Cash America 2015 Annual Report Download - page 71

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Off-Balance Sheet Arrangements
In certain markets, the Company arranges for consumers to obtain consumer loan products from
independentthird-partylendersthroughtheCSOprograms.Forconsumerloanproductsoriginatedbythird-party
lenders under the CSO programs, each lender is responsible for providing the criteria by which the consumer’s
applicationisunderwrittenand,ifapproved,determiningtheamountoftheconsumerloan.TheCompany, in turn, is
responsible for assessing whether or not it will guarantee such loans. When a consumer executes an agreement with
the Company under the CSO programs, the Company agrees, for a fee payable to the Company by the consumer, to
provide certain services to the consumer, one of which is to guarantee the consumer’s obligation to repay the loan
received by the consumer from the third-party lender if the consumer fails to do so. The guarantee represents an
obligation to purchase specific loans that go into default. Short-term loans that the Company guarantees generally
have terms of 45 days or less. Unsecured installment loans that the Company guarantees generally have terms of up
to 12 months. Secured installment loans that the Company guarantees, which the Company ceased offering in the
latter half of 2015, have remaining terms of up to 30 months. AsofDecember31,2015and2014,theamountof
consumer loans guaranteed by the Company was $11.1 million and $9.8 million, respectively, representing amounts
due under consumer loans originated by third-party lenders under the CSO programs. The liability for estimated
lossesonconsumerloansguaranteedbytheCompanyof$2.0millionand$1.1millionasofDecember31,2015
and 2014, respectively, is included in “Accounts payable and accrued expenses” in the consolidated balance sheets.
Recent Regulatory Developments
See “Item 1. Business-Regulation—U.S. Federal Regulation—Military Members and Dependents” and “—
CFPB” for information regarding new military lending rules that are expected to affect the Company’s ability to
offer any of its lending products to members of the military or their dependents and for a discussion of rules being
considered by the CFPB that have not yet been adopted but could impose certain limitations on some of the
consumer loan products offered by the Company, respectively. The new military lending rules are not expected to
have a material adverse effect on the Company’s business, prospects, results of operations or cash flows, but the
Company is still assessing their potential impact. See also “The adoption of new laws or regulations or adverse
changes in, or the interpretation or enforcement of, existing laws or regulations affecting the Company’s products
and services could have a Material Adverse Effect.”
CRITICAL ACCOUNTING POLICIES
Management’s Discussion and Analysis of Financial Condition and Results of Operations is based on the
Company’s consolidated financial statements, which have been prepared in accordance with GAAP. The preparation
of these financial statements requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the dates of the consolidated
financial statements and the reported amounts of revenue and expenses during the reporting periods. On an on-going
basis, management evaluates its estimates and judgments, including those related to revenue recognition on pawn
loan fees and service charges, allowance for losses on merchandise held for disposition and consumer loans,
goodwill, long-lived and intangible assets, income taxes, contingencies and litigation. Management bases its
estimates on historical experience, empirical data and on various other assumptions that are believed to be
reasonable under the circumstances, the results of which form the basis for making judgments about the carrying
values of assets and liabilities. Actual results may differ from these estimates. The development and selection of the
critical accounting policies and the related disclosures below have been reviewed with the Audit Committee of the
Board of Directors of the Company.
Management believes the following critical accounting policies affect its more significant judgments and
estimates used in the preparation of its consolidated financial statements.
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