Avis 2015 Annual Report Download - page 80

F-11
Goodwill and Other Intangible Assets
Goodwill represents the excess, if any, of the fair value of the consideration transferred by the acquirer and
the fair value of any non-controlling interest remaining in the acquiree, if any, over the fair values of the
identifiable net assets acquired. The Company does not amortize goodwill, but assesses it for impairment at
least annually and whenever events or changes in circumstances indicate that the carrying amounts of their
respective reporting units exceed their fair values. The Company performs its annual impairment
assessment in the fourth quarter of each year at the reporting unit level. 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 appropriate, comparative market multiples and other factors are
used to corroborate the discounted cash flow results.
Other intangible assets, primarily trademarks, with indefinite lives are not amortized but are evaluated
annually for impairment and whenever events or changes in circumstances indicate that the carrying
amount of this asset may exceed its fair value. If the carrying value of an other intangible asset exceeds its
fair value, an impairment loss is recognized in an amount equal to that excess. Other intangible assets with
finite lives are amortized over their estimated useful lives and are evaluated each reporting period to
determine if circumstances warrant a revision to these lives.
Impairment of Long-Lived Assets
The Company is required to assess long-lived assets for impairment whenever circumstances indicate
impairment may have occurred. This analysis is performed by comparing the respective carrying values of
the assets to the undiscounted expected future cash flows to be generated from such assets. Property and
equipment is evaluated separately at the lowest level of identifiable cash flows. 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. Any adjustments to depreciation are made
prospectively.
The estimation of residual values requires the Company to make assumptions regarding the age and
mileage of the car 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 at the time of sale. Vehicle-related interest expense amounts are
net of vehicle-related interest income of $13 million, $10 million and $9 million for 2015, 2014 and 2013,
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,