Cabela's 2007 Annual Report Download - page 62

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CABELA’S INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Thousands Except Share and Per Share Amounts)
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business – Cabela’s Incorporated is a retailer of hunting, fishing, and outdoor gear, offering
products through retail stores, the Internet, and regular and special catalog mailings. Cabela’s operates 27 retail
stores, 26 located in 19 states and one located in Winnipeg, Manitoba. World’s Foremost Bank (“WFB” or “bank”), a
wholly-owned subsidiary of Cabela’s, is a limited purpose bank formed under the Competitive Equality Banking Act
of 1987. The lending activities of WFB are limited to credit card lending and its deposit issuance is limited to time
deposits of at least one hundred thousand dollars.
Principles of Consolidation – The consolidated financial statements include the accounts of Cabela’s
Incorporated and its wholly-owned subsidiaries (“Cabela’s,” “Company,” “we,” “our,” or “us”). All material
intercompany accounts and transactions have been eliminated in consolidation.
Reporting Year – Our fiscal year ends on the Saturday nearest to December 31. Unless otherwise stated, the
fiscal years referred to in the notes to these consolidated financial statements are the 52 weeks ended December 29,
2007 (“2007” or “year ended 2007”), the 52 weeks ended December 30, 2006 (“2006” or “year ended 2006”), and the
52 weeks ended December 31, 2005 (“2005” or “year ended 2005”). The year-end of WFB is December 31.
Use of Estimates – The preparation of financial statements in conformity with accounting principles generally
accepted in the United States of America requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ
from those estimates.
Reclassifications – We reclassified an accrued interest receivable totaling $5,864 associated with our
economic development bonds from accounts receivable to other current assets in the 2006 consolidated balance
sheet to conform to the current year presentation. The corresponding line items in the consolidated statements of
cash flows were also reclassified and there was no change in the total of net cash used in operating activities for 2006.
Total current assets were not affected by this reclassification and there was no impact on cash flows or covenant
provisions.
Revenue Recognition – Revenue is recognized for retail store sales at the time of the sale in the store and
for Direct sales when the merchandise is delivered to the customer. We record a reserve for estimated product
returns based on our historical returns experience. Shipping fees charged to customers are included in net revenue
and shipping costs are included in cost of revenue. Revenue from the sale of gift certificates and gift cards (“gift
instruments”) is recognized in revenue when the gift instruments are redeemed for merchandise or services. We
record gift instrument breakage as revenue when the probability of redemption is remote. Our gift instrument liability
at the end of 2007 and 2006 was $113,302 and $86,974, respectively. WFB recognizes gains on sales of credit card
loans as these loans are securitized and sold. Interchange income is earned when a charge is made to a customer’s
account.
Credit Card Interest and Fees – Financial Services revenue includes credit card interest and fees relating
to late payments, over limit, returned check, and cash advance transactions. These fees are assessed according
to the terms of the related cardholder agreements and recognized as revenue when charged to the cardholders’
accounts. Interest and fees are accrued in accordance with the terms of the applicable cardholder agreement on
credit card loans until the date of charge-off. Charge-offs are typically recorded when accounts are, at a minimum,
130 days contractually delinquent. Accounts relating to cardholder bankruptcies, cardholder deaths, and fraudulent
transactions are charged off earlier. Prior to 2007, our policy was to charge-off accounts on the 24th day of the month
after an account became 115 days contractually past due, except in the case of cardholder bankruptcies, cardholder
deaths, and fraudulent transactions, which were charged off earlier. Interest income is accrued on accounts that carry
a balance from the statement date through the end of the month.