Western Union 2011 Annual Report Download - page 87

Description Judgments and Uncertainties
Effect if Actual Results Differ from
Assumptions
Restructuring and Related
Expenses
We have engaged in restructuring
actions and activities associated
with productivity improvement
initiatives and expense reduction
measures. We also evaluate
impairment issues associated with
restructuring activities.
Restructuring and related expenses
consist of direct and incremental
costs associated with restructuring
and related activities, including
severance, outplacement and other
employee related benefits; facility
closure and migration of our 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.
These costs represent management’s
best estimate, until all such amounts
are paid and settled. As such, these
costs require assumptions about the
activities that may change over time.
The decision to include a cost in
the restructuring disclosure
requires an assessment of whether
the cost is direct and incremental
to the productivity improvement
initiatives and expense reduction
measures. This assessment can
require judgment depending on the
nature of the cost.
The timing of recording these costs
was determined by the applicable
accounting guidance. This
judgment significantly impacted
the timing of the recognition of
restructuring and related expenses
on a quarterly basis and between
the years ended December 31,
2010 and 2011.
The restructuring and related
expenses are evaluated
periodically to determine if an
adjustment is required. Should the
actual amounts differ from our
estimates, the amount of the
restructuring and related expenses
could be materially impacted.
For the years ended December 31,
2011 and 2010, we incurred $46.8
million and $59.5 million of
restructuring and related expenses,
respectively. $13.9 million of these
expenses remained unpaid as of
December 31, 2011.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risks arising from changes in market rates and prices, including changes in foreign
currency exchange rates and interest rates and credit risk related to our agents and customers. A risk management
program is in place to manage these risks.
Foreign Currency Exchange Rates
We provide consumer-to-consumer money transfer services in more than 200 countries and territories. We
manage foreign exchange risk through the structure of the business and an active risk management process. We
settle with the vast majority of our agents in United States dollars or euros. However, in certain circumstances,
we settle in other currencies. We typically require the agent to obtain local currency to pay recipients; thus, we
generally are not reliant on international currency markets to obtain and pay illiquid currencies. The foreign
currency exposure that does exist is limited by the fact that the majority of transactions are paid within 24 hours
after they are initiated. To mitigate this risk further, we enter into short-term foreign currency forward contracts,
generally with maturities from a few days up to one month, to offset foreign exchange rate fluctuations between
transaction initiation and settlement. We also utilize foreign currency forward contracts, typically with terms of
less than one year at inception, to offset foreign exchange rate fluctuations on certain foreign currency
denominated cash positions and intercompany loans. In certain consumer money transfer and global business
payments transactions involving different send and receive currencies, we generate revenue based on the
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