Cabela's 2013 Annual Report Download - page 76

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66
Income Taxes
Income taxes are estimated for each jurisdiction in which we operate and require significant judgment, the
use of estimates, and the interpretation and application of complex tax laws. Significant judgment is required in
determining the timing and amounts of deductible and taxable items, and in evaluating the ultimate resolution
of tax matters in dispute with tax authorities. Deferred tax assets and liabilities are provided for based on these
assessments. We record a liability for unrecognized tax benefits resulting from tax positions taken, or expected
to be taken, in an income tax return. We periodically reassess these probabilities and record any changes in the
financial statements as deemed appropriate. We have not provided United States income taxes on undistributed
earnings of foreign subsidiaries that we consider to be indefinitely reinvested outside of the United States as of the
end of year 2013. If these foreign earnings were to be repatriated in the future, the related United States tax liability
may be reduced by any foreign income taxes previously paid on these earnings. We have reserved for potential
adjustments to the provision for income taxes that may result from examinations by tax authorities, and we
believe that the final outcome of these examinations or agreements will not have a material effect on our financial
condition, results of operations, or cash flows.
Recent Accounting Standards and Pronouncements
Effective February 5, 2013, the Financial Accounting Standards Board issued ASU No. 2013-02, Reporting
of Amounts Reclassified Out of Accumulated Other Comprehensive Income, which adds additional disclosure
requirements relating to the reclassification of items out of accumulated other comprehensive income. This ASU
was effective for the first quarter of 2013 for us. During 2013, this pronouncement did not have a material impact
on our consolidated financial statements or disclosures.
On September 13, 2013, the U. S. Treasury and Internal Revenue Service issued final Tangible Property
Regulations (“TPR”) under Internal Revenue Code (“IRC”) Section 162 and IRC Section 263(a). The regulations
are not effective until tax years beginning on or after January 1, 2014; however, certain portions may require a
tax method change on a retroactive basis, thus requiring an IRC Section 481(a) adjustment related to fixed and
real asset deferred taxes. The accounting guidance under Accounting Standards Codification 740 - Income Taxes,
treats the release of these regulations as a change in tax law as of the date of issuance and require us to determine
whether there will be an impact on our consolidated financial statements for the fiscal year ended December 28,
2013. Any such impact of the final tangible property regulations would affect temporary deferred taxes only and
result in a consolidated balance sheet reclassification between current and deferred taxes. We have analyzed the
expected impact of the TPR on the Company as of December 28, 2013, and concluded that the expected impact is
minimal. We will continue to prospectively monitor the impact of any future changes to the TPR on the Company.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to interest rate risk through the operations of the Financial Services segment, and, to a
lesser extent, through our merchandising operations. We also are exposed to foreign currency risk through our
merchandising operations.
Financial Services Segment Interest Rate Risk
Interest rate risk refers to changes in earnings due to interest rate changes. To the extent that interest income
collected on credit card loans and interest expense on certificates of deposit and secured obligations of the Trust do
not respond equally to changes in interest rates, or that rates do not change uniformly, earnings could be affected.
The variable rate credit card loans are indexed to the one month London Interbank Offered Rate (“LIBOR”) and
the credit card portfolio is segmented into risk-based pricing tiers each with a different interest margin. Variable
rate secured obligations of the Trust are indexed to LIBOR-based rates of interest and are periodically repriced.
Certificates of deposit and fixed rate secured obligations of the Trust are priced at the current prevailing market
rate at the time of issuance. We manage and mitigate our interest rate sensitivity through several techniques,