Cash America 2015 Annual Report Download - page 92

In addition, the Company provides an allowance for returns based on historical return rates. Customers can
return merchandise and receive a full refund, a replacement item of comparable value or store credit if the
merchandise is returned within the first seven days of purchase. Following the seven-day period and up to 30 days,
customers can receive a replacement item of comparable value or store credit. Based on management’s analysis of
historicalrefundtrends,theCompanyprovidedareturnallowanceof$0.3millionasofDecember31,2015and
2014, which is recorded in the Company’s balance sheets in “Accounts payable and accrued expenses.”
Property and Equipment
Property and equipment is recorded at cost. The cost of property retired or sold and the related accumulated
depreciation are removed from the accounts, and any resulting gain or loss is recognized in the consolidated
statements of income. Costs associated with repair and maintenance activities are expensed as incurred.
Depreciation expense is generally provided on a straight-line basis, using the following estimated useful lives:
Buildings and building improvements 7 to 40 years
Leasehold improvements 2 to 10 years
Furniture, fixtures and equipment 3 to 7 years
Computer hardware and software 2 to 5 years
Software Development Costs
The Company applies ASC 350, Internal Use Software (“ASC 350”) to its software purchase and
development activities. Under ASC 350, eligible internal and external costs incurred for software purchase and
development activities, as well as for upgrades and enhancements that result in additional functionality of the
applications, are capitalized. Internal and external training and maintenance costs are charged to expense as incurred
or over the related service period. When a software application is placed in service, the Company begins amortizing
the related capitalized software costs using the straight-line method based on its estimated useful life, which
currently ranges from two to five years, except the Company’s proprietary point-of-sale system, which is being
amortized over 10 years.
Goodwill and Other Indefinite Lived Intangible Assets
Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable
intangible assets acquired in each business combination and is not amortized. In accordance with ASC 350-20-35,
Goodwill—Subsequent Measurement (“ASC 350”), the Company tests goodwill and intangible assets with an
indefinitelifeforpotentialimpairmentannuallyasofJune30andbetweenannualtestsifaneventoccursor
circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying
amount, which would result in impairment. The Company has one reportable operating segment, which serves as
the only reporting unit for goodwill assessment.
The Company uses the income approach to complete its annual goodwill assessment. The income approach
uses future cash flows and estimated terminal values for the Company’s reporting unit that are discounted using a
market participant perspective to determine the fair value of the reporting unit, which is then compared to the
carrying value of that reporting unit to determine if there is impairment. The income approach includes assumptions
about revenue growth rates, operating margins and terminal growth rates discounted by an estimated weighted-
average cost of capital derived from other publicly-traded companies that are similar but not identical from an
operational and economic standpoint.
CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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