Cabela's 2013 Annual Report Download - page 75

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65
these factors is subject to a high degree of uncertainty, the measurement of the overall allowance is subject to
estimation risk, and the amount of actual losses can vary significantly from the estimated amounts. For example,
had management’s estimate of net losses over the next 12 months been different by 10% at the end of 2013, the
Financial Services segment’s allowance for loan losses and provision for loan losses would have changed by
approximately $5.3 million.
Credit card loans that have been modified through a fixed payment plan or placed on non-accrual are
considered impaired and are collectively evaluated for impairment. The Financial Services segment charges
off credit card loans and restructured credit card loans on a daily basis after an account becomes at a minimum
130 days contractually delinquent. Accounts relating to cardholder bankruptcies, cardholder deaths, and fraudulent
transactions are charged off earlier. The Financial Services segment recognizes charged-off cardholder fees and
accrued interest receivable in interest and fee income that is included in Financial Services revenue.
Long-Lived Assets
Long-lived assets other than goodwill and other intangible assets, which generally are tested separately for
impairment on an annual basis, are evaluated for impairment whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable. The calculation for an impairment loss compares the carrying
value of the asset to that asset’s estimated fair value, which may be based on estimated future discounted cash
flows, observable market prices, or unobservable market prices. We recognize an impairment loss if the asset’s
carrying value exceeds its estimated fair value. Frequently our impairment loss calculations contain multiple
uncertainties because they require management to make assumptions and to apply judgment to estimate future
cash flows and asset fair values, including forecasting cash flows under different scenarios. We have consistently
applied our accounting methodologies that we use to assess impairment loss. However, if actual results are not
consistent with our estimates and assumptions used in estimating future cash flows and asset fair values, we may
be exposed to losses that could be material.
Economic Development Bonds
Economic development bonds are generally repaid through incremental sales and/or property tax revenues
generated from our retail store locations or additional developments in the local development or tax increment
financing district. Each quarter we revalue each economic development bond using discounted cash flow models
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. Each quarter,
we also evaluate the projected underlying cash flows of our economic development bonds to determine if the
carrying amount of any such bonds, including interest accrued under the bonds, can be recovered. To the extent
the expected cash flows are not sufficient to recover the carrying amount, the bonds are assessed for impairment.
Deficiencies in projected discounted cash flows below the recorded carrying amount of the economic development
bonds evidences that we do not expect to recover the cost basis. Consequently, the valuation results in an other than
temporary impairment. We also reassess the amount of grant income that will ultimately be received. Accordingly,
the cumulative amount of depreciation expense that would be recognized to date as an expense in the absence of
the grant income is recognized immediately as an expense. Had our fair value estimates been lower by 10% as of
the end of 2013, the value of economic development bonds reflected in our consolidated financial statements would
have been approximately $8 million less with the unrealized loss reflected in comprehensive income if the loss was
deemed to be temporary. Any 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 as realized losses.