Financial Restatement

Financial Restatement

Financial Error and Compliance Failures Underlie Hertz’s Restatement of Financial Statements

In 2014, Hertz Global Holdings restated its financial statements to correct at least $46.3 million worth of errors in its 2011 statements as well as corrected its 2012 and 2013 statements. The errors identified were related to Hertz’s conclusions regarding the capitalization and timing of depreciation for certain non-fleet assets, allowances for doubtful accounts, accounts payable and accrued liabilities and vehicle damage receivables and related allowances. The discovery was first identified when Hertz charged customers for damages that did not really exists which then led to the restructuring of their accounting team that included the abrupt resignation of then Chief Financial Officer, Elyse Douglas. The company’s new Chief Financial Officer, Thomas Kennedy, former Hilton Worldwide finance chief hit the ground running with a new team and a commitment to continue to reinforce an environment of strong, disciplined financial controls and oversight.
The accounting principles that are involved as a result of the restatement include cost principle, matching principle and revenue recognition. Cost refers to the amount spent, cash or the cash equivalent when an item was originally obtained, whether that purchase happened last year or thirty years ago. The fact that Hertz did not properly record, expensed and disclose the cost of depreciation and capitalization of certain non-fleet assets in accordance with the guidelines, shows that Hertz violated the cost principle. The matching principle requires companies to use the accrual basis of accounting and that expenses be matched with revenues. Hertz failed to report accounts payable and accrued liabilities in the period in which they were made. Hertz also violated the revenue recognition principle which states that revenues are recognized as soon as the product is sold or the service has been performed, regardless of when...

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