Cabela's 2011 Annual Report Download - page 83

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73
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 34 retail
stores, 32 located in 23 states and two located in Canada. World’s Foremost Bank (“WFB”), a wholly-owned bank
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. Pursuant to the guidance of
Accounting Standards Codification (“ASC”) Topics 810, Consolidations, and 860, Transfers and Servicing,
WFB concluded that it is the primary beneficiary of the Cabela’s Master Credit Card Trust and related entities
(collectively referred to as the “Trust”) and accordingly, consolidated the Trust effective January 3, 2010. As the
servicer and the holder of retained interests in the Trust, WFB has the powers to direct the activities that most
significantly impact the Trust’s economic performance and the right to receive significant benefits or obligations
to absorb significant losses of the Trust. The consolidation of the Trust eliminated retained interests in securitized
loans and required the establishment of an allowance for loan losses on the securitized credit card loans. The credit
card loans of the Trust are recorded as restricted credit card loans and the liabilities of the Trust are recorded as
secured borrowings.
Evaluation of Subsequent Events – Management of the Company evaluated subsequent events through the
filing date of this Form 10-K and determined that there were no subsequent events to recognize or disclose in the
consolidated financial statements presented herein.
Reporting Year – The Company’s 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 31, 2011 (“2011” or “year ended 2011”), the 52 weeks ended January 1, 2011 (“2010” or “year ended
2010”), and the 53 weeks ended January 2, 2010 (“2009” or “year ended 2009”). WFB follows a calendar fiscal
period and, accordingly, fiscal years end on December 31. Fiscal years 2011 and 2010 consisted of 52 weeks
and fiscal 2009 consisted of 53 weeks. The effect of the extra week in 2009 on total revenues was an increase
of $51,444.
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.
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. The Company recognizes a reserve for estimated
product returns based on our historical returns experience. Shipping fees charged to customers are included in
merchandise sales and shipping costs are included in merchandise costs.
Revenue from the sale of gift certificates, gift cards, and e-certificates (“gift instruments”) is recognized in
revenue when the gift instruments are redeemed for merchandise or services. The Company records gift instrument
breakage as revenue when the probability of redemption is remote. The Company recognizes breakage on gift
instruments four years after issuance based on historical redemption rates. Total gift instrument breakage was
$6,985, $4,839, and $4,522 for 2011, 2010, and 2009, respectively. Cabela’s gift instrument liability at the end of
2011 and 2010 was $118,361 and $110,791, respectively.