First Data 2009 Annual Report Download - page 235

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)
result of certain redemption features, discussed in Note 15, concurrent with the adoption of SFAS 123R, the
Company also applies the provisions of Accounting Series Release 268, Redeemable Preferred Stocks
(ASR 268). ASR 268 requires the Company to reclassify amounts relating to outstanding options, and shares
issued as a result of exercise of these options, outside of permanent equity (to temporary equity). There were no
effects on the Company’s results of operations or cash flows as a result of adopting the provisions of SFAS 123R
or ASR 268.
Comprehensive Income
Comprehensive income includes net income, changes in unrealized gains and losses on available-for-sale
investments, amounts resulting from cash flow hedging activities, changes in the adjustment resulting from
foreign currency translation, and certain adjustments to the Pension and SERP liabilities.
Revenue
Revenue represents fees earned for processing credit and debit card transactions for merchants (including
merchant discount fees), partially offset by interchange fees and debit network fees. Revenue also includes
amounts earned from third party credit and debit authorization services, incentive payments from card brands for
participation in certain initiatives, the sale and rental of point-of-sale equipment, merchant call center help desk
services, fees for the deployment of point-of-sale supplies and repair of point-of-sale equipment. Revenue is
recorded as services are performed or as merchandise is shipped.
Income Taxes
The Company’s functional groups discussed in Note 1 have various treatments for tax purposes. FDC Offer
Corp. and its subsidiaries are treated as a corporation for U.S. federal and state income tax purposes. CMS is
treated as a pass-through entity for U.S. federal and state income tax purposes. The members include their share
of the Company’s taxable income in their applicable tax returns. The Company’s U.S. operations are also treated
as a pass-through entity for U.S. federal and most state income tax purposes. Its members include their share of
the Company’s taxable income in their applicable tax returns. The Company’s Canadian operation is treated as a
pass-through entity for Canadian federal and provincial income tax purposes. Its partners include their share of
the Company’s taxable income in their applicable tax returns.
The Company uses the asset and liability method required by SFAS No. 109, Accounting for Income Taxes,
in accounting for income taxes. Deferred tax assets and liabilities are recorded for temporary differences between
the tax basis of assets and liabilities and their reported amounts in the financial statements, using statutory tax
rates for the applicable entity in effect for the year in which the differences are expected to reverse. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period
that includes the enactment date. A valuation allowance is recorded to reduce the carrying amounts of deferred
tax assets unless it is more likely than not that such assets will be realized.
Asset Impairment
In accordance with the provisions of SFAS No. 144, Accounting for the Impairment or Disposal of Long-
Lived Assets, management reviews the carrying value of its long-lived assets whenever events indicate that their
carrying amounts may not be recoverable. If, upon review, an impairment of the value of the asset is indicated,
an impairment loss would be recorded in the period such determination is made. No impairments were recorded
for the years ended December 31, 2007, 2006, or 2005.
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