Cash America 2015 Annual Report Download - page 126

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inputs used to calculate the fair value of these loans include historical loss rates, recent default trends and estimated
remaining loan terms; therefore, the carrying value approximated the fair value.
Pawn loan fees and service charges revenue includes interest, service charges and extension fees and are
typically calculated as a percentage of the pawn loan amount based on the size and duration of the transaction, as
permitted by applicable laws. Other fees, such as origination fees, storage fees and lost ticket fees are generally a
fixed amount per pawn loan. Pawn loan fees and service charges revenue and the related pawn loan fees and service
charges receivable are accrued ratably over the term of the loan for the portion of those pawn loans estimated to be
collectible. The Company uses historical performance data to determine collectability of pawn loan fees and service
charges receivable. Additionally, pawn loan fee and service charge rates are determined by regulations and bear no
valuation relationship to the capital markets’ interest rate movements. Therefore, the carrying value approximates
the fair value.
In connection with its CSO programs, the Company guarantees consumer loan payment obligations to
unrelated third-party lenders for short-term loans, unsecured installment loans and installment loans secured by the
customer’s vehicle and is required to purchase any defaulted loans it has guaranteed. The Company measures the
fair value of its liability for third-party lender-owned consumer loans under Level 3 inputs. The fair value of these
liabilities is calculated by applying historical loss rates combined with recent default trends to the gross consumer
loan balance. The unobservable inputs used to calculate the fair value of these loans include historical loss rates,
recent default trends and estimated remaining loan terms; therefore, the carrying value of these liabilities
approximated the fair value.
The Company measures the fair value of long-term debt instruments using Level 2 inputs. The fair values of
the Company’s long-term debt instruments are estimated based on market values for debt issues with similar
characteristics or rates currently available for debt with similar terms. AsofDecember31,2015,theCompany’s
2018 Senior Notes had a higher fair market value than the carrying value due to the difference in yield when
compared to similar senior unsecured notes.
The Company’s cost-method investment in a non-publicly traded entity amounted to $3.5 million and $2.4
million at December 31, 2015 and 2014, respectively, and is included in “Other assets” on the Company’s
consolidated balance sheets. The Company has not estimated the fair value of this investment because its fair value
is not readily determinable. Under the cost method, the investment is carried at initial value, is adjusted for cash
contributionsanddistributions,andissubjecttoevaluationforimpairment.Whencircumstancesindicatetheremay
have been a reduction in the value of an investment in an unconsolidated entity, the Company evaluates whether the
loss in value is other than temporary. If the loss is other than temporary, the Company recognizes an impairment
charge to reflect the cost-method investment at fair value. No impairment indicators for this investment were noted
as of December 31, 2015.
19. Reorganization
In the third quarter of 2014, the Company initiated a reorganization to better align the corporate and
operating cost structure with its remaining storefront operations after the Enova Spin-off (the “Reorganization”).
The Reorganization continued through the first quarter of 2015. In connection with the Reorganization, the
Company recognized aggregate expenses of $8.4 million for severance and other employee-related costs, of which
$0.9 million and $7.5 million was recognized as expense during 2015 and 2014, respectively, and is included in
“Operations and administration” in the consolidated statements of income. As of December 31, 2015, the Company
had made payments of approximately $8.2 million for the Reorganization and had accrued approximately $0.2
million for future payments. Accrued amounts for the Reorganization are included in “Accounts payable and
accrued expenses” in the consolidated balance sheets.
CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
122