Western Union 2009 Annual Report Download - page 101

software, equipment, telecommunications, bank fees, depreciation and amortization and other expenses
incurred in connection with providing money transfer and other payment services.
Advertising Costs
Advertising costs are charged to operating expenses as incurred or at the time the advertising first takes
place. Advertising costs for the years ended December 31, 2009, 2008 and 2007 were $201.4 million,
$247.1 million and $264.2 million, respectively.
Income Taxes
Western Union accounts for income taxes under the liability method, which requires that deferred tax
assets and liabilities be determined based on the expected future income tax consequences of events that have
been recognized in the consolidated financial statements. Deferred tax assets and liabilities are recognized
based on temporary differences between the financial statement carrying amounts and tax bases of assets and
liabilities using enacted tax rates in effect in the years in which the temporary differences are expected to
reverse.
The Company recognizes the tax benefits from uncertain tax positions only when it is more likely than
not, based on the technical merits of the position, the tax position will be sustained upon examination,
including the resolution of any related appeals or litigation. The tax benefits recognized in the consolidated
financial statements from such a position are measured as the largest benefit that has a greater than fifty
percent likelihood of being realized upon ultimate resolution.
Foreign Currency Translation
The United States dollar is the functional currency for all of Western Union’s businesses except global
business payments subsidiaries located primarily in Canada and South America. Revenues and expenses are
translated at average exchange rates prevailing during the period. Foreign currency denominated assets and
liabilities for those entities for which the local currency is the functional currency are translated into United
States dollars based on exchange rates at the end of the period. The effects of foreign exchange gains and
losses arising from the translation of assets and liabilities of these entities are included as a component of
“Accumulated other comprehensive loss.” Foreign currency denominated monetary assets and liabilities of
operations in which the United States dollar is the functional currency are remeasured based on exchange rates
at the end of the period and are recognized in operations. Non-monetary assets and liabilities of these
operations are remeasured at historical rates in effect when the asset was recognized or the liability was
incurred.
Derivatives
Western Union utilizes derivatives to (a) minimize its exposures related to changes in foreign currency
exchange rates and interest rates and (b) facilitate cross-currency business-to-business payments by writing
derivatives to customers and entering into offsetting derivatives with established financial institution
counterparties, or by holding sufficient foreign currency cash balances to cover those transactions. The
Company recognizes all derivatives in the “Other assets” and “Other liabilities” captions in the accompanying
Consolidated Balance Sheets at their fair value. All cash flows associated with derivatives are included in cash
flows from operating activities in the Consolidated Statements of Cash Flows.
• Cash Flow hedges—Changes in the fair value of derivatives that are designated and qualify as cash
flow hedges are recorded in “Accumulated other comprehensive loss.” Cash flow hedges consist of
foreign currency hedging of forecasted revenues, as well as, from time to time, hedges of anticipated
fixed rate debt issuances. Derivative fair value changes that are captured in “Accumulated other
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THE WESTERN UNION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)