Avis 2013 Annual Report Download - page 82

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F-10
Revenue Recognition
The Company derives revenue primarily through the operation and licensing of the Avis and Budget rental
systems and by providing vehicle rentals and other services to business and leisure travelers and others.
Other revenue includes sales of loss damage waivers and insurance products, fuel and fuel service
charges, rentals of GPS navigation units and other items. Revenue is recognized when persuasive
evidence of an arrangement exists, the services have been rendered to customers, the pricing is fixed or
determinable and collection is reasonably assured.
Vehicle rental and rental-related revenue is recognized over the period the vehicle is rented. Licensing
revenue principally consists of royalties paid by the Company’s licensees and is recorded within other
revenues as the licensees’ revenue is earned (over the rental period of a vehicle). The Company renews
license agreements in the normal course of business and occasionally terminates, purchases or sells
license agreements. In connection with ongoing fees that the Company receives from its licensees pursuant
to license agreements, the Company is required to provide certain services, such as training, marketing and
the operation of reservation systems. Revenue and expenses associated with gasoline, vehicle licensing
and airport concessions are recorded on a gross basis within revenue and operating expenses.
Currency Translation
Assets and liabilities of foreign operations are translated at the rate of exchange in effect on the balance
sheet date; income and expenses are translated at the prevailing monthly average rate of exchange. The
related translation adjustments are reflected in “Accumulated other comprehensive income” in the
stockholders’ equity section of the Consolidated Balance Sheets and in the Consolidated Statements of
Comprehensive Income. The accumulated currency translation adjustment as of December 31, 2013 and
2012 was $166 million and $193 million, respectively. Currency gains and losses resulting from transactions
are included in earnings.
Cash and Cash Equivalents
The Company considers highly liquid investments purchased with an original maturity of three months or
less to be cash equivalents.
Property and Equipment
Property and equipment (including leasehold improvements) are stated at cost, net of accumulated
depreciation and amortization. Depreciation (non-vehicle related) is computed utilizing the straight-line
method over the estimated useful lives of the related assets. Amortization of leasehold improvements is
computed utilizing the straight-line method over the estimated benefit period of the related assets, which
may not exceed 20 years, or the lease term, if shorter. Useful lives are as follows:
Buildings 30 years
Furniture, fixtures & equipment 3 to 10 years
Capitalized software 3 to 7 years
Buses and support vehicles 4 to 15 years
The Company capitalizes the costs of software developed for internal use when the preliminary project
stage is completed and management (i) commits to funding the project and (ii) believes it is probable that
the project will be completed and the software will be used to perform the function intended. The software
developed or obtained for internal use is amortized on a straight-line basis commencing when such
software is ready for its intended use. The net carrying value of software developed or obtained for internal
use was $108 million and $71 million as of December 31, 2013 and 2012, respectively.