Cash America 2012 Annual Report Download - page 80

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The Company amortizes intangible assets subject to amortization on the basis of their expected periods of
benefit, generally three to ten years. The costs of start-up activities and organization costs are charged to expense as
incurred. See “Recent Developments—Reorganization of Mexico-based Pawn Operations and Purchase of
Noncontrolling Interest” for a discussion of additional impairment testing performed in September 2012.
Equity Securities
The Company accounts for its marketable and non-marketable equity securities in accordance with ASC 323-10,
Investments—Equity Method and Joint Ventures and ASC 325-20, Investments—Other—Cost Method Investments,
respectively. The Company’s marketable securities, except for marketable securities related to the Company’s
Nonqualified Savings Plan, which are described below, are classified as available-for-sale and unrecognized gains and
losses, net of tax, are recorded in “Accumulated other comprehensive income (loss)” in the consolidated statements of
equity. The Company’s non-marketable equity securities are recorded on a cost basis. The Company evaluates
marketable and non-marketable equity securities for impairment on a quarterly basis. If an impairment of an equity
security is determined to be other than temporary, the cost basis of the investment will be reduced and the resulting loss
recognized in net income in the period the other-than-temporary-impairment is identified. Marketable and non-
marketable equity securities are held in “Other assets” in the consolidated balance sheets.
The Company also holds marketable securities related to its Nonqualified Savings Plan. See “Item 8. Financial
Statements and Supplementary Data—Note 17” for a description of the Nonqualified Savings Plan. The securities are
classified as trading securities, and the unrealized gains and losses on these securities are netted with the costs of the
plans in “Operations and administration expenses” in the consolidated statements of income. These marketable securities
are recorded at fair value and have an offsetting liability of equal amount. The Nonqualified Savings Plan assets are held
in “Other Assets,” and the offsetting liability is held in “Accounts payable and accrued expenses” in the Company's
consolidated balance sheets.
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
expense 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.
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.
In 2012, the Company recorded a valuation allowance of $21.8 million, including $12.0 million related to net
deferred tax assets at its Mexico-based pawn operations (see “General—Recent Developments—Reorganization of
Mexico-based Pawn Operations and Purchase of Noncontrolling Interest” above for further information related to the
Mexico Reorganization), $0.5 million related to the net deferred tax assets in Mexico generated by the e-commerce
segment, and $9.3 million related to deferred tax assets associated with the Company’s excess tax basis over its basis for
financial reporting purposes in the stock of Creazione.