NetSpend 2015 Annual Report Download - page 50

Notes to Consolidated Financial Statements
Note 1: Basis of Presentation and Summary of Significant Accounting Policies
BUSINESS: Total System Services, Inc.’s (TSYS’ or the Company’s) revenues are derived from providing
payment processing, merchant services and related payment services to financial and nonfinancial institutions,
generally under long-term processing contracts. The Company also derives revenues by providing general-
purpose reloadable (GPR) prepaid debit cards and payroll cards and alternative financial services to underbanked
and other consumers. The Company’s services are provided through four operating segments: North America
Services, International Services, Merchant Services and NetSpend.
Through the Company’s North America Services and International Services segments, TSYS processes
information through its cardholder systems to financial and nonfinancial institutions throughout the United States
and internationally. The Company’s North America Services segment provides these services to clients in the
United States, Canada, Mexico and the Caribbean. The Company’s International Services segment provides
services to clients in Europe, India, Middle East, Africa, Asia Pacific and Brazil. The Company’s Merchant Services
segment provides merchant services to merchant acquirers and merchants mainly in the United States. The
Company’s NetSpend segment provides services to consumers in the United States.
PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION: The accompanying consolidated
financial statements, which are prepared in accordance with generally accepted accounting principles (GAAP)
include the accounts of TSYS and its wholly- and majority-owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated in consolidation. In addition, the Company evaluates its
relationships with other entities to identify whether they are variable interest entities and to assess whether it is
the primary beneficiary of such entities. If the determination is made that the Company is the primary beneficiary,
then that entity is included in the consolidated financial statements.
RISKS AND UNCERTAINTIES AND USE OF ESTIMATES: Factors that could affect the Company’s future
operating results and cause actual results to vary materially from expectations include, but are not limited to,
lower than anticipated growth from existing clients, an inability to attract new clients and grow internationally,
loss of a major customer or other significant client, loss of a major supplier, an inability to grow through
acquisitions or successfully integrate acquisitions, an inability to control expenses, technology changes, the
impact of the application of and/or changes in accounting principles, financial services consolidation, changes in
regulatory requirements, a decline in the use of cards as a payment mechanism, disruption of the Company’s
international operations, breach of the Company’s security systems, a decline in the financial stability of the
Company’s clients and uncertain economic conditions. Negative developments in these or other risk factors
could have a material adverse effect on the Company’s financial position, results of operations and cash flows.
The Company has prepared the accompanying consolidated financial statements in conformity with U.S. GAAP.
The preparation of the consolidated financial statements requires management of the Company to make a
number of estimates and assumptions relating to the reported amounts of assets and liabilities at the date of the
consolidated financial statements and the reported amounts of revenues and expenses during the period. These
estimates and assumptions are developed based upon all information available. Actual results could differ from
estimated amounts.
ACQUISITIONS — PURCHASE PRICE ALLOCATION: TSYS’ purchase price allocation methodology requires
the Company to make assumptions and to apply judgment to estimate the fair value of acquired assets and
liabilities. TSYS estimates the fair value of assets and liabilities based upon appraised market values, the carrying
value of the acquired assets and widely accepted valuation techniques, including discounted cash flows and
market multiple analyses. Management determines the fair value of fixed assets and identifiable intangible assets
such as developed technology or customer relationships, and any other significant assets or liabilities. TSYS
adjusts the purchase price allocation, as necessary, up to one year after the acquisition closing date as TSYS
obtains more information regarding asset valuations and liabilities assumed. Unanticipated events or
circumstances may occur which could affect the accuracy of the Company’s fair value estimates, including
assumptions regarding industry economic factors and business strategies, and result in an impairment or a new
allocation of purchase price.
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