First Data 2007 Annual Report Download - page 197

Chase Paymentech
NOTES TO COMBINED FINANCIAL STATEMENTS – CONTINUED
For the years ended December 31, 2007 and 2006 and
the year ended December 31, 2005 (unaudited)
Other Contingencies
Both the Company and its customers handle sensitive information, such as credit card numbers and personal consumer data, utilizing computer and
telecommunications systems operated by the Company, its customers and outside third party providers. Despite internal controls and card brand imposed data
security rules, which are in place to protect this information, ever-evolving technology presents inherent risks of data compromises. Data compromises of
customers' systems can result in significant financial liability to the Company if the fines and liability for fraudulent card usage exceeds its customers'
financial capacity. While the Company has not experienced significant losses in the past, data compromise of sensitive data processed by the Company or a
third party vendor could have a material impact on the Company's financial position and results of operations.
In the course of business, the Company is a defendant in various lawsuits. Management believes that the resolution of these lawsuits will not have a material
impact on the Company's combined financial position or results of operations.
NOTE 6 – ALLOWANCE FOR DOUBTFUL ACCOUNTS
The Company establishes an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends and other
relevant factors, as discussed in Note 5. Write-offs are recorded as a reduction to the allowance for doubtful accounts when deemed uncollectible.
A summary of the allowance for doubtful accounts is as follows (in thousands):
2007 2006 2005
Reserve balance at beginning of year $ 12,397 $ 12,941 $ 8,489
Additional reserve attributed to the integration of CMS on October 1, 2005 — — 5,449
Provision for doubtful accounts 7,240 8,512 8,530
Write-offs, net (9,562) (9,032) (9,612)
Effects of foreign currency translation 121 (24) 85
Reserve balance at end of year $ 10,196 $ 12,397 $ 12,941
NOTE 7 – GOODWILL AND INTANGIBLE ASSETS
Goodwill
A summary of goodwill is as follows (in thousands):
2007 2006
Balance at beginning of year $ 372,284 $ 372,563
Effects of foreign currency translation 21,857 (279)
Balance at end of year $ 394,141 $ 372,284
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