Cabela's 2011 Annual Report Download - page 86

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CABELA’S INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Thousands Except Share and Per Share Amounts)
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 $126, $124, and $233 for 2011, 2010, and 2009, 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 2011 and 2010, intangible assets totaled $4,401 and $5,342, net of accumulated amortization
of $1,740 and $2,200, respectively. For the fourth quarter of 2011 and 2010, 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 2011 or 2010, but recognized
an impairment of $460 in 2009. 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 $391 (2012), $170 (2013), $170 (2014), $148
(2015), and $72 (2016). The Company has goodwill of $3,450 and $3,519 in its consolidated balance sheet at the
end of 2011 and 2010, respectively, relating to an acquisition of a Canadian outdoors specialty retailer in 2007. The
change in the carrying value of goodwill from 2010 is due to foreign currency translation adjustments.
Land Held for Sale or Development – 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 and/or land grants and has been
typically funded by the local government through proceeds from the sale of economic development bonds. 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. 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. When it is determined that recorded amounts will not be recovered through projected discounted cash
flows, an impairment adjustment is made to reduce deferred grant income, and accumulated amortization on the
deferred grant at that point in time is reversed as an increase to depreciation expense. In 2011 and 2009, deferred
grant income was reduced by $24,314 and $8,032, 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 $6,538 and $2,099 in 2011 and 2009,
respectively, which have been included in impairment and restructuring charges in the consolidated statements
of income. There were no impairment losses in 2010. The Company may agree to guarantee deficiencies in tax
collections which fund the repayment of economic development bonds. The Company did not guarantee any
economic development bonds at the end of 2011, 2010 or 2009.