Western Union 2011 Annual Report Download - page 108

THE WESTERN UNION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
writes to its customers, and typically hedges the net exposure through offsetting contracts with established
financial institution counterparties (economic hedge contract) as part of a broader foreign currency
portfolio, including significant spot exchanges of currency in addition to forwards and options. The
changes in fair value related to these contracts are recorded in “Foreign exchange revenues.”
The fair value of the Company’s derivatives is derived from standardized models that use market based inputs
(e.g., forward prices for foreign currency).
The details of each designated hedging relationship are formally documented at the inception of the
arrangement, including the risk management objective, hedging strategy, hedged item, specific risks being
hedged, the derivative instrument, how effectiveness is being assessed and how ineffectiveness, if any, will be
measured. The derivative must be highly effective in offsetting the changes in cash flows or fair value of the
hedged item, and effectiveness is evaluated quarterly on a retrospective and prospective basis.
Stock-Based Compensation
The Company currently has a stock-based compensation plan that provides for grants of Western Union stock
options, restricted stock awards and restricted stock units to employees who perform services for the Company.
In addition, the Company has a stock-based compensation plan that provides for grants of Western Union stock
options and stock unit awards to non-employee directors of the Company. Prior to the Spin-off, employees of
Western Union participated in First Data’s stock-based compensation plans.
All stock-based compensation to employees is required to be measured at fair value and expensed over the
requisite service period and also requires an estimate of forfeitures when calculating compensation expense. The
Company recognizes compensation expense on awards on a straight-line basis over the requisite service period
for the entire award. Refer to Note 16 for additional discussion regarding details of the Company’s stock-based
compensation plans.
Restructuring and Related Expenses
The Company records severance-related expenses once they are both probable and estimable in accordance
with the provisions of the applicable accounting guidance for severance provided under an ongoing benefit
arrangement. One-time, involuntary benefit arrangements and other exit costs are generally recognized when the
liability is incurred. Expenses arising under the Company’s defined benefit pension plans from curtailing future
service of employees participating in the plans and providing enhanced benefits are recognized in earnings when
it is probable and reasonably estimable. The Company also evaluates impairment issues associated with
restructuring activities when the carrying amount of the assets may not be fully recoverable, in accordance with
the appropriate accounting guidance. Restructuring and related expenses consist of direct and incremental
expenses associated with restructuring and related activities, including severance, outplacement and other
employee related benefits; facility closure and migration of the Company’s IT infrastructure; and other expenses
related to the relocation of various operations to new or existing Company facilities and third-party providers,
including hiring, training, relocation, travel and professional fees. Also included in the facility closure expenses
are non-cash expenses related to fixed asset and leasehold improvement write-offs and accelerated depreciation
at impacted facilities. For more information on the Company’s restructuring and related expenses, see Note 4.
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