Western Union 2009 Annual Report Download - page 97

of the acquired company are included in the Company’s results from the date of the acquisition forward and
includes amortization expense arising from acquired intangible assets. Effective January 1, 2009, the Company
expenses all costs as incurred related to or involved with an acquisition in “Selling, general and
administrative” expenses. Previously, such amounts were capitalized as part of the acquisition.
Cash and Cash Equivalents
Highly liquid investments (other than those included in settlement assets) with maturities of three months
or less at the date of purchase (that are readily convertible to cash), are considered to be cash equivalents and
are stated at cost, which approximates market value.
Western Union maintains cash and cash equivalent balances with various financial institutions, including
a substantial portion in money market funds. Western Union limits the concentration of its cash and cash
equivalents with any one institution; however, such balances often exceed United States federal deposit
insurance limits. Western Union regularly reviews investment concentrations and credit worthiness of these
institutions, and has relationships with a globally diversified list of banks and financial institutions.
Allowance for Doubtful Accounts
Western Union records an allowance for doubtful accounts when it is probable that the related receivable
balance will not be collected based on its history of collection experience, known collection issues, such as
agent suspensions and bankruptcies, and other matters the Company identifies in its routine collection
monitoring. The allowance for doubtful accounts was $33.7 million and $21.6 million at December 31, 2009
and 2008, respectively, and is recorded in the same Consolidated Balance Sheet caption as the related
receivable. During the years ended December 31, 2009, 2008 and 2007, the provision for doubtful accounts
(bad debt expense) reflected in the Consolidated Statements of Income was $36.2 million, $26.6 million and
$23.5 million, respectively.
Settlement Assets and Obligations
Settlement assets represent funds received or to be received from agents for unsettled money transfers,
money orders and consumer payments. Western Union records corresponding settlement obligations relating to
amounts payable under money transfers, money orders and consumer payment service arrangements.
Settlement assets and obligations also include amounts receivable from and payable to businesses for the value
of customer cross-currency payment transactions related to the global business payments segment.
Settlement assets consist of cash and cash equivalents, receivables from selling agents and
business-to-business customers and investment securities. Cash received by Western Union agents generally
becomes available to Western Union within one week after initial receipt by the agent. Cash equivalents
consist of short-term time deposits, commercial paper and other highly liquid investments. Receivables from
selling agents represent funds collected by such agents, but in transit to Western Union. Western Union has a
large and diverse agent base, thereby reducing the credit risk of the Company from any one agent. In addition,
Western Union performs ongoing credit evaluations of its agents’ financial condition and credit worthiness.
Receivables from business-to-business customers arise from cross-currency payment transactions in the
global business payments segment. Receivables (for currency to be received) and payables (for the cross-
currency payments to be made) are recognized at trade date for these transactions. The credit risk arising from
these spot foreign currency exchange contracts is largely mitigated, as in most cases Custom House requires
the receipt of funds from customers before releasing the associated cross-currency payment.
Settlement obligations consist of money transfer, money order and payment service payables and payables
to agents. Money transfer payables represent amounts to be paid to transferees when they request their funds.
Money order payables represent amounts not yet presented for payment. Most agents typically settle with
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THE WESTERN UNION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)