How are Budget's vehicles stated on the financial statements?
Budget Franchise · 2025 FDDAnswer from 2025 FDD Document
ating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Vehicles - Depreciation Expense - United States Risk Vehicles - Refer to Notes 2 and 8 to the financial statements
Critical Audit Matter Description
The Company records rental vehicles at cost, net of accumulated depreciation. The initial cost of the vehicles is recorded net of incentives and allowances from manufacturers. Rental vehicles acquired by the Company outside of the manufacturer repurchase and guaranteed depreciation programs are referred to as risk vehicles and the carrying values of these risk vehicles are depreciated based upon the vehicles' estimated residual values at their expected dates of disposition. The estimation of residual values for risk vehicles requires the Company to make assumptions regarding factors which include, but are not limited to, the anticipated age of the vehicles and market conditions for used vehicles at the time of disposal. The Company regularly evaluates estimated residual values and adjusts vehicle depreciation rates as appropriate. Any adjustments to depreciation are made prospectively.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 79)
What This Means (2025 FDD)
According to Budget's 2025 Franchise Disclosure Document, the company records rental vehicles at cost, net of accumulated depreciation. The initial cost of the vehicles is recorded net of incentives and allowances from manufacturers. For vehicles acquired outside of manufacturer repurchase and guaranteed depreciation programs, referred to as risk vehicles, the carrying values are depreciated based on their estimated residual values at their expected disposition dates.
The estimation of residual values for risk vehicles requires Budget to make assumptions regarding factors such as the anticipated age of the vehicles and market conditions for used vehicles at the time of disposal. Budget regularly evaluates estimated residual values and adjusts vehicle depreciation rates as appropriate. Any adjustments to depreciation are made prospectively.
On the consolidated balance sheets, vehicles are listed under assets under vehicle programs. As of December 2024, the net value of vehicles listed was $17,619 million, while in December 2023, the net value was $21,240 million.