Volkswagen, Fiat, Mercedes, Kia, BMW, Toyota, and Renault, and primarily with
respect to receivables for program cars that were disposed but for which the Company has not yet received
payment from the manufacturers (see Note 2—Summary of Significant Accounting Policies), (ii) receivables
from Realogy and Wyndham related to certain contingent, income tax and other corporate liabilities
assumed by Realogy and Wyndham in connection with their dispostion and (iii) risks related to leases which
have been assumed by Realogy, Wyndham or Travelport but of which the Company is a guarantor.
Concentrations of credit risk associated with trade receivables are considered minimal due to the
Company’s diverse customer base. The Company does not normally require collateral or other security to
support credit sales.
Fair Value
Derivative instruments and hedging activities
As described above, derivative assets and liabilities consist principally of currency exchange contracts,
interest rate swaps, interest rate contracts and commodity contracts.
Certain of the Company’s derivative instruments contain collateral support provisions that require the
Company to post cash collateral to the extent that these derivatives are in a liability position. The aggregate
fair value of such derivatives that are in a liability position and the aggregate fair value of assets needed to
settle these derivatives as of December 31, 2013 was approximately $2 million, for which the Company has
posted cash collateral in the normal course of business.