MoneyGram 2006 Annual Report Download - page 73

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Table of Contents
MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
discounts. These funds are available for investment until the items are presented for payment. Interest and dividends are recognized
as earned. Premiums and discounts on investments are amortized using a straight-line method over the life of the investment.
• Securities gains and losses are recognized upon the sale of securities using the specific identification method to determine the cost
basis of securities sold. Impairments are recognized in the period the security is deemed to be other-than-temporarily impaired.
Fee Commissions Expense — We pay fee commissions to third-party agents for money transfer services. In a money transfer transaction,
both the agent initiating the transaction and the agent disbursing the funds receive a commission. The commission amount is generally
based on a percentage of the fee charged to the customer. We generally do not pay commissions to agents on the sale of money orders.
Fee commissions are recognized at the time of the transaction. Fee commissions also include the amortization of the capitalized incentive
payments to agents.
Investment Commissions Expense — Investment commissions expense includes amounts paid to financial institution customers based
upon average outstanding balances generated by the sale of official checks and costs associated with swaps and the sale of receivables
program. Commissions paid to financial institution customers generally are variable based on short-term interest rates; however, a portion
of the commission expense has been fixed through the use of interest rate swap agreements. Investment commissions are generally
recognized each month based on the average outstanding balances and the contractual variable rate for that month.
Earnings Per Share — Basic earnings per share are computed based on the weighted-average number of common shares outstanding
during each year. Nonvested restricted stock carries dividends and voting rights and is not included in the weighted average number of
common shares outstanding used to compute basic earnings per share. Diluted earnings per share are based on the weighted-average
number of common shares outstanding plus net incremental shares arising out of employee stock compensation plans. The earnings
amounts used for per-share calculations are the same for both the basic and diluted methods. The following is a reconciliation of the
weighted-average share amounts used in calculating earnings per share:
(Amounts in thousands) 2006 2005 2004
Basic common shares outstanding 84,294 84,675 86,916
Incremental shares from stock-based compensation plans 1,524 1,295 414
Diluted common shares outstanding 85,818 85,970 87,330
Stock options excluded from the computation 2 403 2,778
Options with an exercise price greater than the average market price of the common stock or that have an anti-dilutive effect on the
computation are excluded from the calculation of diluted earnings per share.
As the Company's common stock was not issued until June 30, 2004, the weighted average number of common shares outstanding for the
first half of 2004 represents Viad's historical weighted average number of common shares outstanding.
Stock Based Compensation — Through 2004, the Company accounted for stock option grants under the intrinsic value method in
accordance with Accounting Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued to Employees. This method defines
compensation cost for stock options as the excess, if any, of the quoted market price of the Company's stock at the date of the grant over
the amount the employee must pay to acquire the stock. As our stock option plans require the employee to pay an amount equal to the
market price on the date of grant, no compensation expense was recognized under APB 25. Performance-based stock and restricted stock
awards were accounted for using the fair value method under SFAS No. 123, Accounting for Stock-Based Compensation. Under
SFAS No. 123, performance-based stock and restricted stock awards were valued at the quoted market price of the Company's stock at
the date of grant and expensed using the straight-line method over the vesting or service period of the award.
Effective January 1, 2005, the Company adopted SFAS No. 123R, Share-Based Payment, using the modified prospective method. Under
SFAS No. 123R, all share-based compensation awards are measured at fair value at the date of grant and expensed over their vesting or
service periods. Expense is recognized using the straight-line method.
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