What was compared in Budget's recoverability test?
Budget Franchise · 2025 FDDAnswer from 2025 FDD Document
ate 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. There were no impairment to long-lived assets a long-lived asset is impaired, we will
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 79)
What This Means (2025 FDD)
According to Budget's 2025 Franchise Disclosure Document, the recoverability test involves comparing two key values related to the company's vehicle fleet. Specifically, Budget compares the sum of undiscounted cash flows expected to result from the use and eventual disposition of the impacted vehicles to their carrying value. This comparison is performed to determine if the carrying value of the vehicles is recoverable.
The recoverability test was conducted as of November 30, 2024. For the purposes of this test, Budget aggregated vehicles into asset groups based on their make, model, and year. The company used a market approach to determine the fair value of the impacted vehicles, utilizing prices for similar assets in active markets (Level 2). This indicates that Budget looked at comparable vehicle sales to estimate the value of its fleet.
The outcome of the recoverability test can have a significant impact on Budget's financial statements. For example, during the year ended December 31, 2024, 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. This means that the carrying value of certain vehicles was deemed to be higher than the expected future cash flows, resulting in a write-down of the asset value. This test is crucial for Budget to accurately reflect the value of its assets and to comply with accounting standards.