Western Union 2013 Annual Report Download - page 139

2013 FORM 10-K
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As of December 31, 2013, we had $3,172.0 million of goodwill comprising approximately 31% of our total assets, including
$1,947.7 million of goodwill in our Consumer-to-Consumer reporting unit and $996.0 million of goodwill in our Business Solutions
reporting unit. TGBP represents a significant majority of the goodwill related to the Business Solutions reporting unit. For the
Business Solutions reporting unit, a decline in estimated fair value of approximately 15% could occur before triggering an
impairment of goodwill. If we or our reporting units do not generate operating cash flows at levels consistent with our expectations,
we may be required to write down the goodwill on our balance sheet, which could have a significant adverse impact on our financial
condition and results of operations in future periods. See the "Critical Accounting Policies and Estimates" discussion in Part II,
Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operation, for more detail.
We face credit, liquidity and fraud risks from our agents, consumers and businesses that could adversely affect our business,
financial condition and results of operations.
The vast majority of our global funds transfer business is conducted through third-party agents that provide our services to
consumers at their retail locations. These agents sell our services, collect funds from consumers and are required to pay the proceeds
from these transactions to us. As a result, we have credit exposure to our agents. In some countries, our agent networks include
superagents that establish subagent relationships; these agents must collect funds from their subagents in order to pay us. We are
not insured against credit losses, except in certain circumstances related to agent theft or fraud. If an agent becomes insolvent,
files for bankruptcy, commits fraud or otherwise fails to pay money order, money transfer or payment services proceeds to us, we
must nonetheless pay the money order, complete the money transfer or payment services on behalf of the consumer.
The liquidity of our agents is necessary for our business to remain strong and to continue to provide our services. If our agents
fail to settle with us in a timely manner, our liquidity could be affected.
From time to time, we have made, and may in the future make, short-term advances and longer term loans to our agents. These
advances and loans generally are secured by settlement funds payable by us to these agents. However, the failure of these borrowing
agents to repay these advances and loans constitutes a credit risk to us.
In our Business Solutions business, we are also exposed to credit risk relating to foreign currency forward and option contracts
written by us to our customers. The duration of these derivative contracts at inception is generally less than one year. The credit
risk associated with our derivative contracts increases when foreign currency exchange rates move against our customers, possibly
impacting their ability to honor their obligations to deliver currency to us or to maintain appropriate collateral with us. If a customer
becomes insolvent, files for bankruptcy, commits fraud or otherwise fails to pay us for the value of these contracts, we may be
exposed to the value of an offsetting position with a financial institution counterparty.
We offer consumers, primarily in the United States, the ability to transfer money utilizing their bank account or credit or debit
card via the Internet and phone. These transactions have experienced and continue to experience a greater risk of fraud and higher
fraud losses. Additionally, money transfers funded by ACH, or similar methods, are not preauthorized by the sender's bank and
carry the risk that the account may not exist or have sufficient funds to cover the transaction. We apply verification and other tools
to help authenticate transactions and protect against fraud. However, these tools are not always successful in protecting us against
fraud. As the merchant of these transactions, we may bear the financial risk of the full amount sent in some of the fraudulent
transactions. Issuers of credit and debit cards may also incur losses due to fraudulent transactions through our distribution channels
and may elect to block transactions by their cardholders in these channels with or without notice. We may be subject to additional
fees or penalties if the amount of chargebacks exceeds a certain percentage of our transaction volume. Such fees and penalties
escalate over time if we do not take effective action to reduce chargebacks below the threshold, and if chargeback levels are not
ultimately reduced to acceptable levels, our merchant accounts could be suspended or revoked, which would adversely affect our
results of operations.