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Organization and Summary of Significant Accounting Policies
 6 Months Ended
Mar. 31, 2020
Accounting Policies [Abstract]  
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NOTE 1: ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business
When used in this report, the terms “we,” “us,” “our,” “EZCORP” and the “Company” mean EZCORP, Inc. and its consolidated subsidiaries, collectively.
We are a leading provider of pawn loans in the United States and Latin America. Pawn loans are non-recourse loans collateralized by tangible property. We also sell merchandise, primarily collateral forfeited from pawn lending operations and used merchandise purchased from customers, and operate a small number of financial services stores in Canada.
Basis of Presentation
The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements. Our management has included all adjustments it considers necessary for a fair presentation and which are of a normal, recurring nature. All intercompany accounts and transactions have been eliminated in consolidation. Certain prior year amounts have been reclassified to conform to current year presentation.
The accompanying financial statements should be read in conjunction with the consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended September 30, 2019. The balance sheet as of September 30, 2019 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by GAAP for complete financial statements.
Our business is subject to seasonal variations, and operating results for the three and six months ended March 31, 2020 and 2019 (the "current quarter" and "current six-months" and "prior-year quarter" and "prior-year six-months," respectively) are not necessarily indicative of the results of operations for the full fiscal year.
There have been no changes in significant accounting policies as described in our Annual Report on Form 10-K for the year ended September 30, 2019, other than those described below and in Note 12.
Use of Estimates and Assumptions
The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates and judgments, including those related to revenue recognition, inventories, loan loss allowances, long-lived and intangible assets, share-based compensation, income taxes, contingencies and litigation. We base our estimates on historical experience, observable trends and various other assumptions that we believe are reasonable under the circumstances. We use this information to make judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from these estimates under different assumptions or conditions.
Impact of COVID-19
The novel coronavirus disease known as “COVID-19” was characterized as a worldwide pandemic by the World Health Organization on March 11, 2020. It has significantly disrupted businesses around the world. We began to see the impact of COVID-19 to our operations in mid-March, when the closure of non-essential businesses and the implementation of stay-at-home requirements began in our geographic locations. In the U.S. and Mexico, we have been able to keep most of our stores open for business and operating under enhanced safety measures and restrictions on occupancy. Store closure orders in our GPMX countries (Guatemala, El Salvador, Honduras and Peru) have had a more severe impact on our business.
In addition, we have experienced a significant decline in pawn loan originations and associated loan balances since mid-March as a result of a change in customer borrowing behaviors due to COVID-19. These declines continued into April and are ongoing. See Note 14 (Subsequent Event). This reduced activity resulted in net revenue losses during the current quarter, which were partially offset with a strong increase in merchandise sales during the period.
The full extent and duration of the COVID-19 impact on the global economy generally, and on our business specifically, is currently unknown. We expect, however, that the pandemic will have an adverse effect on our net revenues and earnings in
fiscal 2020, and if it continues, it may have an adverse effect on our results of operations, financial position and liquidity in future periods. We continue to focus on the health and safety of our employees and customers while serving our customers’ needs.
Recently Adopted Accounting Policies
On October 1, 2019, we adopted ASC Topic 842, Leases, which requires companies to generally recognize on the balance sheet operating and financing lease liabilities and corresponding right-of-use assets. We adopted this using the optional prospective transition method provided under ASU 2018-11, Leases, (Topic 842): Targeted Improvement as of October 1, 2019. We additionally elected the package of practical expedients under Accounting Standards Codification (“ASC”) 842-10-65-1(f) as well as the practical expedient not to separate lease and non-lease components for all real estate leases under ASC 842-10-15-37. Further, we have elected an accounting policy not to record right-of-use assets and lease liabilities for all leases which have a duration of less than 12-months. See Note 5 for additional discussion.
Recently Issued Accounting Pronouncements
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In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This ASU, along with subsequently issued related ASUs, requires financial assets (or groups of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected, among other provisions. A reporting entity should generally apply the amendment on a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the amendment is effective. We have not identified any impacts to our financial statements that we believe will be material as a result of the adoption of the ASU, although we continue to evaluate the impact of adoption. We believe we are following an appropriate timeline to allow for proper recognition, presentation and disclosure upon adoption of this ASU which is effective for the first quarter of our fiscal 2021.
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In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) — Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This ASU provides optional expedients and exceptions for applying generally accepted accounting principles (GAAP) to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate. This ASU was issued on of March 12, 2020 and is effective upon issuance through December 31, 2022. We have not identified any impacts to our financial statements that we believe will be material as a result of the adoption of the ASU, although we will continue to evaluate the impact.