First Data 2011 Annual Report Download - page 71

Services not specifically described above are generally transaction based fees that are recognized at the time the transactions are
processed or programming services that are recorded as work is performed.
Stock-Based Compensation
Stock-based compensation to employees is measured at the grant date fair values of the respective stock options and restricted
stock awards and expensed over the requisite service periods. An estimate of forfeitures is applied when calculating compensation
expense. The Company recognizes compensation cost on awards with graded vesting on a straight-line basis over the requisite service
period for the entire award. During 2010, the Company modified the terms of its plan and, due to the nature of call rights and vesting
conditions associated with the options and awards, the Company will recognize expense associated with the modifications and grants
subsequent to the modifications only upon the occurrence of certain liquidity or employment termination events. Refer to Note 13 of
these Consolidated Financial Statements for details regarding the Company's stock-based compensation plan.
Foreign Currency Translation
The U.S. dollar is the functional currency for most of the Company's U.S. based businesses and certain foreign based
businesses. Significant operations with a local currency as their functional currency include operations in the United Kingdom,
Australia, Germany, Ireland, Greece and Argentina. Foreign currency denominated assets and liabilities for these units and other less
significant operations are translated into U.S. dollars based on exchange rates prevailing at the end of the period, and revenues and
expenses are translated at average exchange rates during each monthly period. The effects of foreign exchange gains and losses arising
from the translation of assets and liabilities of those entities where the functional currency is not the U.S. dollar are included as a
component of Other Comprehensive Income ("OCI"). Intercompany loans are generally not considered invested on a long-term basis
and such foreign currency gains and losses are recorded in income. Transaction gains and losses related to operating assets and
liabilities are included in the "Cost of services" and "Selling, general and administrative" lines of the Consolidated Statements of
Operations and were immaterial. Non-operating transaction gains and losses derived from non-operating assets and liabilities are
included in the "Other income (expense)" line of the Consolidated Statements of Operations and are separately disclosed in Note 9 of
these Consolidated Financial Statements.
Derivative Financial Instruments
The Company utilizes derivative instruments to enhance its ability to manage interest rate risk and foreign exchange risk. The
Company recognizes all derivative financial instruments in the Consolidated Balance Sheets as assets or liabilities at fair value. Such
amounts are recorded in either the "Other long-term assets", "Other current liabilities" or "Other long-term liabilities" captions in the
Consolidated Balance Sheets. Changes in fair value of derivative instruments are recognized immediately in earnings unless the
derivative is designated and qualifies as a hedge of future cash flows or a hedge of a net investment in a foreign operation. For
derivatives that qualify as hedges of future cash flows, the effective portion of changes in fair value is recorded temporarily in equity
as a component of OCI and then recognized in earnings in the same period or periods during which the hedged item affects earnings.
For derivatives that qualify as a hedge of a net investment in a foreign operation, the gain or loss is reported in OCI as part of the
cumulative translation adjustment to the extent the hedge is effective. Any ineffective portions of cash flow hedges and net investment
hedges are recognized in the "Other income (expense)" line in the Consolidated Statements of Operations during the period of change.
Additional discussion of derivative instruments is provided in Note 6 of these Consolidated Financial Statements.
Noncontrolling and Redeemable Noncontrolling Interests
Noncontrolling interests represent the minority shareholders' share of the net income or loss and equity in consolidated
subsidiaries. Substantially all of the Company's noncontrolling interests are presented pretax in the Consolidated Statements of
Operations as "Net income attributable to noncontrolling interests" since the majority of the Company's non-wholly owned
consolidated subsidiaries are flow through entities for tax purposes. Noncontrolling interests are presented as a component of equity in
the Consolidated Balance Sheets and reflect the original investments by these noncontrolling shareholders in the consolidated
subsidiaries, along with their proportionate share of the earnings or losses of the subsidiaries, net of dividends or distributions.
Noncontrolling interests that are redeemable at the option of the holder are presented outside of equity and are carried at their
estimated redemption value. A noncontrolling interest is recorded on the date of acquisition based on the total fair value of the
acquired entity and the noncontrolling interest's share of that value.
Reserve for Merchant Credit Losses and Check Guarantees
With respect to the merchant acquiring business, the Company's merchant customers (or those of its unconsolidated alliances)
have the liability for any charges properly reversed by the cardholder. In the event, however, that the Company is not able to collect
such amounts from the merchants due to merchant fraud, insolvency, bankruptcy or another reason, the Company may be liable for
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