First Data 2007 Annual Report Download - page 192

Chase Paymentech
NOTES TO COMBINED FINANCIAL STATEMENTS – CONTINUED
For the years ended December 31, 2007 and 2006 and
the year ended December 31, 2005 (unaudited)
basis. Certain eliminations of the Company's intercompany activities have been reclassified to each of the appropriate components of owners' equity in the
Company's combined statements of changes in owners' equity. Although these reclassifications do not affect owners' equity in total, the components of
owners' equity differ from previously filed documents, which presented these eliminations separately. These reclassifications did not impact the combined
balance sheets and statements of income and comprehensive income. The Company's deferred contract incentives have been reclassified from current to non-
current assets and certain liabilities, primarily related to the Company's deferred compensation, long-term incentive, and pension benefit plans, have been
reclassified from current to non-current liabilities in the Company's combined balance sheets. The change in classification to non-current reflects the long-
term nature of the respective asset or liability. As a result, total current assets and total current liabilities differ from previously filed documents. These
reclassifications did not impact total assets, total liabilities or the combined statements of income and comprehensive income. Management does not believe
that these reclassifications are material to the combined financial statements.
Use of Estimates
The preparation of combined financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the
amounts reported on the combined financial statements and accompanying notes. Actual results could differ from those estimates.
Foreign Currency Translation
The Company's Canadian operation uses its local currency, the Canadian dollar (CAD), as its functional currency. The assets and liabilities related to the
Canadian operations in the accompanying combined balance sheets are translated at period end exchange rates. Resulting translation adjustments are reported
as a separate component of owners' equity in accumulated other comprehensive income. All income and expense items are translated using the average
exchange rate for the period. Net transaction gains and losses are included in earnings. Unless otherwise stated, amounts presented herein related to the
Canadian operations are in U.S. dollars.
Cash and Cash Equivalents
The Company considers cash, certificates of deposit, money market funds, and all highly liquid investments with original maturities of three months or less
when purchased to be cash equivalents.
Receivables Related to Merchant Processing
Receivables related to merchant processing represent amounts due from card brands for transactions that have been processed.
Marketable and other securities
The Company has investments in marketable securities, as well as investments in non-marketable equity securities. Investments in marketable securities are
classified as available-for-sale and consist of government, government-backed, corporate debt securities, and short term bond mutual funds. Available-for-sale
securities are stated at fair value based on quoted market prices, with unrealized gains or losses on the securities, net of any related tax effects, recorded as a
separate component of comprehensive income. The cost basis of debt securities is adjusted for the amortization of premiums and accretion of discounts to
maturity. Amortization and accretion, as well as interest and dividend income earned, and realized gains and losses on sales of securities are recorded in
interest and other income. Realized gains and losses are derived using the average cost method for determining the cost of securities sold. A decline in market
value of any available-for-sale security below cost that is deemed to be other-than-temporary results in an impairment charge to earnings, and a new cost basis
for the security is established.
Investments in non-marketable equity securities are accounted for under the cost method as such investments do not meet the equity method criteria. The
Company assesses the potential for impairments to cost method investments when impairment indicators are present. Any resulting impairment that is deemed
other-than-temporary is charged to earnings.
Concentrations of Credit Risk
The Company maintains cash and cash equivalents with financial institutions in excess of federally insured levels. The Company believes that the
concentration of credit risk with respect to these balances is minimal due to the credit standing of the financial institutions. Concentrations of credit risk with
respect to accounts receivable are considered minimal. Amounts receivable are generally deducted from customers' accounts either monthly or as debit and
credit card transactions are processed. No single customer accounted for more than ten percent of receivables at December 31, 2007 or 2006, or of revenue for
the years ended December 31, 2007, 2006, or 2005.
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