Western Union 2008 Annual Report Download - page 56

WESTERN UNION
2008 Annual Report
5454
Amounts charged to expense for depreciation of property
and equipment were $61.7 million, $49.1 million and
$34.8 million during the years ended December 31, 2008,
2007 and 2006, 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”) transactions 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
customer’s expected participation in the program, gener-
ally five 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 liabilities assumed arising from business combinations.
The Company’s annual goodwill impairment test did not
identify any goodwill impairment during the years ended
December 31, 2008, 2007 and 2006.
Other Intangible Assets
Other intangible assets primarily consist of contract costs
(primarily amounts paid to agents in connection with estab-
lishing and renewing long-term contracts) and software.
Other intangible assets are amortized on a straight-line
basis over the length of the contract or benefit peri-
ods. Included in “Cost of services” in the Consolidated
Statements of Income is amortization expense of approxi-
mately $82.3 million, $74.8 million and $68.7 million for
the years ended December 31, 2008, 2007 and 2006,
respectively.
The Company capitalizes initial payments for new
and renewed agent contracts to the extent recoverable
through future operations, contractual minimums and/or
penalties in the case of early termination. The Company’s
accounting policy is to limit the amount of capitalized costs
for a given contract to the lesser of the estimated future
cash flows from the contract or the termination fees the
Company would receive in the event of early termination
of the contract.
The Company develops software that is used in provid-
ing services. Software development costs are capitalized
once technological feasibility of the software has been
established. Costs incurred prior to establishing techno-
logical feasibility are expensed as incurred. Technological
feasibility is established when the Company has completed
all planning and designing activities that are necessary
to determine that a product can be produced to meet its
design specifications, including functions, features and
technical performance requirements. Capitalization of
costs ceases when the product is available for general use.
Software development costs and purchased software are
generally amortized over a term of three to five years.
Property and equipment consists of the following (in millions):
December 31, 2008 2007
Equipment $ 319.2 $ 289.1
Leasehold improvements 38.9 37.4
Furniture and fixtures 25.2 29.0
Land and improvements 16.9 16.9
Buildings 74.8 70.6
Projects in process 1.3 8.8
476.3 451.8
Less accumulated depreciation (284.0) (251.5)
Property and equipment, net $ 192.3 $ 200.3
The following table provides the components of other intangible assets (in millions):
December 31, 2008 December 31, 2007
Weighted-
Average
Amortization Net of Net of
Period Accumulated Accumulated
(inyears) Initial Cost Amortization Initial Cost Amortization
Capitalized contract costs 6.3 $316.2 $213.2 $274.0 $193.1
Acquired contracts 9.4 78.1 49.4 74.1 42.8
Acquired trademarks 24.7 43.7 38.2 44.7 41.0
Developed software 4.2 78.2 15.2 74.6 15.2
Purchased or acquired software 3.4 82.3 29.7 74.9 32.5
Other intangibles 6.8 28.6 4.9 28.6 9.5
Total other intangibles 7.4 $627.1 $350.6 $570.9 $334.1