First Data 2014 Annual Report Download - page 60

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

the most recent impairment analysis date, the fair value of each reporting unit exceeded its carrying value. The Company did not record any goodwill
impairment charges in 2014 or 2013.
The following table presents changes to goodwill for the years ended December 31, 2013 and 2014:












Balance as of January 1, 2013
Goodwill
$ 14,071.8
$ 3,451.4
$ 2,641.1
$ 177.0
$ 181.3
$ 20,522.6
Accumulated impairment losses
(1,106.5)
(1,399.7)
(375.6)
(177.0)
(181.3)
(3,240.1)
12,965.3
2,051.7
2,265.5
—
—
17,282.5
Acquisitions
24.4
—
—
—
—
24.4
Other adjustments (primarily foreign
currency)
(0.7)
—
(58.4)
—
—
(59.1)
Balance as of December 31, 2013
Goodwill
14,095.5
3,451.4
2,582.7
177.0
181.3
20,487.9
Accumulated impairment losses
(1,106.5)
(1,399.7)
(375.6)
(177.0)
(181.3)
(3,240.1)
12,989.0
2,051.7
2,207.1
—
—
17,247.8
Acquisitions
33.0
—
—
—
—
33.0
Other adjustments (primarily foreign
currency)
—
—
(264.2)
—
—
(264.2)
Balance as of December 31, 2014
Goodwill
14,128.5
3,451.4
2,318.5
177.0
181.3
20,256.7
Accumulated impairment losses
(1,106.5)
(1,399.7)
(375.6)
(177.0)
(181.3)
(3,240.1)
$ 13,022.0
$ 2,051.7
$ 1,942.9
$ —
$ —
$ 17,016.6
Customer relationships represent the estimated value of the Company’s relationships with customers, primarily merchants and financial institutions, to which
it provides services. Customer relationships are amortized based on the pattern of undiscounted cash flows for the period as a percentage of total projected
undiscounted cash flows. The Company selected this amortization method for these customer relationships based on a conclusion that the projected
undiscounted cash flows could be reliably determined.
The Company capitalizes initial payments for new contracts, contract renewals, and conversion costs associated with customer processing relationships to the
extent recoverable through future operations, contractual minimums, and/or penalties in the case of early termination. The Company’s accounting policy is
to limit the amount of capitalized costs for a given contract to the lesser of the estimated ongoing future cash flows from the contract or the termination fees
the Company would receive in the event of early termination of the contract by the customer. The initial payments for new contracts and contract renewals
are amortized over the term of the contract as a reduction of the associated revenue (transaction and processing service fees). Conversion costs are also
amortized over the term of the contract but are recorded as an expense in “Depreciation and amortization” in the Consolidated Statements of Operations.
The Company develops software that is used in providing processing services to customers. To a lesser extent, the Company also develops software to be sold
or licensed to customers. Costs incurred during the preliminary project stage are expensed as incurred. Capitalization of costs begins when the preliminary
project stage is completed and management, with the relevant authority, authorizes and commits to funding the project and it is probable that the project will
be completed and the software will be used to perform the function intended. Capitalization of costs ceases when the software is substantially complete and
ready for its intended use. Software development costs are amortized using the straight-line method over the estimated useful life of the software, which is
generally five years. Software acquired in connection with business combinations is amortized using the straight-line method over the estimated useful life of
the software which generally ranges from three to 10 years.
In addition to capitalized contract and software development costs, other intangibles include copyrights, patents, purchased software, trademarks, and non-
compete agreements acquired in business combinations. Other intangibles, except for the First Data trade name discussed below, are amortized on a straight-
line basis over the length of the contract or benefit period, which
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