Cash America 2008 Annual Report Download - page 53

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30
long-lived and intangible assets may not be recoverable, impairment is measured based on the excess of the
assets’ carrying value over the estimated fair value.
Income taxes. As part of the process of preparing its consolidated financial statements, the Company is
required to estimate income taxes in each of the jurisdictions in which it operates. This process involves
estimating the actual current tax exposure together with assessing temporary differences in recognition of
income for tax and accounting purposes. These differences result in deferred tax assets and liabilities and are
included within the Company’s consolidated balance sheets. Management must then assess the likelihood
that the deferred tax assets will be recovered from future taxable income and, to the extent it believes that
recovery is not likely, it must establish a valuation allowance. An expense, or benefit, is included within the
tax provision in the statement of operations for any increase, or decrease, in the valuation allowance for a
given period.
Effective January 1, 2007, the Company began accounting for uncertainty in income taxes
recognized in the consolidated financial statements in accordance with Financial Accounting Standards
Board (“FASB”) Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”). FIN 48
requires that a more-likely-than-not threshold be met before the benefit of a tax position may be recognized
in the consolidated financial statements and prescribes how such benefit should be measured. Management
must evaluate tax positions taken on the Company’s tax returns for all periods that are open to examination
by taxing authorities and make a judgment as to whether and to what extent such positions are more likely
than not to be sustained based on merit.
Management judgment is required in determining the provision for income taxes, the deferred tax
assets and liabilities and any valuation allowance recorded against deferred tax assets. Management
judgment is also required in evaluating whether tax benefits meet the more-likely-than-not threshold for
recognition under FIN 48.
RECENT ACCOUNTING PRONOUNCEMENTS
In September 2006, FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 157,
“Fair Value Measurements” (“SFAS 157”). SFAS 157 defines fair value to be the price that would be
received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at
the measurement date and emphasizes that fair value is a market-based measurement, not an entity-specific
measurement. It establishes a fair value hierarchy and expands disclosures about fair value measurements in
both interim and annual periods. SFAS 157 was effective for fiscal years beginning after November 15,
2007 and interim periods within those fiscal years. In February 2008, FASB issued FASB Staff Position
(“FSP”) FAS 157-2, “Effective Date of FASB Statement No. 157”, which delays the effective date of SFAS
157 for nonfinancial assets and nonfinancial liabilities that are recognized or disclosed in the financial
statements on a nonrecurring basis. The FSP partially defers the effective date of SFAS 157 to fiscal years
beginning after November 15, 2008, and interim periods within those fiscal years for items within the scope
of this FSP. The Company adopted the provisions of SFAS 157 for its financial assets and financial
liabilities on January 1, 2008. The adoption of SFAS 157 did not have a material effect on the Company’s
financial position or results of operations. In accordance with FSP FAS 157-2, the Company has not applied
the provisions of SFAS 157 to its nonfinancial assets and nonfinancial liabilities. The Company will apply
the provisions of SFAS 157 to these assets and liabilities beginning January 1, 2009 as required by FSP FAS
157-2. In October 2008, the FASB issued FSP No. FAS 157-3, “Determining the Fair Value of a Financial
Asset When the Market for That Asset Is Not Active,” (“FSP FAS 157-3”) which clarifies the application of
SFAS 157 as it relates to the valuation of financial assets in a market that is not active for those financial
assets. FSP FAS 157-3 became effective for the Company upon issuance, and had no material impact on the
Company’s financial position or results of operations.
In February 2007, FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and
Financial Liabilities” (“SFAS 159”). SFAS 159 permits entities to choose, at specified election dates, to
measure eligible items at fair value (the “fair value option”) and requires an entity to report unrealized gains