NetSpend 2014 Annual Report Download - page 62

Download and view the complete annual report

Please find page 62 of the 2014 NetSpend annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 95

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95

Note 11 Contract Acquisition Costs, net
Significant components of contract acquisition costs as of December 31, 2014 and 2013 are summarized as
follows:
(in thousands) 2014 2013
Conversion costs, net .......................................................... $159,339 112,177
Payments for processing rights, net .............................................. 76,966 72,651
Total ...................................................................... $236,305 184,828
Amortization expense related to contract acquisition cost for the years ended December 31, 2014, 2013 and
2012 are as follows:
(in thousands) 2014 2013 2012
Amortization expense related to:
Conversion costs ................................................. $17,816 19,515 24,014
Payments for processing rights ...................................... 16,209 13,099 13,290
The weighted average useful life for each component of contract acquisition costs, and in total, as of
December 31, 2014 is as follows:
Weighted
Average
Amortization
Period (Yrs)
Payments for processing rights ......................................................... 14.5
Conversion costs ..................................................................... 12.3
Total ............................................................................. 13.4
Estimated future amortization expense of conversion costs and payments for processing rights as of
December 31, 2014 for the next five years is:
(in thousands) Conversion
Costs Payments for
Processing Rights
2015 ................................................................ $30,060 16,897
2016 ................................................................ 28,598 13,797
2017 ................................................................ 26,210 11,691
2018 ................................................................ 23,687 10,229
2019 ................................................................ 20,715 8,322
Note 12 Equity Investments
The Company has an equity investment in TSYS de México and records its 49% ownership using the equity
method of accounting. The operation prints statements and provides card-issuing support services to the equity
investment clients and others.
The Company has an equity investment in CUP Data and records its 44.56% ownership using the equity method
of accounting. CUP Data is sanctioned by the People’s Bank of China, China’s central bank, and has become one
of the world’s largest and fastest-growing payments networks. CUP Data currently provides transaction
processing, disaster recovery and other services for banks and bankcard issuers in China.
TSYS’ equity investments are recorded initially at cost and subsequently adjusted for equity in earnings, cash
contributions and distributions, and foreign currency translation adjustments. TSYS believes the carrying value
approximates the underlying assets of the equity investments.
59