Hertz 2015 Annual Report Download - page 96

Table of Contents
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The Company follows the practice of charging maintenance and repairs, including the cost of minor replacements, to maintenance expense. Costs
of major replacements of units of property are capitalized to property and equipment accounts and depreciated.
Fair Value Measurements
Generally accepted accounting principles define fair value as the price that would be received to sell an asset or be paid to transfer a liability in an
orderly transaction between market participants at the measurement date (exit price) and establishes a fair value hierarchy that prioritizes the
inputs used to measure fair value using the following definitions (from highest to lowest priority):
Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or
liabilities.
Level 2 - Observable inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or
indirectly, including quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and
liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data by
correlation or other means.
Level 3 - Prices or valuation techniques requiring inputs that are both significant to the fair value measurement and unobservable.
Environmental Liabilities
The use of automobiles and other vehicles is subject to various governmental controls designed to limit environmental damage, including those
caused by emissions and noise. Generally, these controls are met by the manufacturer, except in the case of occasional equipment failure
requiring repair. Liabilities for these expenditures are recorded at undiscounted amounts when it is probable that obligations have been incurred and
the amounts can be reasonably estimated.
Asset Retirement Obligations
The Company maintains a liability for asset retirement obligations. Asset retirement obligations are legal obligations to perform certain activities in
connection with the retirement, disposal or abandonment of long-lived assets. The Company’s asset retirement obligations are primarily related to
the removal of underground gasoline storage tanks and the restoration of its rental facilities. The asset retirement obligations are measured at
discounted fair values at the time the liability is incurred. Accretion expense is recognized as an operating expense using the credit-adjusted risk-
free interest rate in effect when the liability was recognized. The associated asset retirement obligations are capitalized as part of the carrying
amount of the long-lived asset and depreciated over the estimated remaining useful life of the asset.
Foreign Currency Translation and Transactions
Assets and liabilities of international subsidiaries whose functional currency is the local currency are translated at the rate of exchange in effect on
the balance sheet date; income and expenses are translated at the average exchange rates throughout the year. The related translation
adjustments are reflected in “Accumulated other comprehensive loss” in the equity section of the Company's consolidated balance sheets. Foreign
currency gains and losses resulting from transactions are included in earnings.
Advertising
Advertising and sales promotion costs are expensed the first time the advertising or sales promotion takes place. Advertising costs are reflected
as a component of “Selling, general and administrative” in the Company's consolidated statements of operations and for the years ended
December 31, 2015, 2014 and 2013 were $170 million, $199 million, and $207 million, respectively.
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The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,
except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.