Cash America 2013 Annual Report Download - page 143

CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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value and have an offsetting liability of equal amount. The assets related to the nonqualified deferred compensation
plans are held in “Other Assets,” and the offsetting liability is held in “Accounts payable and accrued expenses” in the
consolidated balance sheets.
Investments in Unconsolidated Subsidiaries
The Company records investments in unconsolidated subsidiaries at cost. The Company’s investments in
unconsolidated subsidiaries are held in “Other assets” in the consolidated balance sheets and are adjusted for cash
contributions and distributions. In July 2013, the Company changed its accounting to the cost method from the equity
method of accounting due to the decrease in its ownership percentage of one of its investments. From January 1, 2013
through June 30, 2013, the Company accounted for this investment under the equity method of accounting. Under the
equity method, an investment is initially recorded at cost and subsequently adjusted for equity in earnings and cash
contributions and distributions. Under the equity method, earnings on the unconsolidated investments were recorded in
“Equity in loss (income) of unconsolidated subsidiary” in the consolidated statements of income. The Company
evaluates its investments in unconsolidated subsidiaries for impairment if an event occurs or circumstances change that
would more likely than not reduce the fair value of the investment below its carrying amount. If an impairment of the
investment 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.
As of December 31, 2013, the Company owned a $6.0 million investment in the preferred stock of an early-
stage privately-held developing consumer financial services entity that the Company accounts for under the cost
method. The entity is not currently profitable and has historically funded its operations through a series of capital
contributions from investors. Based on the Company’s impairment evaluation of this investment as of December 31,
2013, it determined that an impairment loss was not probable as of that date. The Company will continue to evaluate
the impairment risk of this entity by monitoring and assessing the entity’s ability to raise capital or generate profits to
fund its future operations.
Operations and Administration Expenses
Operations expenses include expenses incurred for personnel, 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 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 information or applications from 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 initiatives are expensed as incurred. Other marketing
costs are expensed as incurred. 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,
Compensation—Stock Compensation (“ASC 718”). In accordance with ASC 718, 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