Avis 2015 Annual Report Download - page 61

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Our goodwill and other indefinite-lived intangible assets are allocated among our reporting units. During 2015,
2014 and 2013, there was no impairment of goodwill or other intangible assets. In the future, failure to achieve our
business plans, a significant deterioration of the macroeconomic conditions of the countries in which we operate,
or significant changes in the assumptions and estimates that are used in our impairment testing for goodwill and
indefinite-lived intangible assets (such as the discount rate) could result in significantly different estimates of fair
value that could trigger an impairment of the goodwill or intangible assets of our reporting units.
Vehicles. We present vehicles at cost, net of accumulated depreciation, on the Consolidated Balance Sheets. We
record the initial cost of the vehicle, net of incentives and allowances from manufactures. We acquire our rental
vehicles either through repurchase and guaranteed depreciation programs with certain automobile manufacturers
or outside of such programs. For rental vehicles purchased under such programs, we depreciate the vehicles
such that the net book value on the date of sale or return to the manufacturers is intended to equal the contractual
guaranteed residual values. For risk vehicles, acquired outside of manufacturer repurchase and guaranteed
depreciation programs, we depreciate based on the vehicles’ estimated residual market values and their expected
dates of disposition. The estimation of residual values requires the Company to make assumptions regarding the
age and mileage of the vehicle at the time of disposal, as well as expected used vehicle auction market
conditions. The Company periodically evaluates estimated residual values and adjusts depreciation rates as
appropriate. Differences between actual residual values and those estimated result in a gain or loss on disposal
and are recorded as part of vehicle depreciation and lease charges, net, at the time of sale. See Note 2 to our
Consolidated Financial Statements.
Income Taxes. We account 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 reflected
in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the
differences between the financial statement and tax bases 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.
We record net deferred tax assets to the extent we believe these assets will more likely than not be realized. In
making such determination, we consider 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 we were to determine that we would be able to realize deferred income tax assets in the
future in excess of their net recorded amount, we would make an adjustment to the valuation allowance which
would reduce the provision for income taxes. Currently we do not record valuation allowances on the majority of
our tax loss carryforwards as there are adequate deferred tax liabilities that could be realized within the
carryforward period.
See Notes 2 and 8 to our Consolidated Financial Statements for more information regarding income taxes.
Public Liability, Property Damage and Other Insurance Liabilities. Insurance liabilities on our Consolidated
Balance Sheets include supplemental liability insurance, personal effects protection insurance, public liability,
property damage and personal accident insurance claims for which we are self-insured. We estimate the required
liability of such claims on an undiscounted basis utilizing an actuarial method that is based upon various
assumptions which include, but are not limited to, our historical loss experience and projected loss development
factors. The required liability is also subject to adjustment in the future based upon changes in claims experience,
including changes in the number of incidents for which we are ultimately liable and changes in the cost per
incident.
Adoption of New Accounting Pronouncements
During 2015, we adopted the following standards as a result of the issuance of new accounting pronouncements:
• Accounting Standards Update (“ASU”) 2014-08, “Reporting Discontinued Operations and Disclosures of
Disposals of Components of an Entity”;
• ASU 2015-03, “Simplifying the Presentation of Debt Issuance Costs”; and
• ASU 2015-17, “Balance Sheet Classification of Deferred Taxes”.
On January 1, 2016, we adopted the following standards as a result of the issuance of new accounting
pronouncements:
• ASU 2015-16, “Simplifying the Accounting for Measurement-Period Adjustments”;
• ASU 2015-05, “Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement”; and