First Data 2007 Annual Report Download - page 92

PPS, IDLogix and Taxware as discontinued operations. Their results of operations are treated as income from discontinued operations, net of tax, and
separately stated on the Consolidated Statements of Income after income from continuing operations.
Business Description
FDC operates electronic commerce businesses providing a variety of services to financial institutions, commercial establishments and consumers. Such
services include merchant transaction processing and acquiring; credit, retail and debit card issuing and processing; official check issuance; and check
verification, settlement and guarantee services.
On September 29, 2006, the Company separated its Western Union money transfer business into an independent, publicly traded company through a
spin-off of 100% of Western Union to FDC shareholders in a transaction intended to qualify for tax-free treatment ("the spin-off"). FDC and Western Union
are independent and have separate public ownership, boards of directors and management.
Upon completion of a strategic review of the Company's official check and money order operations in the first quarter of 2007, the Company decided to
gradually exit this line of business. The Company expects the wind-down of the majority of the business to take place in 2008. During 2007, the Company
repositioned its investment portfolio associated with this business from long-term investments to principally short-term investments, the majority of which
were short-term tax-exempt variable rate demand notes at December 31, 2007. In January 2008, the portfolio was repositioned from these short-term tax-
exempt variable rate demand notes to short-term taxable investments the majority of which were in commercial paper and bank certificates of deposits.
Revenue Recognition
The majority of the Company's revenues are comprised of transaction-based fees, which typically constitute a percentage of dollar volume processed,
per transaction processed, accounts on file or some combination thereof. In limited circumstances, revenue is allocated to the separate units of accounting in a
multiple element transaction based on relative fair values, provided each element has stand alone value to the customer, the fair value of any undelivered
items can be readily determined, and delivery of any undelivered items is probable and substantially within the Company's control.
The Company's official check services generate revenue primarily through the Company's ability to invest funds pending settlement. Historically and
during 2007, the Company invested a majority of these funds in high quality instruments issued by municipalities to minimize its exposure to credit risks. The
Company pays its agents commissions based on short-term variable interest rates and the balance of outstanding checks or money orders (the
"commissionable balance"). The Company nets the commissions paid to agents against the revenue it earns from its investments. Gains and losses associated
with the above noted investments are recognized in revenue.
In the case of merchant contracts that the Company owns and manages, revenue is primarily comprised of fees charged to the merchant, net of
interchange and assessments charged by the credit card associations, and is recognized at the time of sale. The fees charged to the merchant are a percentage
of the credit card and signature based debit card transaction's dollar value, a fixed amount or a combination of the two. Personal identification number based
debit ("PIN-debit") network fees are recognized in "Reimbursable debit network fees, postage and other" revenues and expenses in the Consolidated
Statements of Income. STAR network access fees charged to merchants are assessed on a per transaction basis as part of an acquiring activity.
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