Green Dot 2010 Annual Report Download - page 74

Note 2 — Summary of Significant Accounting Policies (continued)
conduct other transactions at certain ATMs in accordance with the terms and conditions in the applicable
cardholder agreements. We recognize ATM fees when the withdrawal is made by the cardholder, which is
the same time our service is completed and the fees are assessed. Other revenues consist of customer
service fees, and fees associated with optional products or services, which we generally offer to
consumers during the card activation process. We charge customer service fees pursuant to the terms
and conditions in the applicable cardholder agreements and recognize them when the underlying services
are completed. Optional products and services that generate other revenues include providing a second
card for an account, expediting delivery of the personalized debit card that replaces the temporary card
obtained at the retail store, and upgrading a cardholder account to one of our upgrade programs. We
generally recognize revenue related to optional products and services when the underlying services are
completed, but we treat revenues related to our upgrade programs in a manner similar to new card fees
and monthly maintenance fees.
We generate cash transfer revenues when consumers purchase our cash transfer products (reload
services) in a retail store. We recognize these revenues when the cash transfer transactions are
completed, generally within three business days from the time of sale of these products.
We earn interchange revenues from fees remitted by the merchant’s bank, which are based on rates
established by Visa and MasterCard, when cardholders make purchase transactions using our cards. We
recognize interchange revenues as these transactions occur.
We report our different types of revenues on a gross or net basis based on our assessment of whether
we act as a principal or an agent in the transaction. To the extent we act as a principal in the transaction, we
report revenues on a gross basis. In concluding whether or not we act as a principal or an agent, we
evaluate whether we have the substantial risks and rewards under the terms of the revenue-generating
arrangements, whether we are the party responsible for fulfillment of the services purchased by the
cardholders, and other factors. For all of our significant revenue-generating arrangements, including GPR
and gift cards, we record revenues on a gross basis.
Generally, customers have limited rights to a refund of a new card fee or a cash transfer fee. We have
elected to recognize revenues prior to the expiration of the refund period, but reduce revenues by the
amount of expected refunds, which we estimate based on actual historical refunds.
On occasion, we enter into incentive agreements with our retail distributors designed to increase
product acceptance and sales volume. We record incentive payments, including the issuance of equity
instruments, as a reduction of revenues and recognize them over the period the related revenues are
recognized or as services are rendered, as applicable.
Sales and Marketing Expenses
Sales and marketing expenses primarily consist of sales commissions, advertising and marketing
expenses, and the costs of manufacturing and distributing card packages, placards, and promotional
materials to our retail distributors’ locations and personalizedGPR cards to consumers who have activated
their cards.
We pay our retail distributors and brokers commissions based on sales of our prepaid debit cards and
cash transfer products in their stores. We defer and expense commissions related to new cards sales
ratably over the average card lifetime, which is currently nine months for our GPR cards and six months for
our gift cards. We expense commissions related to cash transfer products when the cash transfer
transactions are completed. Sales commissions were $82.4 million for the year ended December 31,
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GREEN DOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)