How does Dollar Rent A Car initially measure assets and liabilities held for sale?
Dollar_Rent_A_Car Franchise · 2025 FDDAnswer from 2025 FDD Document
In December 2023, the Company identified the First EV Disposal Group, which was in response to management's determination that the supply of EVs exceeded customer demand, elevated EV damage and collision costs, and a decline in EV residual values. As a result, the First EV Disposal Group was classified as held for sale as of December 31, 2023 and recorded at the lower of carrying value or fair value (as determined using Level 2 inputs) less costs to sell. As of December 31, 2024, the sale of the First EV Group was substantially complete. See Note 5, "Revenue Earning Vehicles," for additional information.
Source: Item 23 — RECEIPTS (FDD pages 102–301)
What This Means (2025 FDD)
According to Dollar Rent A Car's 2025 Franchise Disclosure Document, the company classifies assets held for sale when management determines that the supply of EVs exceeds customer demand, leading to elevated EV damage and collision costs, and a decline in EV residual values. These assets are then recorded at the lower of their carrying value or fair value, less costs to sell. The fair value is determined using Level 2 inputs.
In 2023, Dollar Rent A Car identified the First EV Disposal Group in response to these market conditions. As of December 31, 2023, this group was classified as held for sale and measured according to the aforementioned criteria. By December 31, 2024, the sale of the First EV Group was substantially complete.
This accounting practice means that Dollar Rent A Car aims to reflect the actual market value of assets intended for sale, ensuring that financial statements accurately represent the company's financial position. For a prospective franchisee, understanding these valuation methods is crucial, as it provides insight into how Dollar Rent A Car manages its assets and responds to changing market dynamics, particularly in the context of vehicle sales and fleet management.