Discover 2010 Annual Report Download - page 156

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24. Segment Disclosures
The Company’s business activities are managed in two segments: Direct Banking and Payment Services.
•Direct Banking. The Direct Banking segment includes Discover card-branded credit cards issued to individuals and
small businesses on the Discover Network and other consumer products and services, including student loans,
personal loans, prepaid cards and other consumer lending and deposit products offered through the Company’s
Discover Bank subsidiary.
•Payment Services. The Payment Services segment includes PULSE, an automated teller machine, debit and electronic
funds transfer network; Diners Club, a global payments network; and the Company’s third-party issuing business,
which includes credit, debit and prepaid cards issued on the Discover Network by third parties.
The business segment reporting provided to and used by the Company’s chief operating decision maker is prepared
using the following principles and allocation conventions:
• Prior to adoption of Statements No. 166 and 167 on December 1, 2009, segment information was presented on a
managed basis because management considered the performance of the entire managed loan portfolio in
managing the business. A managed basis presentation involved reporting securitized loans with the Company’s
owned loans and reporting the earnings on securitized loans in the same manner as the owned loans instead of as
securitization income. Although similar, a managed basis presentation is not the same as presenting a full
consolidation of the trusts and, therefore, certain information may not be comparable between current and prior
periods, particularly related to net interest income, provision for loan losses and other income. Subsequent to the
consolidation of securitized assets and liabilities in connection with the adoption of Statements No. 166 and 167,
there is no distinction between securitized and non-securitized assets on a GAAP basis. See Note 2: Change in
Accounting Principle for more information.
• Other accounting policies applied to the operating segments are consistent with the accounting policies described in
Note 3: Summary of Significant Accounting Policies.
• Corporate overhead is not allocated between segments; all corporate overhead is included in the Direct Banking
segment.
• Through its operation of the Discover Network, the Direct Banking segment incurs fixed marketing, servicing and
infrastructure costs that are not specifically allocated among the operating segments.
• The assets of the Company are not allocated among the operating segments in the information reviewed by the
Company’s chief operating decision maker.
• Income taxes are not specifically allocated among the operating segments in the information reviewed by the
Company’s chief operating decision maker.
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