What approach did Budget use to determine the value of the impacted vehicles for the recoverability test?
Budget Franchise · 2025 FDDAnswer from 2025 FDD Document
unted future cash flows expected to be generated by the asset. Assets are grouped at the lowest level of identifiable cash flows. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds the
During the fourth quarter of 2024, we changed our fleet strategy, specific to United States and Canadian rental car vehicles, to accelerate certain fleet rotations in order to decrease the age of our fleet for competitive reasons, and accordingly, we shortened the useful life associated with such vehicles. We considered this change in strategy to be a triggering event that indicated the carrying amount of these assets may not be recoverable. As a result, we performed a recoverability test by comparing the sum of undiscounted cash flows expected to result from the use and eventual disposition of the impacted assets may not be recoverable. As a result, we performed a recoverability test by comparing the sum of undiscounted cash flows expected to result from the use and eventual disposition of the impacted assets. vehicles to their carrying value and concluded, that for certain vehicles, the carrying value exceeded the sum of undiscounted cash flows expected to result from the use and eventual disposition of those venicies to meir carrying value and concluded, that for certain venicies, the carrying value exceeded the sum of undiscounted cash flows expected to result from the use and eventual disposition of those vehicles. For purposes of the recoverability test, the vehicles were aggregated into asset groups based on make, model and year of the vehicles. The test was performed as of November 30, 2024, and used a market approach to determine the value of the impacted vehicles, utilizing prices for similar assets in active markets (Level 2). During the year ended December 31, 2024, we recorded a $2.3 billion non-cash impairment within long-lived asset impairment and other related charges in the Consolidated Statement of Operations within our Americas reportable segment. There were no impairments to longnon-cash impairment within long-lived asset impairment and other related charges in the Consolidated Statement of Operations within our Americas reportable segment.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 79)
What This Means (2025 FDD)
According to Budget's 2025 Franchise Disclosure Document, when performing a recoverability test on its United States and Canadian rental car vehicles, Budget used a market approach to determine the value of the impacted vehicles. This involved utilizing prices for similar assets in active markets, categorized as Level 2. The recoverability test was conducted as of November 30, 2024. Budget aggregated the vehicles into asset groups based on the make, model, and year of the vehicles.
This recoverability test was initiated due to a change in Budget's fleet strategy during the fourth quarter of 2024, which involved accelerating certain fleet rotations to decrease the age of the fleet for competitive reasons. This change led to shortening the useful life associated with these vehicles, which Budget considered a triggering event that indicated the carrying amount of these assets may not be recoverable.
The purpose of the recoverability test was to compare the sum of undiscounted cash flows expected to result from the use and eventual disposition of the impacted vehicles to their carrying value. The results of this test led Budget to conclude that, for certain vehicles, the carrying value exceeded the sum of undiscounted cash flows. As a result, Budget recorded a $2.3 billion non-cash impairment within long-lived asset impairment and other related charges in the Consolidated Statement of Operations within their Americas reportable segment for the year ended December 31, 2024.