Western Union 2015 Annual Report Download - page 202

THE WESTERN UNION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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Business Combinations
The Company accounts for all business combinations where control over another entity is obtained using the acquisition
method of accounting, which requires that most assets (both tangible and intangible), liabilities (including contingent consideration),
and remaining noncontrolling interests be recognized at fair value at the date of acquisition. The excess of the purchase price over
the fair value of assets less liabilities and noncontrolling interests is recognized as goodwill. Certain adjustments to the assessed
fair values of the assets, liabilities, or noncontrolling interests made subsequent to the acquisition date, but within the measurement
period, which is one year or less, are recorded as adjustments to goodwill. Any adjustments subsequent to the measurement period
are recorded in income. Any cost or equity method interest that the Company holds in the acquired company prior to the acquisition
is remeasured to fair value at acquisition with a resulting gain or loss recognized in income for the difference between fair value
and existing book value. Results of operations of the acquired company are included in the Company's results from the date of the
acquisition forward and include amortization expense arising from acquired intangible assets. The Company expenses all costs as
incurred related to or involved with an acquisition in "Selling, general and administrative" expenses.
Cash and Cash Equivalents
Highly liquid investments (other than those included in settlement assets) with maturities of three months or less at the date
of purchase (that are readily convertible to cash) are considered to be cash equivalents and are stated at cost, which approximates
fair value.
The Company maintains cash and cash equivalent balances, including a portion in money market funds, with a group of
globally diversified banks and financial institutions. The Company limits the concentration of its cash and cash equivalents with
any one institution and regularly reviews investment concentrations and credit worthiness of these 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,
consumer chargebacks and insufficient funds, and other matters the Company identifies in its routine collection monitoring. The
allowance for doubtful accounts was $41.1 million and $37.2 million as of December 31, 2015 and 2014, respectively, and is
recorded in the same Consolidated Balance Sheet caption as the related receivable. During the years ended December 31, 2015,
2014 and 2013, the provision for doubtful accounts (bad debt expense) reflected in the Consolidated Statements of Income was
$60.3 million, $50.7 million and $50.1 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, customers for the value of their 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.
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