Western Union 2011 Annual Report Download - page 100

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THE WESTERN UNION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(the “Spin-off”). Effective on September 29, 2006, First Data completed the separation and the distribution of
these businesses by distributing The Western Union Company common stock to First Data shareholders (the
“Distribution”). Prior to the Distribution, the Company had been a segment of First Data.
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 the Company’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
The Company consolidates financial results when it has both the power to direct the activities of an entity that
most significantly impact the entity’s economic performance and the ability to absorb losses or the right to
receive benefits of the entity that could potentially be significant to the entity. The Company utilizes the equity
method of accounting when it is able to exercise significant influence over the entity’s operations, which
generally occurs when the Company 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, 2011, 2010 and 2009, there were 17.1 million, 34.0 million and 37.5 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.
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