Cabela's 2012 Annual Report Download - page 91

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CABELA’S INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Thousands Except Share and Per Share Amounts)
shorter of the estimated useful lives of the assets or the lease term. When property is fully depreciated, retired or
otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting
gain or loss is reflected in the consolidated statement of income. The costs of major improvements that extend the
useful life of an asset are capitalized. Long-lived assets are reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be recoverable. Capitalized interest on
projects during the construction period totaled $2,798, $126, and $124 for 2012, 2011, and 2010, respectively. Costs
related to internally developed software are capitalized and amortized on a straight-line basis over their estimated
useful lives.
Intangible Assets – Intangible assets are recorded in other assets and include non-compete agreements and
goodwill. At the end of 2012 and 2011, intangible assets totaled $4,093 and $4,401, net of accumulated amortization
of $2,178 and $1,740, respectively. For the fourth quarter of 2012 and 2011, in connection with the preparation of
our consolidated financial statements, the Company completed its annual impairment analyses of goodwill and
other intangible assets. The Company did not recognize any impairment in 2012 or 2011. The Company records
impairment and restructuring charges where projected discounted cash flows are less than the fair value of the
reporting unit.
Intangible assets, excluding goodwill, are amortized over three to five years. Amortization expense for these
intangible assets for the next five years is estimated to approximate $170 (2013), $170 (2014), $145 (2015), $73
(2016), and $0 (2017). The Company has goodwill of $3,535 and $3,450 in its consolidated balance sheet at the end
of 2012 and 2011, respectively, relating to an acquisition of a Canadian outdoors specialty retailer in 2007. The
change in the carrying value of goodwill from 2011 is due to foreign currency translation adjustments.
Land Held for Sale – Land held for sale is recorded at the lower of cost or estimated fair value less estimated
selling costs. Proceeds from the sale of land from development activities are recognized in other revenue and the
corresponding costs of land sold are recognized in costs of other revenue.
Government Economic Assistance – When Cabela’s constructs a new retail store or retail development,
the Company may receive economic assistance from local governments to fund a portion or all of the Company’s
associated capital costs. This assistance typically comes in the form of cash grants, land grants, and/or proceeds
from the sale of economic development bonds funded by the local government. The Company has historically
purchased the majority of the bonds associated with its developments. Cash grants are made available to fund land,
retail store construction, and/or development infrastructure costs. Economic development bonds are typically
repaid through sales and/or property taxes generated by the retail store and/or within a designated development
area. Cash and land grants are recognized as deferred grant income as a reduction to the costs, or recognized fair
value in the case of land grants, of the associated property and equipment. Property and equipment was reduced by
deferred grant income of $290,734 and $299,428 at the end of 2012 and 2011, respectively. Deferred grant income
is amortized to earnings, as a reduction of depreciation expense, over the average estimated useful life of the
associated assets.
Deferred grant income estimates, and their associated present value, are updated whenever events or changes
in circumstances indicate that their recorded amounts may not be recovered. These estimates are determined
when estimation of the fair value of associated economic development bonds are performed if there are related
bond investments. If it is determined that the Company will not receive the full amount remaining from the
bonds, the Company will adjust the deferred grant income to appropriately reflect the change in estimate and will
immediately record a cumulative additional depreciation charge that would be recognized to date as expense in
the absence of the grant income. In 2012 and 2011, deferred grant income was reduced by $5,030 and $24,314,
respectively, due to other than temporary impairment losses of the same amounts that were recognized on the
Company’s economic development bonds. These reductions in deferred grant income resulted in increases in
depreciation expense of $1,309 and $6,538 in 2012 and 2011, respectively, which have been included in impairment