First Data 2009 Annual Report Download - page 103

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
In January 2009, the Company adopted new accounting guidance related to noncontrolling interests which
modified reporting for noncontrolling interests (minority interests) in consolidated financial statements. The new
guidance required noncontrolling interests be reported in equity on the balance sheet and establishes a new
framework for recognizing net income or loss and comprehensive income by the controlling interest. Upon
adoption, prior period financial statements were revised to conform to the presentation requirements of the new
guidance.
Effective January 1, 2009, the Company re-aligned the business and began making strategic and operating
decisions with regards to assessing performance and allocating resources based on a new segment structure.
Additionally, beginning in the third quarter of 2009, the Company’s Chief Operating Decision Maker (its Chief
Executive Officer) began evaluating results of the Company’s segments based upon certain revised performance
measures. Segment results for 2008 and 2007 have been revised to reflect the new structure and revised
performance measures. Refer to Note 16 for a description of the segments and these performance measures.
Other amounts in 2008 and 2007 have been adjusted to conform to current year presentation, the largest of which
was the reclassification of certain expenses from “Cost of services” to “Selling, general and administrative”.
The Company sold a merchant acquiring business in Canada as well as a debit and credit card issuing and
acquiring processing business in Austria and Active Business Services, Ltd, all reported within the International
segment, in November 2009, August 2009 and July 2008, respectively, and Peace Software, reported within the
Financial Services segment, in October 2008. The results of divested businesses are excluded from segment
results. The International and Financial Services performance measures have been adjusted for 2009, 2008, and
2007 to exclude the results of divested businesses. Retail and Alliance Services segment performance measures
have been adjusted for 2008 and 2007 to reflect the sale of 12.5% of the Company’s ownership interest in the
Wells Fargo Merchant Services alliance that occurred on December 31, 2008.
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 $27.7 million for the successor year ended
December 31, 2009, $10.9 million for the successor year ended December 31, 2008, $0.9 million for the
successor period from September 25, 2007 through December 31, 2007, and $39.6 million for the predecessor
period from January 1, 2007 through September 24, 2007. Also not included is amortization related to equity
method investments which is netted within the “Equity earnings in affiliates” line of $73.8 million for the
successor year ended December 31, 2009, $179.0 million for the successor year ended December 31, 2008, $58.5
million for the successor period from September 25, 2007 through December 31, 2007, and $24.2 million for the
predecessor period from January 1, 2007 through September 24, 2007.
Revenue Recognition
The majority of the Company’s revenues are comprised of transaction-based fees, which typically constitute
a percentage of dollar volume processed, or a fee per transaction processed, or account on file or some
combination thereof. In limited circumstances, revenue is allocated to the separate units of accounting in a
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