First Data 2009 Annual Report Download - page 109

FIRST DATA CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The Company develops software that is used in providing processing services to customers. To a lesser
extent, the Company also develops software to be sold or licensed to customers. Software development costs are
capitalized once technological feasibility of the software has been established. Costs incurred prior to
establishing technological feasibility are expensed as incurred. Technological feasibility is established when the
Company has completed all planning, designing, coding and testing activities that are necessary to determine that
a product can be produced to meet its design specifications, including functions, features and technical
performance requirements. Capitalization of costs ceases when the product is available for general use. Software
development costs are amortized using the straight-line method over the estimated useful life of the software,
which is generally five years. Software values allocated as part of the purchase price allocation are amortized
over three to 10 years.
In addition to capitalized contract and software development costs, other intangibles include copyrights,
patents, acquired software, trademarks and noncompete agreements acquired in business combinations. Other
intangibles, except for the First Data trade name discussed below, are amortized on a straight-line basis over the
length of the contract or benefit period, which generally ranges from three to 25 years. Other intangible
amortization expense (including amortization associated with investments in affiliates) totaled $1,253.5 million
in 2009, $1,306.9 million in 2008, $362.2 million for the successor period from September 25, 2007 through
December 31, 2007, and $375.1 million for the predecessor period from January 1, 2007 through September 24,
2007.
In conjunction with the allocation of the purchase price related to the merger, $603.5 million was allocated
to the First Data trade name. Upon consideration of many factors, including the determination that there are no
legal, regulatory or contractual provisions that limit the useful life of the First Data trade name, the Company
determined that the First Data trade name had an indefinite useful life. The Company also considered the effects
of obsolescence, demand, competition, other economic factors and ability to maintain and protect the trade name
without significant expenditures. The First Data trade name is expected to contribute directly or indirectly to the
future cash flows of the Company for an indefinite period. As an indefinite lived asset, the First Data trade name
will not be amortized but will be reviewed annually for impairment until such time as it is determined to have a
finite life. The First Data trade name was not impaired at December 31, 2009 or 2008.
The following table provides the components of other intangibles (in millions):
As of December 31,
2009
Cost
2009
Accumulated
Amortization
2009
Net of
Accumulated
Amortization
2008
Cost
2008
Accumulated
Amortization
2008
Net of
Accumulated
Amortization
Customer relationships .............. $7,732.6 $(1,723.8) $6,008.8 $6,919.7 $(932.1) $5,987.6
Other intangibles:
Conversion costs ............... $ 57.2 $ (13.7) $ 43.5 $ 31.9 $ (10.0) $ 21.9
Contract costs .................. 145.5 (36.4) 109.1 96.8 (5.8) 91.0
Software ...................... 1,197.0 (544.4) 652.6 1,141.6 (318.5) 823.1
Other ........................ 1,419.7 (103.8) 1,315.9 1,018.4 (38.8) 979.6
Total other intangibles ....... $2,819.4 $ (698.3) $2,121.1 $2,288.7 $(373.1) $1,915.6
The estimated future aggregate amortization expense for existing customer relationships and other
intangibles as of December 31, 2009 is $1,134.0 million in 2010, $1,021.3 million in 2011, $883.3 million in
2012, $789.6 million in 2013, and $749.2 million in 2014.
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