Under what circumstances does Budget review its long-lived assets for impairment?

According to Budget's 2025 Franchise Disclosure Document, the company reviews long-lived assets for impairment when events or changes in circumstances suggest that the carrying value of these assets might be higher than their current fair values. This process involves comparing the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. Assets are assessed at the lowest level where identifiable cash flows can be determined.

If the carrying amount of an asset is more than its estimated future cash flows, Budget recognizes an impairment charge. This charge is equal to the amount by which the carrying amount of the asset exceeds its fair value. For example, in 2024, Budget changed its fleet strategy for vehicles in the United States and Canada, which led to a recoverability test. This test compared the undiscounted cash flows from the use and disposition of the vehicles to their carrying value.

As a result of this test, Budget determined that the carrying value of certain vehicles exceeded the expected cash flows, leading to a non-cash impairment charge. For the recoverability test, vehicles were grouped by make, model, and year. The fair value of the vehicles was determined using a market approach, based on prices of similar assets in active markets. This detailed review process ensures that Budget's assets are accurately valued on its financial statements, reflecting any declines in their recoverable value due to changing market conditions or strategic shifts.