Cash America 2009 Annual Report Download - page 109

CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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as “Prenda Fácil”). The Company has no ownership interest in Huminal; however, Prenda Fácil qualifies as
the primary beneficiary of Huminal in accordance with Financial Accounting Standards Board (“FASB”)
Accounting Standards Codification (“Codification” or “ASC”) 810-10-50, Variable Interest Entities.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the dates of the consolidated financial
statements and the reported amounts of revenue and expenses during the reporting periods. On an ongoing
basis, management evaluates its estimates and judgments, including those related to revenue recognition,
merchandise held for disposition, allowance for losses on cash advances, long-lived and intangible assets,
income taxes, contingencies and litigation. Management bases its estimates on historical experiences,
relevant external factors and various other assumptions that are believed to be reasonable, the results of which
form the basis for making judgments about the carrying values of assets and liabilities. Actual results may
differ from these estimates under different assumptions or conditions.
Foreign Currency Translations
The functional currencies for the Company’s subsidiaries that serve residents of the United Kingdom,
Australia, Canada, and Mexico are the British pound, the Australian dollar, the Canadian dollar, and the
Mexican peso, respectively. The assets and liabilities of these subsidiaries are translated into U.S. dollars at
the exchange rates in effect at each balance sheet date, and the resulting adjustments are accumulated in other
comprehensive income (loss) as a separate component of equity. Revenue and expenses are translated at the
monthly average exchange rates occurring during each year.
Cash and Cash Equivalents
The Company considers cash on hand in operating locations, deposits in banks and short-term
marketable securities with original maturities of 90 days or less as cash and cash equivalents.
Revenue Recognition
Pawn Lending • The Company offers pawn loans through its lending locations and through its
unconsolidated franchised locations. Pawn loans are made on the pledge of tangible personal property. In the
Company’s U.S. pawn business, it accrues finance and service charges revenue only on those pawn loans that
it deems collectible based on historical loan redemption statistics. Pawn loans written during each calendar
month are aggregated and tracked for performance. The gathering of this empirical data allows the Company
to analyze the characteristics of its outstanding pawn loan portfolio and estimate the probability of collection
of finance and service charges. For loans not repaid, the carrying value of the forfeited collateral
(“merchandise held for disposition”) is stated at the lower of cost (cash amount loaned) or market. Revenue is
recognized at the time merchandise is sold. Interim customer payments for layaway sales are recorded as
customer deposits and subsequently recognized as revenue during the period in which the final payment is
received.
In the Company’s foreign pawn loan business, service charges are accrued ratably over the four week
term of the loan for loans not redeemed prior to maturity. Following the expiration of the grace period, which
is generally three weeks, the collateral underlying unredeemed loans is sold with the proceeds applied against
the outstanding loan balance and accrued service charges and fees. Accrued interest on loans that have passed