Cabela's 2012 Annual Report Download - page 79

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Recent Accounting Standards and Pronouncements
Effective June 16, 2011, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2011-05,
Comprehensive Income, requiring entities to report components of other comprehensive income in either a single
continuous statement or in two separate but consecutive statements of net income and other comprehensive
income. This ASU does not change the items that must be reported in comprehensive income, how these items are
measured, or when these items must be classified to net income. Effective with the first quarter of 2012, we have
provided herein the required financial reporting presentation pursuant to ASU 2011-05.
On February 5, 2013, the FASB issued ASU No. 2013-02, Reporting of Amounts Reclassified Out of
Accumulated Other Comprehensive Income, which adds additional disclosure requirements relating to the
reclassification of items out of accumulated other comprehensive income. This ASU is effective for the first quarter
of 2013.
Effective September 15, 2011, the FASB issued ASU No. 2011-08, Testing Goodwill for Impairment, which
gives companies testing goodwill for impairment the option of performing a qualitative assessment before
calculating the fair value of a reporting unit in step one of the goodwill impairment test. If companies determine,
based on qualitative factors, that the fair value of a reporting unit is more likely than not less than the carrying
amount, the two-step impairment test would be required. Otherwise, further testing would not be needed. ASU
2011-08 was effective for the first quarter of 2012 for the Company. The value of our goodwill was not affected by
the adoption of the provisions of this ASU.
The FASB issued ASU No. 2011-04, Amendments to Achieve Common Fair Value Measurement and
Disclosure Requirements in U.S. GAAP and IFRSs, to improve comparability of fair value measurements between
statements presented in U.S. GAAP and IFRS. This ASU, which was effective for the first quarter of 2012
for the Company, provided additional explanation on how to measure fair value but did not require additional
fair value measurements. Certain amendments in this ASU require the assessment of additional disclosures
regarding the measurement of fair value. The adoption of this ASU did not have a significant impact on our fair
value measurements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to interest rate risk through the operations of the Financial Services segment, and, to a
lesser extent, through our merchandising operations. We also are exposed to foreign currency risk through our
merchandising operations.
Financial Services Segment Interest Rate Risk
Interest rate risk refers to changes in earnings due to interest rate changes. To the extent that interest income
collected on credit card loans and interest expense on certificates of deposit and secured borrowings do not respond
equally to changes in interest rates, or that rates do not change uniformly, earnings could be affected. The variable
rate credit card loans are indexed to the one month London Interbank Offered Rate (“LIBOR”) and the credit card
portfolio is segmented into risk-based pricing tiers each with a different interest margin. Variable rate secured
borrowings are indexed to LIBOR-based rates of interest and are periodically repriced. Certificates of deposit and
fixed rate secured borrowings are priced at the current prevailing market rate at the time of issuance. We manage
and mitigate our interest rate sensitivity through several techniques, but primarily by indexing the customer rates
to the same index as our cost of funds. Additional techniques we use include managing the maturity, repricing, and
mix of fixed and variable assets and liabilities by issuing fixed rate secured borrowings or certificates of deposit
and entering into interest rate swaps.