Western Union 2008 Annual Report Download - page 64

WESTERN UNION
2008 Annual Report
6262
Union will invest the cash received from IPS in high-quality,
investment grade securities in accordance with applicable
regulations, which are the same as those currently gov-
erning the investment of the Company’s United States
originated money transfer principal. In anticipation of the
Company’s exposure to fluctuations in interest rates, the
Company has entered into interest rate swaps on certain
of its fixed rate notes. Through a combination of the rev-
enue generated from these investment securities and the
anticipated interest expense savings resulting from the
interest rate swaps, the Company estimates that it should
be able to retain subsequent to the Transition Date, on a
pretax income basis through 2011, a comparable rate of
return as it is receiving under its current agreement with
IPS. Refer to Note 14 for additional information on the
interest rate swaps.
Subsequent to the Transition Date, all revenue gener-
ated from the management of the investment portfolio will
be retained by the Company and none will be shared with
its agents. IPS will continue to provide to the Company
clearing services necessary for payment of the money
orders in exchange for the payment by the Company to
IPS of a per-item administrative fee. The Company will
no longer provide to IPS the services required under the
original money order agreement or receive from IPS the
fee for such services.
8. Fair Value Measurements
As discussed in Note 2, the Company adopted the provi-
sions of SFAS No. 157 on January 1, 2008. SFAS No. 157
defines fair value as the exchange price that would be
received for an asset or paid to transfer a liability (an exit
price) in the principal or most advantageous market for the
asset or liability in an orderly transaction between market
participants on the measurement date. For additional infor-
mation on how Western Union measures fair value, refer
to Note 2, “Summary of Significant Accounting Policies.”
The following table reflects assets and liabilities that are measured and carried at fair value on a recurring basis as
of December 31, 2008 (in millions):
Fair Value Measurement Using
Assets/
Liabilities
Level1 Level2 Level3 at Fair Value
Assets
State and municipal debt instruments $ — $401.7 $ — $401.7
Debt securities issued by foreign governments 0.1 3.8 — 3.9
Derivatives — 116.8 — 116.8
Total assets $0.1 $522.3 $ — $522.4
Liabilities
Derivatives $ — $ 10.8 $ — $ 10.8
Total liabilities $ — $ 10.8 $ — $ 10.8
9. Other Assets and Other Liabilities
The following table summarizes the components of other assets and other liabilities (in millions):
December 31, 2008 2007
Other assets:
Receivable for securities sold $298.1 $ —
Equity method investments 213.1 211.3
Derivatives 116.8 8.1
Amounts advanced to agents, net of discounts 69.3 93.1
Deferred customer set up costs 34.6 41.9
Receivables from First Data 26.3 9.1
Prepaid expenses 20.6 19.8
Accounts receivable, net 19.8 22.5
Debt issue costs 14.0 13.5
Prepaid commissions 3.0 22.5
Other 42.5 56.2
Total other assets $858.1 $498.0
Other liabilities:
Pension obligations $107.1 $ 27.6
Deferred revenue 59.4 74.2
Derivatives 10.8 37.2
Other 20.7 43.9
Total other liabilities $198.0 $182.9