Western Union 2007 Annual Report Download - page 61

59
Notes to Consolidated Financial Statements
In December 2007, the FASB issued SFAS No. 160, “Noncon-
trolling Interests in Consolidated Financial Statements —
an amendment of ARB No. 51” (“SFAS No. 160”). The statement
establishes accounting and reporting standards for a noncontrol-
ling interest in a subsidiary. The adoption of the requirements of
SFAS No. 160 is effective for fi scal years and interim periods
within those fi scal years, beginning after December 15, 2008 and
may not be early adopted. The Company is currently evaluating
the potential impact of the adoption of SFAS No. 160. However,
we do not expect the impact to be signifi cant on the fi nancial
position, results of operations and cash fl ows, as the Company’s
current non-controlling interests are immaterial.
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3. Acquisitions and Disposals
In October 2007, the Company entered into agreements totaling
$18.3 million to convert its non-participating interest in an agent
in Singapore to a fully participating 49% equity interest and to
extend the agent relationship at more favorable commission
rates to Western Union. As a result, the Company will now earn
a pro-rata share of profi ts and will have enhanced voting rights.
The Company also has the right to add additional agent relation-
ships in Singapore. In addition, in October 2007, the Company
completed an agreement to acquire a 25% ownership interest
in an agent in Jamaica and to extend the term of the agent rela-
tionship for $29.0 million. The aggregate consideration paid
resulted in $20.2 million of identifi able intangible assets, which
are being amortized over seven to 10 years. Western Union’s
investments in these agents are accounted for under the equity
method of accounting.
In December 2006, the Company acquired SEPSA, which
operates under the brand name Pago Fácil
SM
, for a total purchase
price of $69.8 million, less cash acquired of $3.0 million.
Pago Fácil provides consumer-to-business payments and pre-
paid mobile phone top-up services in Argentina. Previously, the
Company held a 25% interest in Pago Fácil, which was treated
as an equity method investment. As a result of acquiring the
additional 75% ownership, the Company’s entire investment in
and results of operations of Pago Fácil have been included in the
consolidated fi nancial statements since the acquisition date. The
purchase price allocation resulted in $28.1 million of identifi able
intangible assets, a signifi cant portion of which were attributable
to the Pago Fácil service mark and acquired agent and biller
relationships. The identifi able intangible assets were calculated
based on the additional 75% ownership interest acquired, and
are being amortized over two to 25 years. After adjusting the
additional acquired net assets to fair value, goodwill of $44.5
million was recorded, substantially all of which is eligible for
amortization for tax purposes across various jurisdictions.
In October 2005, First Data acquired 100% of GMT Group,
Inc. (“GMT”), the owner of Vigo, a provider of consumer-to-
consumer money transfer services to various countries, for
approximately $369.2 million, including cash acquired of $20.1
million. GMT was contributed to Western Union in connection
with the Spin-off. The results of Vigo’s operations have been
included in the consolidated fi nancial statements since the
acquisition date. The purchase price allocation resulted in $83.6
million of identifi able intangible assets, which are being amortized
over 3.5 to 11 years, except for acquired trademarks aggregating
$28.6 million, which are being amortized over 25 years. Goodwill
of $284.4 million was recorded in connection with the acquisition
of GMT, none of which is deductible for tax purposes.
In the fourth quarter of 2005, Western Union recorded a
goodwill impairment charge of $8.7 million due to a change in
strategic direction related to its 51% ownership interest in EPOSS
Limited (“EPOSS”). In the second quarter 2006, the Company
sold its majority interest in EPOSS. The fair value of net assets on
disposition approximated the net book value subsequent to the
recognition of the goodwill impairment charge noted above.
The pro forma impact of all acquisitions on net income in
2007, 2006 and 2005 was immaterial.
The following table presents changes to goodwill for the years ended December 31, 2007 and 2006 (in millions):
Consumer-to- Consumer-to-
Consumer Business Other Total
January 1, 2006 balance $1,390.7 $195.1 $32.2 $1,618.0
Acquisitions — 48.0 — 48.0
Purchase price adjustments 1.3 — — 1.3
Disposals — — (19.3) (19.3)
December 31, 2006 balance $1,392.0 $243.1 $12.9 $1,648.0
Purchase price adjustments (3.0) (5.9) 1.7 (7.2)
Currency translation — (1.3) — (1.3)
December 31, 2007 balance $1,389.0 $235.9 $14.6 $1,639.5