First Data 2007 Annual Report Download - page 97

FIRST DATA CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The estimated future aggregate amortization expense for existing customer relationships and other intangibles as of December 31, 2007 is $1,023.5
million in 2008, $945.9 million in 2009, $884.6 million in 2010, $765.2 million in 2011, and $661.1 million in 2012.
Certain long-lived assets are reviewed for impairment on an annual basis or whenever events indicate that their carrying amount may not be
recoverable. In such reviews, estimated undiscounted future cash flows associated with these assets or operations are compared with their carrying value to
determine if a write-down to fair value (normally measured by the expected present value technique) is required.
Inventory
Inventories are stated at lower of cost or market and consist primarily of POS terminals, forms, envelopes and blank financial paper. The cost of
inventory is determined using average cost for POS terminals and blank financial paper, and first-in first-out ("FIFO") for forms. In connection with the
allocation of the purchase price related to the merger, inventories were carried forward at historical balances as the best estimate of fair value.
Investment Securities
A majority of the Company's settlement assets represent short-term, liquid investments, which are primarily comprised of state and municipal
government obligations. Additionally, the Company maintains various other investments included in the "Other assets" line item of the Consolidated Balance
Sheets which include primarily equity securities. The specific identification method is used to determine the cost basis of securities sold. At December 31,
2007 and 2006, all of the above noted investments were classified as available-for-sale. Unrealized gains and losses on these investments are included as a
separate component of OCI, net of any related tax effect. The Company also has investments in non-marketable equity securities for strategic purposes, which
are included in "Other assets" in the Company's Consolidated Balance Sheets and were carried at cost in the predecessor period and at the allocated fair value
in the successor period as a result of the purchase price allocation related to the merger.
Declines in value that are judged to be other than temporary in nature are recognized in the Consolidated Statements of Income. For public company
investments, the Company's policy is to treat a decline in the investment's quoted market value that has lasted for more than six months as an other than
temporary decline in value. The Company also considers other qualitative and quantitative indicators in judging whether a decline in value is other than
temporary in nature. The Company's policy is the same for investments in non-marketable equity securities; however, their fair values are estimated. In
estimating fair value, market conditions, offering prices, trends of earnings/losses, price multiples, financial position, new financing and other key measures
are considered. The Company believes the estimates result in a reasonable reflection of the fair values of these investments.
Treasury Stock
The Company records treasury stock purchases under the cost method whereby the entire cost of the acquired stock is recorded as treasury stock. The
FIFO method is used on the subsequent reissuance of shares and any resulting gains or losses are credited or charged to retained earnings.
New Accounting Pronouncements
In September 2006, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standard ("SFAS") No. 157, "Fair
Value Measurements". This statement defines fair value, establishes a fair value hierarchy to be used in generally accepted accounting principles and expands
disclosures about fair value measurements. Although this statement does not require any new fair value measurements, in certain cases, its application will
change current practice. SFAS No. 157 will be effective for fiscal years beginning after November 15, 2007 as it relates to fair value measurements of
financial assets and liabilities and for fiscal years beginning after November 15, 2008 for certain non-financial assets and non-financial liabilities that are not
recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). Effective January 1, 2008, the Company will adopt
SFAS No. 157 for all financial assets and liabilities. The effect of adopting this standard is expected to reduce the Company's derivative liabilities by
approximately $13 million as of the date of adoption. The majority of this amount relates to derivatives that have been designated as cash flow hedges for
accounting purposes and, accordingly, the impact will be recorded as a reduction of the unrealized losses in "Other comprehensive income" to the extent the
hedges are effective. The amount of adjustment related to derivatives not designated as accounting hedges is immaterial and will be reflected as a gain in the
"Other income (expense)" line item in the Consolidated Statements of Income upon adoption. The Company is currently evaluating the January 1, 2009
impact of adopting the new statement on fair value measurements for non-financial assets and non-financial liabilities.
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