Cabela's 2010 Annual Report Download - page 88

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CABELA’S INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Thousands Except Share and Per Share Amounts)
3. CHANGE IN ACCOUNTING PRINCIPLES - CONSOLIDATION OF CABELA’S MASTER CREDIT
CARD TRUST
Change in Accounting Principles:
The Company’s wholly-owned bank subsidiary, WFB, utilizes the Trust for the purpose of routinely selling
and securitizing credit card loans and issuing beneficial interest to investors. In June 2009, the Financial FASB
issued Statement of Financial Accounting Standards (“FAS”) No. 167, Amendments to FASB Interpretation
No. 46(R), which was codified to ASC Topic 810, Consolidations, in December 2009, and FAS No. 166, Accounting
for Transfers of Financial Assets, an amendment of FASB Statement No. 140, which was codified to ASC Topic
860, Transfers and Servicing, in December 2009, which significantly changed the accounting for transfers of
financial assets and the criteria for determining whether to consolidate a variable interest entity (“VIE”). The
update to ASC Topic 860 eliminated the qualifying special purpose entity (“QSPE”) concept and the update to
ASC Topic 810 required reporting entities to evaluate former QSPEs for consolidation, changed the approach
to determining a VIE’s primary beneficiary from a mainly quantitative assessment to an exclusively qualitative
assessment designed to identify a controlling financial interest, and increased the frequency of required
reassessments to determine whether a company is the primary beneficiary of a VIE. With the elimination of the
QSPE concept, the Trust was evaluated based upon its characteristics, risks, purpose, WFB’s involvement, what
activities most significantly impact its economic performance, and what entity has the right to receive benefits
or obligations to absorb losses that would be significant to the Trust to determine if the Trust was a VIE and if
WFB was the primary beneficiary of the Trust. Based upon this qualitative evaluation, WFB was determined to
be the primary beneficiary of the Trust therefore resulting in the consolidation of the Trust effective January 3,
2010, under the guidance of ASC Topics 810 and 860. Prior to these updates to ASC Topics 810 and 860, the
securitizations issued by the Trust qualified for sales treatment under generally accepted accounting principles
(“GAAP”); therefore, the Trust was excluded from the consolidated financial statements in accordance with GAAP.
The consolidation of the Trust added to the consolidated balance sheet the securitized credit card loans as
restricted credit card loans and the obligations of the Trust as secured borrowings. The consolidation of the Trust
eliminated retained interests in securitized loans, including asset-backed securities, and required the establishment
of an allowance for loan losses on the securitized credit card loans. As a result of the initial adoption of the updates
to ASC Topics 810 and 860, the Company’s retained earnings were adjusted for the additional allowance for loan
losses, the recording of the fair value of an interest rate swap relating to a variable rate obligation of the Trust,
and the derecognition of the interest-only strip (previously a component of retained interests), net of tax effects.
The components for the Financial Services segment will not be comparable to prior year amounts as a result of
the consolidation of the Trust with the adoption of ASC Topics 810 and 860 as of January 3, 2010. In 2010, the
securitization income component is no longer reflected; rather the remaining components now reflect the financial
performance of the entire managed portfolio which includes the Trust.