Cabela's 2010 Annual Report Download - page 86

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76
CABELA’S INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Thousands Except Share and Per Share Amounts)
grant at that point in time is reversed as an increase to depreciation expense. The Company may agree to guarantee
deficiencies in tax collections which fund the repayment of economic development bonds. The Company did not
guarantee any economic development bonds at the end of 2010, 2009 or 2008.
Land grants typically include land associated with the retail store and may include other land for sale and
further development. Land grants are recognized at the fair value of the land on date of grant. Deferred grant
income on land grants is recognized as a reduction to depreciation expense over the estimated life of the related
assets of the developments. In 2010, the Company received land grants with a fair value of $6,847. In 2009, the
Company did not receive any land under these grants.
Certain grants contain covenants the Company is required to comply with regarding minimum employment
levels, maintaining retail stores in certain locations, and maintaining office facilities in certain locations. For these
grants the Company recognizes grant revenue as the milestones associated with the grant are met. For 2010 and
2009, the Company was in compliance with the requirements under these grants.
Economic Development Bonds – Economic development bonds issued by state and local municipalities are
classified as available-for-sale and recorded 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 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 $91,750 and $80,610 at the end of 2010 and 2009, respectively. The total cost incurred for all credit card
rewards and loyalty programs was $136,375, $121,512, and $118,269 for 2010, 2009, and 2008, 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. The Company
recognizes 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. The
Company establishes valuation allowances if we believe it is more likely than not that some or all of the Company’s
deferred tax assets will not be realized.
Stock-Based Compensation – The Company adopted the provisions of ASC 718-10, Share-Based Payment,
on January 1, 2006, using the modified prospective transition method. 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 as of January 1, 2006, the Company estimated
compensation expense based on the grant date fair value estimated under the provisions of Accounting Principles
Board Opinion No. 25. Costs associated with all awards are included in compensation expense as a component of
selling, distribution, and administrative expenses.