Cabela's 2014 Annual Report Download - page 118

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108
CABELA’S INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Thousands Except Share and Per Share Amounts)
Level 3 is comprised of financial instruments whose fair value is estimated based on internally developed
models or methodologies utilizing significant inputs that are primarily unobservable from objective sources. At
December 27, 2014, the financial instruments carried on our consolidated balance sheets subject to fair value
measurements consisted of economic development bonds and were classified as Level 3 for valuation purposes. For
2014, 2013, and 2012, there were no transfers in or out of Levels 1, 2, or 3.
The table below presents changes in fair value of the economic development bonds measured at fair value on
a recurring basis using significant unobservable inputs (Level 3) for the years ended:
2014 2013 2012
Balance, beginning of year $ 78,504 $ 85,041 $ 86,563
Total gains or losses:
Included in earnings - realized - - -
Included in accumulated other comprehensive income
(loss) - unrealized 7,777 (3,064) 5,814
Valuation adjustments - - (5,030)
Purchases, issuances, and settlements:
Purchases 558--
Issuances - - -
Settlements (4,765) (3,473) (2,306)
Total (4,207) (3,473) (2,306)
Balance, end of year $ 82,074 $ 78,504 $ 85,041
Fair values of the Company’s economic development bonds were estimated using discounted cash flow
projection estimates. These estimates are based on available market interest rates and the estimated amounts and
timing of expected future payments to be received from municipalities under tax development zones, which we
consider to be unobservable inputs (Level 3). These fair values do not reflect any premium or discount that could
result from offering these bonds for sale or through early redemption, or any related income tax impact. 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. In 2012, we determined that the fair value of a bond was below carrying
value, with the decline in fair value deemed to be other than temporary, which resulted in a fair value adjustment
of $5,030 at the end of 2012. Accordingly, deferred grant income was reduced by $5,030 due to an other than
temporary impairment loss of the same amount that was recognized on this economic development bond. This
reduction in deferred grant income resulted in an increase in depreciation expense of $1,309 in 2012, which was
included in impairment and restructuring charges in the consolidated statements of income. There were no other
than temporary fair value adjustments of economic development bonds and no adjustments of deferred grant
income related to economic development bonds in 2014 or 2013.
On a quarterly basis, we perform various procedures to analyze the amounts and timing of projected cash
flows to be received from our economic development bonds. Please refer to Note 1 “Nature of Business and
Summary of Significant Accounting Policies” of the Notes to Consolidated Financial Statements under the section
entitled “Economic Development Bonds” for information on our procedures used to analyze the amounts and
timing of projected cash flows to be received from our economic development bonds.