What information was compared to historical data during the Budget audit?
Budget Franchise · 2025 FDDAnswer from 2025 FDD Document
Our audit procedures related to impairment of long-lived assets of United States vehicles included the following, among others:
- We tested the effectiveness of controls over (1) management's identification of events or changes in circumstances that indicate that the carrying amount of vehicles may not be recoverable, including management's review of forecasted future cash flows, and (2) management's review of the methodology in determining the fair value estimate of vehicles.
- We evaluated whether management appropriately identified events or changes in circumstances that indicated that the carrying amounts of vehicle assets may not be recoverable.
- We evaluated management's determination of asset groups at the lowest level of identifiable cash flows.
- We tested management's recoverability test by comparing the sum of undiscounted cash flows expected to result from the use and eventual disposition of the impacted vehicles to their carrying value by performing the following:
- Tested the mathematical accuracy of management's analysis.
- Compared relevant information to historical data.
- Assessed management's assumptions used when determining the expected rental revenue, operating expenses and residual values expected at the time of disposition of vehicles as part of their recoverability test.
- We tested the fair value estimates for the impacted vehicles.
- With the assistance of our fair value specialists, we evaluated the reasonableness of the valuation methodology applied and fair value determined for vehicles by testing the methodology applied and measurable inputs used, and the mathematical accuracy of the calculation.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 79)
What This Means (2025 FDD)
According to Budget's 2025 Franchise Disclosure Document, during the audit of impairment of long-lived assets of United States vehicles, relevant information was compared to historical data. This comparison was part of testing Budget's recoverability test, which involves comparing the sum of undiscounted cash flows expected from the use and disposition of the vehicles to their carrying value.
This process is crucial for Budget to accurately assess the value of its vehicle assets and ensure that they are not overvalued on the company's balance sheets. For a potential franchisee, this indicates that Budget's financial statements are rigorously audited, with comparisons to historical data used to validate key assumptions about revenue, expenses, and residual values of vehicles.
Furthermore, the audit also involved assessing management's assumptions regarding expected rental revenue, operating expenses, and residual values at the time of vehicle disposition. These assumptions are vital for determining the financial health and stability of Budget, as they directly impact the company's profitability and asset valuation. The audit procedures also included testing the mathematical accuracy of management's analysis and evaluating whether management appropriately identified events or changes in circumstances that indicated that the carrying amount of vehicles may not be recoverable.
In addition to vehicle assets, the audit procedures related to United States public liability and property damage self-insurance reserves included testing the underlying data that served as the basis for the Company's actuarial analysis, including historical claims, to test the reasonableness of the inputs to the actuarial estimate. The reasonableness of the assumptions used in management's estimate was evaluated by comparing prior-year assumptions of expected development and ultimate loss to actuals incurred during the current year to identify potential bias in the determination of these liabilities.