MoneyGram 2010 Annual Report Download - page 102

Table of Contents
MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Payments on Long-Term Contracts — The Company makes payments to certain agents and financial institution customers as an incentive
to enter into long-term contracts. The payments, or signing bonuses, are generally required to be refunded pro rata in the event of
nonperformance under, or cancellation of, the contract by the customer. For contracts requiring payments to be refunded, the signing
bonuses are capitalized and amortized over the life of the related contract as such costs are recoverable through future operations or, in
the case of early termination, through penalties or refunds. Amortization of signing bonuses on long-term contracts is recorded in "Fee
and other commissions expense" in the Consolidated Statements of Income (Loss). The carrying values of the signing bonuses are
reviewed annually or whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. Signing
bonuses for contracts that do not require a refund in the event of nonperformance or cancellation are expensed upon payment in "Fee and
other commissions expense" in the Consolidated Statements of Income (Loss).
Income Taxes — The provision for income taxes is computed based on the pre-tax income included in the Consolidated Statements of
Income (Loss). Deferred tax assets and liabilities are recorded based on the future tax consequences attributable to temporary differences
that exist between the financial statement carrying value of assets and liabilities and their respective tax basis, and operating loss and tax
credit carry-backs and carry-forwards on a taxing jurisdiction basis. We measure deferred tax assets and liabilities using enacted statutory
tax rates that will apply in the years in which we expect the temporary differences to be recovered or paid. Our ability to realize our
deferred tax assets depends on our ability to generate sufficient taxable income within the carry-back or carry-forward periods provided
for in the tax law. We establish valuation allowances for our deferred tax assets based on a more likely than not threshold. To the extent
management believes that recovery is not likely, a valuation allowance is established in the period in which the determination is made.
The liability for unrecognized tax benefits is recorded as a non-cash item in "Accounts payable and other liabilities" in the Consolidated
Balance Sheets. The Company records interest and penalties for unrecognized tax benefits in "Income tax expense (benefit)" in the
Consolidated Statements of Income (Loss). See Note 14 — Income Taxes for further discussion.
Treasury Stock — Repurchased common stock is stated at cost and is presented as a separate component of stockholders' deficit. See
Note 12 — Stockholders' Deficit for further discussion.
Foreign Currency Translation — The Company converts assets and liabilities of foreign operations to their United States dollar
equivalents at rates in effect at the balance sheet dates, recording the translation adjustments in "Accumulated other comprehensive loss"
in the Consolidated Balance Sheets. Income statements of foreign operations are translated from the operation's functional currency to
United States dollar equivalents at the average exchange rate for the month. Foreign currency exchange transaction gains and losses are
reported in "Transaction and operations support" in the Consolidated Statements of Income (Loss).
Revenue Recognition — The Company derives revenue primarily through service fees charged to consumers and its investing activity. A
description of these revenues and recognition policies is as follows:
• Fee and other revenues primarily consist of transaction fees and foreign exchange revenue.
• Transaction fees consist primarily of fees earned on money transfer, money order, bill payment and official check transactions.
The money transfer transaction fees vary based on the principal value of the transaction and the locations in which these money
transfers originate and to which they are sent. The money order and bill payment transaction fees are fixed fees charged on a per
item basis. Transaction fees are recognized at the time of the transaction or sale of the product.
• Foreign exchange revenue is derived from the management of currency exchange spreads on money transfer transactions
involving different "send" and "receive" currencies. Foreign exchange revenue is recognized at the time the exchange in funds
occurs.
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