First Data 2009 Annual Report Download - page 107

FIRST DATA CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2008, the Company had accrued warranty balances of $16.6 million and $15.2 million, and accrued recovery
balances of $32.5 million and $45.1 million, respectively. Accrued warranties are included in “Other current
liabilities” and accrued recoveries are included in “Accounts receivable” in the Consolidated Balance Sheets. The
maximum potential future payments under the guarantees were estimated by the Company to be approximately
$1.6 billion at December 31, 2009 which represented an estimate of the total uncleared checks at that time.
Income Taxes
The Company and its domestic subsidiaries file a consolidated U.S. income tax return with its parent
“Holdings” as defined in Note 2. The Company’s foreign operations file income tax returns in their local
jurisdictions. Income taxes are computed in accordance with current accounting guidance and reflect the net tax
effects of temporary differences between the financial reporting carrying amounts of assets and liabilities and the
corresponding income tax amounts. The Company has deferred tax assets and liabilities and maintains valuation
allowances where it is more likely than not that all or a portion of deferred tax assets will not be realized. To the
extent the Company determines that it will not realize the benefit of some or all of its deferred tax assets, then
these deferred tax assets will be adjusted through the Company’s provision for income taxes in the period in
which this determination is made.
The Company recognizes the tax benefits from uncertain tax positions only when it is more likely than not,
based on the technical merits of the position, that the tax position will be sustained upon examination, including
the resolution of any related appeals or litigation. The tax benefits recognized in the consolidated financial
statements from such a position are measured as the largest benefit that has a greater than fifty percent likelihood
of being realized upon ultimate resolution.
Discontinued Operations
Losses from discontinued operations for the predecessor period from January 1, 2007 through
September 24, 2007 relate to certain tax account true-ups and discrete tax items related to Western Union.
Cash and Cash Equivalents
Investments (other than those included in settlement assets) with original maturities of three months or less
(that are readily convertible to cash) are considered to be cash equivalents and are stated at cost, which
approximates market value. Cash and cash equivalents that were restricted from use due to regulatory
requirements are included in “Other long-term assets” in the Consolidated Balance Sheets and were immaterial at
December 31, 2009 and 2008.
Accounts Receivable
Accounts receivable balances are stated net of allowance for doubtful accounts. Historically, the Company
has not encountered significant write-offs. The Company records allowances for doubtful accounts when it is
probable that the accounts receivable balance will not be collected. Long-term accounts receivable balances are
included in “Other long-term assets” in the Consolidated Balance Sheets.
Property and Equipment
Property and equipment are stated at fair value for assets in place at the time of the merger or cost less
accumulated depreciation. The allocation of the merger purchase price to fixed assets was finalized in the third
quarter 2008. Depreciation expense is computed using the straight-line method over the lesser of the estimated
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