Cabela's 2009 Annual Report Download - page 87

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CABELA’S INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Thousands Except Share and Per Share Amounts)
Certain grants contain covenants we are required to comply with regarding minimum employment levels,
maintaining retail stores in certain locations, and maintaining office facilities in certain locations. For these grants
we recognize grant revenue as the milestones associated with the grant are met. For 2009 and 2008, we were in
compliance with all material requirements under these grants.
Economic Development Bonds – Economic development bonds (“bonds”) issued by state and local
municipalities that management has the intent and ability to hold to maturity are classified as held-to-maturity
and recorded at amortized cost. Other bonds are classified as available-for-sale and valued at their fair value. Fair
values of bonds are estimated using discounted cash flow projections based on available market interest rates and
management estimates including the estimated amounts and timing of expected future tax payments to be received
by the municipalities under development zones. These fair values do not reflect any premium or discount that could
result from offering these bonds for sale or through early redemption, or any related income tax impact. Declines in
the fair value of held-to-maturity and available-for-sale economic development bonds below cost that are deemed to
be other than temporary are reflected in earnings.
Credit Card and Loyalty Rewards Programs – Cabela’s CLUB Visa cardholders receive Cabela’s points based
on the dollar amounts of transactions through WFB issued credit cards which may be redeemed for Cabela’s products
and services. Points may also be awarded for special promotions for the acquisition and retention of accounts. The
dollar amount of related points are accrued as earned by the cardholder and recorded as a reduction in Financial
Services revenue. In addition to the WFB issued credit cards, customers receive points for purchases at Cabela’s
from various loyalty programs. The dollar amount of unredeemed credit card points and loyalty points was $80,610
and $78,675 at the end of 2009 and 2008, respectively. The total cost incurred for all credit card rewards and loyalty
programs was $121,512, $118,269, and $109,619 for 2009, 2008, and 2007, respectively.
Income Taxes – The Company files consolidated federal and state income tax returns with its wholly-owned
subsidiaries. The consolidated group follows a policy of requiring each entity to provide for income taxes in an amount
equal to the income taxes that would have been incurred if each were filing separately. We recognize deferred income
tax assets and liabilities for the expected future tax consequences of temporary differences between the financial
statement carrying amounts and the tax bases of our assets and liabilities. We establish valuation allowances if we
believe it is more likely than not that some or all of our deferred tax assets will not be realized.
At the beginning of 2007, we adopted the provisions of Financial Accounting Standards Board (“FASB”)
Accounting Standards Codification (“ASC”) 740-10-05-6 which prescribes a recognition threshold and measurement
attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a
tax return. The recognition threshold required that we determine whether it is more likely than not that a tax position
will be sustained upon examination, and then the position is measured at the largest amount of the benefit that is
greater than 50 percent likely of being realized upon ultimate settlement. Unrecognized tax benefits are tax benefits
claimed on our tax returns that do not meet these recognition and measurement standards. As a result of adopting
the provisions of ASC Topic 740, we recognized additional liabilities for unrecognized tax benefits of $8,569 at the
beginning of 2007. Of this amount, $966 after-tax was recorded as a one-time decrease to our beginning retained
earnings. The remaining amount was previously accrued. In addition, we recorded $1,196 before-tax, or $789 after-
tax, of accrued interest on the estimated unrecognized tax benefits as a one-time decrease to our beginning retained
earnings. The cumulative effect of adopting the provisions of ASC Topic 740 totaled $1,755 as a decrease to our
beginning retained earnings.
Stock-Based Compensation – We adopted the provisions of ASC 718-10, Share-Based Payment, on January
1, 2006, using the modified prospective transition method. Under ASC 718-10, we recognize compensation expense
as follows. For equity awards issued after January 1, 2006, compensation expense is estimated based on grant date
fair value on a straight-line basis over the requisite service period. For awards granted prior to, but not yet vested