First Data 2007 Annual Report Download - page 198

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)
Intangible Assets
A summary of intangible assets and accumulated amortization by intangible asset category as of December 31, 2007 and 2006 is as follows (in thousands):
Gross Carrying Amount
Merchant
Portfolios
Non-compete/
Referral
Agreements
Pension
Intangibles Total
Balance at December 31, 2005 $ 543,995 $ 14,529 $ 28 $ 558,552
Additions 1,566 — — 1,566
Effects of foreign currency translation (151) (32) — (183)
Adjustment for SFAS 158 (Note 14) — — (28) (28)
Balance at December 31, 2006 545,410 14,497 — 559,907
Additions 23,399 — — 23,399
Effects of foreign currency translation 11,617 2,540 — 14,157
Balance at December 31, 2007 $ 580,426 $ 17,037 $ — $ 597,463
Accumulated Amortization
Merchant
Portfolios
Non-compete/
Referral
Agreements
Pension
Intangibles Total
Balance at December 31, 2005 $ (418,634) $ (4,823) $ — $ (423,457)
Additions (73,433) (1,456) — (74,889)
Effects of foreign currency translation 249 49 — 298
Balance at December 31, 2006 (491,818) (6,230) — (498,048)
Additions (17,904) (1,544) — (19,448)
Effects of foreign currency translation (5,806) (1,213) — (7,019)
Balance at December 31, 2007 $ (515,528) $ (8,987) $ — $ (524,515)
Amortization expense related to intangible assets was $19.4 million, $74.9 million, and $42.1 million for the years ended December 31, 2007, 2006, and 2005,
respectively.
The Company periodically evaluates the appropriateness of the amortization period to determine whether circumstances warrant revised estimates of the
useful lives of its contributed and purchased merchant portfolios and other intangible assets. If, upon review, such revision of useful life is necessary, the
remaining unamortized cost would be amortized over the revised useful life. In performing these reviews, the Company takes into account all currently
available data. As a result of additional analysis of attrition statistics and other data, the Company's U.S. operations revised the estimated useful lives of some
of its purchased merchant portfolios effective January 1, 2006 from useful lives of eleven to forty years to useful lives of ten years. This change in estimate
was applied on a prospective basis and resulted in additional amortization in 2006 of $13.8 million, which is included in depreciation and amortization on the
combined statements of income and comprehensive income.
During 2007 and 2006, the Company purchased merchant portfolios totaling $23.4 million and $1.6 million, respectively, with a weighted-average
amortization period of nine and four years, respectively, and no significant residual value.
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