Cabela's 2012 Annual Report Download - page 88

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78
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 its retail stores, the Internet, and regular and special catalog mailings. Cabela’s operates 40 retail
stores, 37 located in 24 states and three located in Canada. World’s Foremost Bank (“WFB,” “Financial Services
segment,” or “Cabela’s CLUB”), 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 intercompany
accounts and transactions have been eliminated in consolidation. We evaluated the guidance of Accounting
Standards Codification (“ASC”) Topics 810, Consolidations, and 860, Transfers and Servicing, and concluded
that WFB is the primary beneficiary of the Cabela’s Master Credit Card Trust and related entities (collectively
referred to as the “Trust”). Accordingly, we consolidated the Trust effective January 3, 2010, and for all subsequent
years through December 29, 2012. 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 29, 2012 (“2012” or “year ended 2012”), the 52 weeks ended December 31, 2011 (“2011” or “year ended
2011”), and the 52 weeks ended January 1, 2011 (“2010” or “year ended 2010”). WFB follows a calendar fiscal
period so fiscal years end on December 31 with years 2010 through 2012 each consisting of 52 weeks.
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
$7,576, $6,985, and $4,839 for 2012, 2011, and 2010, respectively. Cabela’s gift instrument liability at the end of
2012 and 2011 was $134,566 and $118,361, respectively.