Cash America 2015 Annual Report Download - page 94

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Hedging and Derivatives Activity
As a policy, the Company does not hold, issue or trade derivative instruments for speculative purposes. The
Company has formerly used foreign currency forward contracts for hedging exposure with its foreign operations
although the Company no longer has foreign operations following the Enova Spin-off and the sale of its Mexico-
based pawn operations. The Company may periodically enter into forward sale contracts with a major gold bullion
bank to sell refined gold that is acquired in the normal course of business from the Company’s liquidation of
forfeited gold merchandise. These contracts are not accounted for as derivatives because they meet the criteria for
the normal purchases and normal sales scope exception in ASC 815, Derivatives and Hedging.
Equity Securities
The Company has marketable equity securities that are held in its Nonqualified Savings Plan, marketable
equity securities for its retained shares of Enova common stock, and a cost-method investment, each as described
further below. The Company accounts for its marketable equity securities and its cost-method investment in
accordance with ASC 323, Investments—Equity Method and Joint Ventures, and ASC 325, Investments—Other—
Cost Method Investments, respectively.
The Company holds marketable equity securities in its Nonqualified Saving Plan for certain employees. See
Note 15 for a description of that plan. The securities are classified as trading securities, but the unrealized gains and
losses on these securities offset and have no net impact on the Company's net income. These securities are recorded
at fair value and have an offsetting liability of equal amount. The plan costs associated with these securities are
included in “Operations and administration expenses” in the consolidated statements of income. The assets related
to the Nonqualified Saving Plan are held in “Other Assets,” and the offsetting liability is held in “Accounts payable
and accrued expenses” in the consolidated balance sheets.
The Company retained approximately 20% of the outstanding shares of Enova common stock after the
Enova Spin-off. The shares of Enova common stock held by the Company are classified as available-for-sale, and
unrecognized gains and losses, net of tax, are recorded in “Accumulated other comprehensive income (loss)” in the
consolidated statements of equity. As a result of the registration of these shares with the SEC in September 2015,
these shares are carried on the consolidated balance sheet as of December 31, 2015 based on the market-determined
stock price of Enova. Prior to September 2015, as the Enova shares were not-yet-registered securities with the SEC,
these shares were not carried at the fair value of the quoted Enova stock prices, but rather the Company valued these
shares using the market-determined stock price of Enova, less an adjustment factor due to the unregistered nature of
these shares.
The Company has an investment in a non-publicly traded entity that is not controlled by the Company, and
over which the Company does not exercise significant influence. The investment is recorded using the cost method,
under which the investment is carried at initial value, is adjusted for cash contributions and distributions and is
subjecttoevaluationforimpairment.Thecost-methodinvestmentisincludedin“Otherassets”ontheCompany’s
consolidated balance sheets.
The Company evaluates its marketable securities and its cost-method investment for impairment if
circumstances arise that indicate that an impairment may exist. If an impairment of an equity security is determined
to be other than temporary, the cost basis of the investment will be reduced and the resulting loss recognized in net
income in the period the other-than-temporary-impairment is identified.
Operations and Administration Expenses
Operations expenses include all expenses directly related to the Company’s storefront locations, the
operations management for each operating district and region, the Company’s centralized jewelry processing center
CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
90