Cash America 2013 Annual Report Download - page 141

CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
116
The allowance deducted from the carrying value of merchandise held for disposition amounted to $0.9 million
at both December 31, 2013 and 2012, respectively. The Company offers customers a 30-day satisfaction guarantee,
whereby the customer can return merchandise and receive a full refund, a replacement item of comparable value or
store credit. Based on management’s analysis of historical refund trends, the Company provided a return allowance of
$0.3 million as of December 31, 2013 and 2012.
Property and Equipment
Property and equipment is recorded at cost. The cost of property retired or sold and the related accumulated
depreciation are removed from the accounts, and any resulting gain or loss is recognized in the consolidated statements
of income. Costs associated with repair and maintenance activities are expensed as incurred. Depreciation expense is
generally provided on a straight-line basis, using the following estimated useful lives:

Buildings and building improvements(a) 7 to 40 years
Leasehold improvements(b) 2 to 10 years
Furniture, fixtures and equipment 3 to 7 years
Computer hardware and software 1 to 10 years
(a)Structural components are depreciated over 30 to 40 years, and the remaining building systems and features are
depreciated over 7 to 20 years. a
a
(b)Leasehold improvements are depreciated over the terms of the lease agreements with a maximum life of 10 years.

Software Development Costs
The Company applies ASC 350, Internal Use Software (“ASC 350”), to its software purchase and
development activities. Under ASC 350, eligible internal and external costs incurred for the development of computer
applications, as well as for upgrades and enhancements that result in additional functionality of the applications, are
capitalized. Internal and external training and maintenance costs are charged to expense as incurred or over the related
service period. When a software application is placed in service, the Company begins amortizing the related
capitalized software costs using the straight-line method based on its estimated useful life, which currently ranges from
two to five years, except the Company’s proprietary point-of-sale system, which is being amortized over 10 years.
Goodwill and Other Indefinite Lived Intangible Assets
Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable
intangible assets acquired in each business combination. In accordance with ASC 350, Goodwill—Subsequent
Measurement, the Company tests goodwill and intangible assets with an indefinite life for potential impairment
annually as of June 30 and between annual tests if an event occurs or circumstances change that would more likely
than not reduce the fair value of a reporting unit below its carrying amount.
The Company uses the income approach to complete its annual goodwill assessment. The income approach
uses future cash flows and estimated terminal values for each of the Company’s reporting units that are discounted
using a market participant perspective to determine the fair value of each reporting unit, which is then compared to the
carrying value of that reporting unit to determine if there is impairment. The income approach includes assumptions
about revenue growth rates, operating margins and terminal growth rates discounted by an estimated weighted-average
cost of capital derived from other publicly-traded companies that are similar but not identical from an operational and
economic standpoint. The Company completed its annual assessment of goodwill as of June 30, 2013 and determined
that the fair value of its goodwill exceeded carrying value, and, as a result, no impairment existed at that date.
The Company performed its annual indefinite-lived intangible asset impairment test as of June 30, 2013. The
Company elected to perform a qualitative assessment in accordance with FASB Accounting Standards Update