First Data 2008 Annual Report Download - page 114

FIRST DATA CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Revenue from check verification, settlement and guarantee services is recognized at the time of sale less the fair value of the guarantee. The fair value
of the guarantee is deferred until the later of the Company being called upon to honor the guarantee or the expiration of the guarantee. Check verification fees
generally are a fixed amount per transaction while check guarantee fees generally are a percentage of the check amount.
The purchase and sale of merchant contracts is an ordinary element of the Company's Merchant Services and International businesses, and therefore, the
gains from selling these revenue-generating assets are included within the "Product sales and other" component of revenues.
Fees based on cardholder accounts on file, both active and inactive, are recognized after the requisite services or period has occurred. Fees for PIN-debit
transactions where the Company is the debit card processor for the financial institution are recognized on a per transaction basis. Revenues for output services
are derived primarily on a per piece basis and consist of fees for the production, materials and postage related to mailing finished products.
Software licensing revenue, which is reported in the "Product sales and other" line item of the Consolidated Statements of Operations, is not recognized
until each of the following four criteria are met: evidence of an agreement exists, delivery and acceptance has occurred or services have been rendered, the
selling price is fixed or determinable, and collection of the selling price is reasonably assured.
The sale and leasing of point-of-sale devices ("terminals") are also reported in "Product Sales and Other". Revenue for terminals sold or sold under a
sales-type lease transaction is recognized when the following four criteria are met: evidence of an agreement exists, delivery has occurred, the selling price or
minimum lease payments are fixed or determinable, and collection of the selling price or minimum lease payments is reasonably assured. Revenue for
operating leases is recognized on a straight-line basis over the lease term.
Services not specifically described above are generally transaction based fees that are recognized at the time the transactions are processed or
programming services that are recorded as work is performed.
Stock-Based Compensation
Stock-based compensation to employees is measured at the grant date fair values of the respective stock options and restricted stock awards and
expensed over the requisite service periods. An estimate of forfeitures is applied when calculating compensation expense. The Company recognizes
compensation cost on awards with graded vesting on a straight-line basis over the requisite service period for the entire award. In conjunction with the merger,
all predecessor stock-based compensation plans were terminated and vesting provisions were accelerated and all unrecognized stock-based compensation was
recognized in the predecessor period. The Company established a new stock-based compensation plan in October 2007. Refer to Note 15 for additional
discussion regarding details of the Company's stock-based compensation plan.
Foreign Currency Translation
The U.S. dollar is the functional currency for most of the Company's U.S. based businesses and certain foreign based businesses. Significant operations
with a local currency as their functional currency include operations in the United Kingdom, Australia, Germany, Greece and Argentina. Foreign currency
denominated assets and liabilities for these units and other less significant operations are translated into U.S. dollars based on exchange rates prevailing at the
end of the period, and revenues and expenses are translated at average exchange rates during the period. The effects of foreign exchange gains and losses
arising from the translation of assets and liabilities of those entities where the functional currency is not the U.S. dollar are included as a component of
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