Cash America 2013 Annual Report Download - page 78

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Withdrawal of Proposed Initial Public Offering of Enova International, Inc.
On September 15, 2011, Enova International Inc. (“Enova”) filed a registration statement on Form S-1
(“Registration Statement”) with the Securities and Exchange Commission (the “SEC”) in connection with a proposed
initial public offering (“IPO”) of its common stock. On July 25, 2012, Enova filed an Application for Withdrawal of
Registration Statement with the SEC to withdraw the proposed IPO and the Registration Statement, together with all
exhibits and amendments. The Registration Statement had not been declared effective by the SEC, and no securities
have been sold in connection with the offering pursuant to the Registration Statement. During the year ended December
31, 2012, expenses that were previously capitalized totaling $3.9 million were recognized in earnings due to the
withdrawal of the Registration Statement and are included in “Operations and administration expenses” in the
consolidated statements of income.
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CRITICAL ACCOUNTING POLICIES
Management’s Discussion and Analysis of Financial Condition and Results of Operations is based on the
Company’s consolidated financial statements, which have been prepared in accordance with generally accepted
accounting principles in the United States (“GAAP”). The preparation of these financial statements 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 on-going basis, management evaluates its estimates and
judgments, including those related to revenue recognition on pawn loan fees and service charges and consumer loan
fees, allowance for losses on merchandise held for disposition and consumer loans, goodwill, long-lived and intangible
assets, income taxes, contingencies and litigation. Management bases its estimates on historical experience, empirical
data and on various other assumptions that are believed to be reasonable under the circumstances, 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. The development and selection of the critical accounting policies and the related disclosures below have
been reviewed with the Audit Committee of the Board of Directors of the Company.
Management believes the following critical accounting policies affect its more significant judgments and
estimates used in the preparation of its consolidated financial statements.
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Pawn Loan Fees and Service Charges
Pawn Loans and Pawn Loan Fees and Service Charges Receivable
Pawn loans are short-term loans made on the pledge of tangible personal property. The maximum pawn loan
amount is generally assessed as a percentage of the personal property’s estimated disposition value. The typical loan
term is generally 30 to 90 days and, in many cases, an additional grace period (typically 10 to 60 days) may be available
to the borrower. A pawn loan is considered delinquent if the customer does not repay or, where allowed by law, renew
or extend the loan on or prior to its contractual maturity date plus any applicable grace period. Pawn loan fees and
service charges do not accrue on delinquent pawn loans. When a pawn loan is considered delinquent, any accrued pawn
loan fees and service charges are reversed and no additional pawn loan fees and service charges are accrued. Pawn loans
written during each calendar month are aggregated and tracked for performance. This empirical data allows the
Company to analyze the characteristics of its outstanding pawn loan portfolio and assess the collectability of the
principal balance in addition to pawn loan fees and service charges.
Revenue Recognition
Pawn loan fees and service charges revenue are accrued ratably over the term of the loan for the portion of those
pawn loans deemed collectible. If the future actual performance of the loan portfolio differs significantly (positively or
negatively) from expectations, revenue for the next reporting period would be likewise affected.
At the end of the current year and based on the revenue recognition method described above, the Company had
accrued $53.4 million of pawn loan fees and service charges receivable. Assuming the year-end accrual of pawn loan
fees and service charges revenue was overestimated or underestimated by 10%, pawn loan fees and service charges