Western Union 2012 Annual Report Download - page 97

THE WESTERN UNION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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The Company maintains cash and cash equivalent balances with various financial institutions, including a substantial portion
in money market funds. The Company limits the concentration of its cash and cash equivalents with any one institution. The
Company regularly reviews investment concentrations and credit worthiness of these institutions, and has relationships with a
globally diversified list of banks and financial institutions.
Allowance for Doubtful Accounts
The Company records an allowance for doubtful accounts when it is probable that the related receivable balance will not be
collected based on its history of collection experience, known collection issues, such as agent suspensions and bankruptcies, and
other matters the Company identifies in its routine collection monitoring. The allowance for doubtful accounts was $46.8 million
and $28.5 million as of December 31, 2012 and 2011, respectively, and is recorded in the same Consolidated Balance Sheet caption
as the related receivable. During the years ended December 31, 2012, 2011 and 2010, the provision for doubtful accounts (bad
debt expense) reflected in the Consolidated Statements of Income was $44.9 million, $24.3 million and $19.1 million, respectively.
Settlement Assets and Obligations
Settlement assets represent funds received or to be received from agents for unsettled money transfers, money orders and
consumer payments. The Company records corresponding settlement obligations relating to amounts payable under money
transfers, money orders and consumer payment service arrangements. Settlement assets and obligations also include amounts
receivable from and payable to businesses for the value of customer cross-currency payment transactions related to the Business
Solutions segment.
Settlement assets consist of cash and cash equivalents, receivables from selling agents and Business Solutions customers, and
investment securities. Cash received by Western Union agents generally becomes available to the Company within one week after
initial receipt by the agent. Cash equivalents consist of short-term time deposits, commercial paper and other highly liquid
investments. Receivables from selling agents represent funds collected by such agents, but in transit to the Company. Western
Union has a large and diverse agent base, thereby reducing the credit risk of the Company from any one agent. In addition, the
Company performs ongoing credit evaluations of its agents' financial condition and credit worthiness. See Note 7 for information
concerning the Company's investment securities.
Receivables from Business Solutions customers arise from cross-currency payment transactions in the Business Solutions
segment. Receivables occur when funds have been paid out to a beneficiary but not yet received from the customer. Aside from
these receivables, the credit risk associated with spot foreign currency exchange contracts is largely mitigated, as in most cases
the Company requires the receipt of funds from customers before releasing the associated cross-currency payment.
Settlement obligations consist of money transfer, money order and payment service payables and payables to agents. Money
transfer payables represent amounts to be paid to transferees when they request their funds. Money order payables represent
amounts not yet presented for payment. Most agents typically settle with transferees first and then obtain reimbursement from the
Company. Payment service payables represent amounts to be paid to utility companies, auto finance companies, mortgage servicers,
financial service providers, government agencies and others. Due to the agent funding and settlement process, payables to agents
represent amounts due to agents for money transfers that have been settled with transferees.