First Data 2014 Annual Report Download - page 56

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transaction’s dollar value, a fixed amount or a combination of the two. Personal identification number based debit (PIN-debit) network fees are recognized in
“Reimbursable debit network fees, postage, and other” revenues and expenses in the Consolidated Statements of Operations. STAR network access fees
charged to merchants are assessed on a per transaction basis. Interchange fees and assessments charged by credit card associations to the Company’s
consolidated subsidiaries and network fees related to PIN-debit transactions charged by debit networks are as follows:
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Interchange fees and assessments
$ 20,405.7
$ 19,367.7
$ 18,373.0
Debit network fees
2,964.5
2,914.9
2,786.3
The Company charges processing fees to its merchant alliances. In situations where an alliance is accounted for under the equity method, the Company’s
consolidated revenues include the processing fees charged to the alliance, as presented on the face of the Consolidated Statements of Operations.
Revenue from check verification, settlement, and guarantee services is recognized at the time of sale less the fair value of the guarantee. The fair value of the
guarantee is deferred and recognized at the later of the Company being called upon to honor the guarantee or the expiration of the guarantee. Check
verification fees generally are a fixed amount per transaction while check guarantee fees generally are a percentage of the check amount.
The purchase and sale of merchant contracts is an ordinary element of the Company’s Merchant Solutions and International businesses, and therefore, the
gains from selling these revenue-generating assets are included within the “Product sales and other” component of revenues.
Fees based on cardholder accounts on file, both active and inactive, are recognized after the requisite services or period has occurred. Fees for PIN-debit
transactions where the Company is the debit card processor for the financial institution are recognized on a per transaction basis. Revenues for output
services are derived primarily on a per piece basis and consist of fees for the production, materials, and postage related to mailing finished products and
recognized as the services are provided.
The sale and leasing of point-of-sale (POS) devices (terminals) are also reported in “Product sales and other”. Revenue for terminals sold or sold under a sales-
type lease transaction is recognized when the following four criteria are met: evidence of an agreement exists, delivery has occurred, the selling price or
minimum lease payments are fixed or determinable, and collection of the selling price or minimum lease payments is reasonably assured. Revenue for
operating leases is recognized on a straight-line basis over the lease term.
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.
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Stock-based compensation to employees is measured at the grant date fair values of the respective stock options and restricted stock awards. For awards
without certain liquidity or employment triggers, expense is recognized over the requisite service periods and for awards with certain liquidity or
employment triggers, expense is recognized upon the occurrence of such events. 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. Refer to Note 11 "Stock Compensation Plans" of these Consolidated Financial Statements for details regarding the Company’s stock-based
compensation plan.
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