First Data 2014 Annual Report Download - page 55





First Data Corporation (FDC or the Company) is a global provider of electronic commerce and payment solutions for merchants, financial institutions, and
card issuers. The services the Company provides include merchant transaction processing and acquiring; credit, retail, and debit card issuing and processing;
prepaid services; and check verification, settlement and guarantee services.

The accompanying Consolidated Financial Statements of FDC include the accounts of FDC and its controlled subsidiaries. All significant intercompany
accounts and transactions have been eliminated. Investments in unconsolidated affiliated companies are accounted for under the equity method and are
included in “Investment in affiliates” in the accompanying Consolidated Balance Sheets. The Company generally utilizes the equity method of accounting
when it has an ownership interest of between 20% and 50% in an entity, provided the Company is able to exercise significant influence over the investee’s
operations.
The Company consolidates an entity’s financial statements when the Company has a controlling financial interest in the entity. Control is normally
established when ownership interests exceed 50% in an entity; however, when the Company does not exercise control over a majority-owned entity as a
result of other investors having rights over the management and operations of the entity, the Company accounts for the entity under the equity method. As of
December 31, 2014 and 2013, there were no greater-than-50%-owned affiliates whose financial statements were not consolidated.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make
estimates and assumptions that affect the amounts reported in the Consolidated Financial Statements and accompanying notes. Actual results could differ
from those estimates.

Depreciation and amortization presented as a separate line item on the Company’s Consolidated Statements of Operations does not include amortization of
initial payments for new contracts which is recorded as a contra-revenue within “Transaction and processing service fees.” Also not included is amortization
related to equity method investments which is netted within the “Equity earnings in affiliates” line. The following table presents the amounts associated with
such amortization:


  
Amortization of initial payments for new contracts
$ 45.3
$ 41.5
$ 44.5
Amortization related to equity method investments
62.5
79.1
94.8

The majority of the Company’s revenues are comprised of: 1) transaction-based fees, which typically constitute a percentage of dollar volume processed; 2)
fees per transaction processed; 3) fees per account on file during the period; or 4) some combination thereof.
In multiple-element transactions, revenue is allocated to the separate units of accounting provided each element has stand-alone value to the customer.
Stand-alone value is based on the relative selling price of any undelivered items for which delivery is probable and substantially within the Company’s
control.
In the case of merchant contracts that the Company owns and manages, revenue is comprised of fees charged to the merchant, net of interchange and
assessments charged by the credit card associations, and is recognized at the time the merchant accepts a point of sale transaction. The fees charged to the
merchant are a percentage of the credit card and signature based debit card
55