Cash America 2012 Annual Report Download - page 136

CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
111
Investments in Unconsolidated Subsidiaries
The Company records investments in unconsolidated subsidiaries initially at cost and subsequently adjusts
them for equity in earnings and cash contributions and distributions. Earnings on unconsolidated investments are
recorded under the equity method of accounting in “Equity in loss (income) of unconsolidated subsidiary” in the
consolidated statements of income. Investments in unconsolidated subsidiaries are held in “Other assets” in the
consolidated balance sheets.
Operations and Administration Expenses
Operations expenses include expenses incurred for occupancy, marketing and other charges that are directly
related to the retail services and e-commerce segments. Operations expenses are incurred within the retail services
locations and the Company’s call centers for customer service and collections. In addition, costs related to
management supervision, oversight of locations and other costs for the oversight of the Company’s retail services
locations are included in operations expenses. Administration expenses include expenses related to corporate service
functions, such as legal, occupancy, executive oversight, insurance and risk management, public and government
relations, internal audit, treasury, payroll, compliance and licensing, finance, accounting, tax and information systems.
Marketing Expenses
Marketing expenses consist of online marketing costs, such as sponsored search and advertising on social
networking sites, and other marketing costs such as television, radio and print advertising. In addition, marketing
expense includes lead purchase costs paid to marketers in exchange for providing leads to potential customers
interested in using the Company’s services. Online marketing and lead purchase costs are expensed as incurred. The
production costs associated with other marketing are expensed as incurred. Other marketing costs are expensed over
the media campaign period. The Company also has an agreement with an independent third party pursuant to which it
pays a portion of the net revenue received from the customers referred to the Company by such third party. These
expenses are included in “Operations and administration expenses” in the consolidated statements of income.
Stock-Based Compensation
The Company accounts for its stock-based employee compensation plans in accordance with ASC 718-10-30,
Compensation—Stock Compensation (“ASC 718-10-30”). In accordance with ASC 718-10-30, the Company
recognizes compensation expense over the remaining vesting periods for stock-based awards. For performance-
based stock awards, compensation expense is originally based on the number of shares that would vest if the Company
achieved the level of performance that management estimates is the most probable outcome at the grant date.
Throughout the requisite service period, management monitors the probability of achievement of the performance
condition and adjusts stock-based compensation expense if necessary.
Income Taxes
The provision for income taxes is based on income before income taxes as reported for financial statement
purposes. Deferred income taxes are provided for in accordance with the assets and liability method of accounting for
income taxes in order to recognize the tax effects of temporary differences between financial statement and income tax
accounting.
The Company performs an evaluation of the recoverability of its deferred tax assets on a quarterly basis. The
Company establishes a valuation allowance if it is more likely than not (greater than 50 percent) that all or some
portion of the deferred tax asset will not be realized. The Company analyzes several factors, including the nature and
frequency of operating losses, the Company’s carry-forward period for any losses, the reversal of future taxable
temporary differences, the expected occurrence of future income or loss and the feasibility of available tax planning
strategies to protect against the loss of deferred tax assets.