First Data 2009 Annual Report Download - page 233

Chase Paymentech
NOTES TO COMBINED FINANCIAL STATEMENTS
For the years ended December 31, 2007 and 2006 and
the year ended December 31, 2005 (unaudited) (Continued)
Concentrations of Credit Risk
The Company maintains cash and cash equivalents with financial institutions in excess of federally insured
levels. The Company believes that the concentration of credit risk with respect to these balances is minimal due
to the credit standing of the financial institutions. Concentrations of credit risk with respect to accounts
receivable are considered minimal. Amounts receivable are generally deducted from customers’ accounts either
monthly or as debit and credit card transactions are processed. No single customer accounted for more than ten
percent of receivables at December 31, 2007 or 2006, or of revenue for the years ended December 31, 2007,
2006, or 2005.
Property and Equipment
Property and equipment are carried at cost, net of accumulated depreciation and amortization. Depreciation
for furniture and equipment is recorded on a straight-line basis over periods generally ranging from three to five
years. Leasehold improvements are amortized over the lesser of the economic useful life of the improvement or
the term of the lease. The Company capitalizes computer software costs in accordance with Statement of Position
No. 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use. These costs
are amortized on a straight-line basis over the period of benefit ranging from three to five years.
Advertising
Advertising costs are expensed as incurred. For the years ended December 31, 2007, 2006, and 2005, the
Company incurred $5.2 million, $5.3 million, and $4.1 million in advertising expense, respectively.
Goodwill and Intangible Assets
Goodwill represents the excess of purchase price over identifiable assets acquired, less liabilities assumed
from business combinations. The Company’s annual impairment tests did not identify any impairment in 2007,
2006, or 2005.
Intangible assets primarily consist of purchased merchant portfolios, technology-based intangible assets, and
non-compete/referral agreements. These intangible assets are amortized over their estimated useful lives and are
subject to impairment testing whenever events occur that would affect the recoverability of the asset. The
Company amortizes these intangible assets, primarily on a straight-line basis, over the estimated period to be
benefited. On January 1, 2006, a change in the estimated amortization period for purchased merchant portfolios
occurred (as discussed in Note 7). These periods range from four to ten years for the years ended December 31,
2007 and 2006.
Other Assets
Other assets consist primarily of deferred charges, company-owned life insurance (COLI) policies held in
trust for the Company’s deferred compensation plan and deferred contract incentives. Deferred charges represent
contributions for services paid on the Company’s behalf, which are amortized on a straight-line basis over the
period that the services are to be performed. COLI assets are carried at the policies’ respective cash surrender
values. Deferred contract incentives represent initial payments to merchants for new contracts and contract
renewals, which are capitalized to the extent recoverable through future operations and are amortized over the
term of the contract as a reduction of the associated revenue.
233