First Data 2008 Annual Report Download - page 112

FIRST DATA CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make
estimates and assumptions that affect the amounts reported in the Consolidated Financial Statements and accompanying notes. Actual results could differ from
those estimates.
Presentation
The Company's Consolidated Balance Sheet presentation has historically been unclassified due to the short-term nature of its settlement obligations
contrasted with the Company's ability to invest cash awaiting settlement in long-term investment securities. The Company repositioned the majority of its
investment portfolio associated with cash awaiting settlement from long-term investments to short-term investments. As a result of the repositioning of the
portfolio such that a majority of the settlement assets and all settlement liabilities are short-term, the Company has changed to a classified balance sheet in
2008. The Consolidated Balance Sheet as of December 31, 2007 has been revised to conform to this presentation.
A new Chief Executive Officer, the Company's chief operating decision maker ("CODM"), was appointed as a result of the September 24, 2007 merger
with an affiliate of KKR. In connection with this change in leadership, changes were made to the Company's senior management and organization of the
business. Effective January 1, 2008, the Company's new Chief Executive Officer began making strategic and operating decisions with regards to assessing
performance and allocating resources based on a new segment structure. Segment results for 2007 and 2006 have been revised to reflect the new structure. In
connection with this segment realignment, the Company also reclassified certain transaction and processing service fees revenue components in the
Consolidated Statements of Operations, primarily the prepaid business from "Merchant related services" to "Other services" and the debit network business
from "Merchant related services" to "Card services". Additionally, consolidated expenses for 2007 and 2006 have been revised to present certain depreciation
and amortization amounts as a separate component of expenses.
Effective January 1, 2009, the CODM further strategically re-aligned the business and a new segment structure was implemented. This annual report on
Form 10-K does not reflect the changes made in 2009. Refer to Note 17 for a description of the segments.
The Company sold its ownership interests in Active Business Services, Ltd ("Active"), reported within the International segment, in July 2008 and
Peace Software ("Peace"), reported within the Financial Services segment, in October 2008. Revenue and operating profit associated with Active and Peace
are excluded from segment results. The International and Financial Services segment revenue and operating profit were adjusted for 2007 and 2006 to exclude
the results of Active and Peace.
Depreciation and amortization presented as a separate line item on the Company's Consolidated Statements of Operations does not include amortization
of initial payments for new contracts which is recorded as a contra-revenue within "Transaction and processing service fees" of $10.9 million for the year
ended December 31, 2008, $0.9 million for the successor period from September 25, 2007 through December 31, 2007, $39.6 million for the predecessor
period from January 1, 2007 through September 24, 2007, and $51.9 million for the year ended December 31, 2006. Also not included is amortization related
to equity method investments which is netted within the "Equity earnings in affiliates" line of $179.0 million for the year ended December 31, 2008, $58.5
million for the successor period from September 25, 2007 through December 31, 2007, $24.2 million for the predecessor period from January 1, 2007 through
September 24, 2007 and $29.2 million for the year ended December 31, 2006.
111