First Data 2009 Annual Report Download - page 104

FIRST DATA CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
multiple element transaction based on relative fair values, provided each element has stand alone value to the
customer, the fair value of any undelivered items can be readily determined, and delivery of any undelivered
items is probable and substantially within the Company’s control.
The official check and money order services and merchant acquiring business generate revenue through the
ability to invest funds pending settlement. With respect to official checks, IPS pays some of its agents
commissions based on short-term variable interest rates and the balance of outstanding official checks
attributable to the individual agent. IPS nets the commissions paid to agents against the revenues it earns from its
investments. Gains and losses associated with the above noted investments are recognized in revenue.
In the case of merchant contracts that the Company owns and manages, revenue is primarily comprised of
fees charged to the merchant, net of interchange and assessments charged by the credit card associations, and is
recognized at the time of sale. The fees charged to the merchant are a percentage of the credit card and signature
based debit card transaction’s dollar value, a fixed amount or a combination of the two. Personal identification
number based debit (“PIN-debit”) network fees are recognized in “Reimbursable debit network fees, postage and
other” revenues and expenses in the Consolidated Statements of Operations. STAR network access fees charged
to merchants are assessed on a per transaction basis.
Interchange fees and assessments charged by credit card associations to the Company’s consolidated
subsidiaries and network fees related to PIN-debit transactions charged by debit networks are as follows (in
millions):
Successor Predecessor
Year ended December 31,
Period from
September 25,
2007
through
December 31,
2007
Period from
January 1,
2007
through
September 24,
20072009 2008
Interchange fees and assessments .......... $14,325.2 $9,186.9 $2,129.8 $5,241.9
Debit network fees ...................... 2,091.9 1,351.7 303.1 719.8
The Company charges processing fees to its merchant alliances. In situations where an alliance is accounted
for under the equity method, the Company’s consolidated revenues include the processing fees charged to the
alliance, as presented on the face of the Consolidated Statements of Operations.
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 Retail and Alliance
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.
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