First Data 2009 Annual Report Download - page 234

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)
Liabilities Related to Merchant Processing
Liabilities related to merchant processing primarily represent payables to merchants for transactions that
have been processed.
Accrued Assessments
Accrued assessments represent fees payable to card brands for debit and credit card transactions that have
been processed.
Other Liabilities
Other liabilities consist primarily of accrued liabilities for employee benefit plans, including the defined
benefit pension plan, Supplemental Executive Retirement Plan (SERP), deferred compensation plan and long-
term incentive plan. The Company adopted SFAS No. 158, Employers’ Accounting for Defined Benefit Pension
and Other Postretirement Plans—an amendment of FASB Statements No. 87, 88, 106, and 132(R) (SFAS 158) as
of December 31, 2006 for its pension plan and SERP. SFAS 158 requires a company to recognize the funded
status of a benefit plan as an asset or liability in its statement of financial position and to recognize previously
unrecognized gains/(losses) and prior service costs as components of comprehensive income, net of tax. The
effect of applying the recognition provisions of SFAS 158 to the Company’s pension plan was a $28 thousand
(pre-tax) decrease in intangible assets related to unrecognized prior service costs and a corresponding increase in
accumulated other comprehensive income on the combined balance sheet as of December 31, 2006.
Minority Interest
Minority interest represents the minority stockholders’ proportionate share of the equity and earnings of
Paymentech, Inc. Minority interest represented 0.2%, 0.3% and 0.8% of Paymentech, Inc.’s outstanding stock at
December 31, 2007, 2006, and 2005, respectively.
Cash Flow Hedges
The Company’s Canadian operations utilize forward contracts to hedge exposure to foreign currency
fluctuations in the exchange rate for U.S. dollars. Derivative instruments are accounted for as cash flow hedges in
accordance with SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended by
SFAS 138, Accounting for Certain Derivative Instruments and Certain Hedging Activities (SFAS 133). The
Company includes derivatives in prepaid expenses and other current assets or other accrued expenses, as
appropriate, on the combined balance sheets at fair value. Changes in the fair value of derivative contracts
designated as cash flow hedges are recorded as a component of accumulated other comprehensive income, and
reclassified into foreign currency exchange in the combined statements of income and comprehensive income
when the underlying hedged item affects earnings.
Share-Based Payments
Effective January 1, 2006, the Company adopted the provisions of SFAS No. 123R, Share-Based Payment
(SFAS 123R) and all related interpretations under the modified prospective method. SFAS 123R requires all
share-based payments to employees, including employee stock options and stock appreciation rights (SARs), to
be measured at their grant date fair values and expensed over the requisite service periods. The Company had
previously adopted the expense provisions of SFAS No. 123, Accounting for Stock-Based Compensation.Asa
234