Western Union 2007 Annual Report Download - page 57

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Notes to Consolidated Financial Statements
Settlement assets and obligations are comprised of the following (in millions):
December 31, 2007 2006
Settlement assets:
Cash and cash equivalents $ 203.5 $ 348.8
Receivables from selling agents 921.9 781.2
Investment securities 193.8 154.2
$1,319.2 $1,284.2
Settlement obligations:
Money transfer and payment service payables $ 870.8 $ 714.5
Payables to agents 448.4 568.0
$1,319.2 $1,282.5
Property and Equipment
Property and equipment are stated at cost, except for acquired
assets which are recorded at fair market value under purchase
accounting rules. Depreciation is computed using the straight-line
method over the lesser of the estimated life of the related assets
(generally three to 10 years, for equipment, furniture and fi xtures,
and 30 years for buildings) or the lease term. Maintenance and
repairs, which do not extend the useful life of the respective
assets, are charged to expense as incurred.
Property and equipment consists of the following (in millions):
December 31, 2007 2006
Equipment $ 289.1 $ 245.8
Leasehold improvements 37.4 32.4
Furniture and fi xtures 29.0 23.9
Land and improvements 16.9 12.9
Buildings 70.6 71.5
Projects in process 8.8 2.7
451.8 389.2
Less accumulated depreciation (251.5) (213.1)
Property and equipment, net $ 200.3 $ 176.1
Amounts charged to expense for depreciation of property and equipment were $49.1 million, $34.8 million and $32.0 mil lion during
the years ended December 31, 2007, 2006 and 2005, respectively.
Deferred Customer Set Up Costs
The Company capitalizes direct incremental costs not to exceed
related deferred revenues associated with the enrollment of
customers in the Equity Accelerator program, a service that allows
consumers to complete automated clearing house (“ACH”) trans-
actions to make recurring mortgage payments. Deferred customer
set up costs, included in “Other assets” in the Consolidated
Balance Sheets, are amortized to “Cost of services” in the
Consolidated Statements of Income over the length of the cus-
tomer’s expected participation in the program, generally fi ve to
seven years. Actual customer attrition data is assessed at least
annually and the amortization period is adjusted prospectively.
Goodwill
Goodwill represents the excess of purchase price over the fair
value of tangible and other intangible assets acquired, less liabili-
ties assumed arising from business combinations. The Company’s
annual goodwill impairment test did not identify any goodwill
impairment in 2007 or 2006; however, Western Union recorded
a goodwill impairment charge of $8.7 million in 2005 due to a
change in strategic direction relating to one of its majority owned
prepaid businesses (Note 3). The majority of goodwill on Western
Union’s Consolidated Balance Sheets arose in connection with
FFMC’s acquisition of WUFSI in November 1994. FFMC was
acquired by First Data in October 1995.
Other Intangible Assets
Other intangible assets primarily consist of contract costs (pri-
marily amounts paid to agents in connection with establishing
and renewing long-term contracts) and software. Other intangible
assets are amortized on a straight-line basis over the length of
the contract or benefi t periods. Included in “Cost of services”
in the Consolidated Statements of Income is amortization
expense of approximately $74.8 million, $68.7 million and
$47.5 million for the years ended December 31, 2007, 2006
and 2005, respectively.