Western Union 2010 Annual Report Download - page 123

Risk-free interest rate—The risk-free rate for stock options granted during the period is determined by using a
United States Treasury rate for the period that coincided with the expected terms listed above.
The assumptions used to calculate the fair value of options granted will be evaluated and revised, as necessary, to
reflect market conditions and the Company’s historical experience and future expectations. The calculated fair value
is recognized as compensation cost in the Company’s financial statements over the requisite service period of the
entire award. Compensation cost is recognized only for those options expected to vest, with forfeitures estimated at
the date of grant and evaluated and adjusted periodically to reflect the Company’s historical experience and future
expectations. Any change in the forfeiture assumption will be accounted for as a change in estimate, with the
cumulative effect of the change on periods previously reported being reflected in the financial statements of the
period in which the change is made. In the future, as more historical data is available to calculate the volatility of
Western Union stock and the actual terms Western Union employees hold options, expected volatility and expected
term may change which could change the grant-date fair value of future stock option awards and, ultimately, the
recorded compensation expense.
17. Segments
As previously described in Note 1, the Company classifies its businesses into two reportable segments:
consumer-to-consumer and global business payments. Operating segments are defined as components of an
enterprise that engage in business activities, about which separate financial information is available that is evaluated
regularly by the Company’s CODM in deciding where to allocate resources and in assessing performance.
The consumer-to-consumer reporting segment is viewed as one global network where a money transfer can be
sent from one location to another, around the world. The segment consists of three regions, which primarily
coordinate agent network management and marketing activities. The CODM makes decisions regarding resource
allocation and monitors performance based on specific corridors within and across these regions, but also reviews
total revenue and operating profit of each region. These regions frequently interact on transactions with consumers
and share processes, systems and licenses, thereby constituting one global consumer-to-consumer money transfer
network. The regions and corridors generally offer the same services distributed by the same agent network, have
the same types of customers, are subject to similar regulatory requirements, are processed on the same system and
have similar economic characteristics, allowing the geographic regions to be aggregated into one reporting segment.
The global business payments segment processes payments from consumers or businesses to other businesses.
The results of the Company’s existing consumer-to-business operations as well as the acquired Custom House
business have been combined in this segment as both are focused on facilitating payments. For further information
on Custom House, now referred to as Western Union Business Solutions, see Note 4.
All businesses that have not been classified into consumer-to-consumer or global business payments are reported
as “Other.” These businesses primarily include the Company’s money order services businesses.
The Company’s reportable segments are reviewed separately below because each reportable segment represents a
strategic business unit that offers different products and serves different markets. The business segment
measurements provided to, and evaluated by, the Company’s CODM are computed in accordance with the
following principles:
• The accounting policies of the reportable segments are the same as those described in the summary of
significant accounting policies.
• Corporate and other overhead is allocated to the segments primarily based on a percentage of the segments’
revenue compared to total revenue.
• Expenses incurred in connection with mergers and acquisitions are included in “Other.”
• Restructuring and related expenses of $59.5 million and $82.9 million for the years ended December 31, 2010
and 2008, respectively, were not allocated to the segments. The Company did not incur any material
restructuring and related expenses in the year ended December 31, 2009. While these items were
identifiable to the Company’s segments, they were not included in the measurement of segment operating
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