Western Union 2009 Annual Report Download - page 99

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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 make mortgage
payments based on a customized payment program. 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, generally 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, 2009, 2008
and 2007.
Other Intangible Assets
Other intangible assets primarily consist of contract costs (primarily amounts paid to agents in connection
with establishing and renewing long-term contracts), acquired contracts and software. Other intangible assets
are amortized on a straight-line basis over the length of the contract or benefit periods. Included in “Cost of
services” in the Consolidated Statements of Income is amortization expense of approximately $98.3 million,
$82.3 million and $74.8 million for the years ended December 31, 2009, 2008 and 2007, respectively.
The Company capitalizes initial payments for new and renewed agent contracts to the extent recoverable
through future operations 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.
Acquired contracts include customer and contractual relationships and networks of subagents that are
recognized in connection with our acquisitions.
The Company develops software that is used in providing services. Software development costs are
capitalized once technological feasibility of the software has been established. Costs incurred prior to
establishing technological 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.
85
THE WESTERN UNION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)