Western Union 2009 Annual Report Download - page 95

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Basis of Presentation
The financial statements in this Annual Report on Form 10-K are presented on a consolidated basis and
include the accounts of the Company and its majority-owned subsidiaries. All significant intercompany
transactions and accounts have been eliminated.
Consistent with industry practice, the accompanying Consolidated Balance Sheets are unclassified due to
the short-term nature of Western Union’s settlement obligations contrasted with the Company’s ability to invest
cash awaiting settlement in long-term investment securities.
2. Summary of Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the
United States of America (“GAAP”) requires management to make estimates and assumptions that affect the
amounts reported in the financial statements and accompanying notes. Actual results could differ from these
estimates.
Principles of Consolidation
Western Union consolidates financial results when it will absorb a majority of an entity’s expected losses
or residual returns or when it has the ability to exert control over the entity. Control is normally established
when ownership interests exceed 50% in an entity. Western Union utilizes the equity method of accounting
when it is able to exercise significant influence over the entity’s operations, which generally occurs when
Western Union has an ownership interest of between 20% and 50% in an entity.
Earnings Per Share
The calculation of basic earnings per share is computed by dividing net income available to common
stockholders by the weighted-average number of shares of common stock outstanding for the period. Unvested
shares of restricted stock are excluded from basic shares outstanding. Diluted earnings per share reflects the
potential dilution that could occur if outstanding stock options at the presented dates are exercised and shares
of restricted stock have vested, using the treasury stock method. The treasury stock method assumes proceeds
from the exercise price of stock options, the unamortized compensation expense and assumed tax benefits of
options and restricted stock are available to acquire shares at an average market price throughout the year, and
therefore, reduce the dilutive effect.
As of December 31, 2009, 2008 and 2007, there were 37.5 million, 8.0 million and 10.4 million,
respectively, of outstanding options to purchase shares of Western Union stock excluded from the diluted
earnings per share calculation, as their effect was anti-dilutive. During the year ended December 31, 2009, the
average market price of the Company’s common stock was lower than the exercise price for most of its
outstanding options, resulting in higher anti-dilutive shares than in the comparable prior periods.
The following table provides the calculation of diluted weighted-average shares outstanding (in millions):
2009 2008 2007
For the Year Ended
December 31,
Basic weighted-average shares outstanding ................................ 698.9 730.1 760.2
Common stock equivalents ........................................... 2.1 8.1 12.7
Diluted weighted-average shares outstanding . . ............................ 701.0 738.2 772.9
81
THE WESTERN UNION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)