Green Dot 2011 Annual Report Download - page 70

GREEN DOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Note 2—Summary of Significant Accounting Policies (continued)
60
test compares the implied fair value of the reporting unit’s goodwill with its carrying amount to measure the amount of
impairment loss, if any. The implied fair value of goodwill is determined in the same manner as the amount of goodwill
recognized in a business combination. If the carrying amount of the reporting unit’s goodwill exceeds the implied fair
value of that goodwill, an impairment loss is recognized in an amount equal to that excess.
Amounts Due to Card Issuing Banks for Overdrawn Accounts
Our card issuing banks fund overdrawn cardholder account balances on our behalf. Amounts funded are due from
us to the card issuing banks based on terms specified in the agreements with the card issuing banks. Generally, we
expect to settle these obligations within 12 months.
Amounts Due Under Line of Credit
After a consumer purchases a new card or cash transfer product at a retail location, we make the funds immediately
available once the consumer goes online or calls a toll-free number to activate the new card or add funds from a cash
transfer product. Since our retail distributors do not remit funds to our card issuing banks, on average, for two business
days, we maintain a line of credit with certain card issuing banks that is available to fund any cash requirements related
to the timing difference between funds remitted by our retail distributors to the card issuing banks and funds utilized
by consumers. We repay any draws on this line of credit when our retail distributors remit the funds to the card issuing
banks’ bank accounts.
Revenue Recognition
Our operating revenues consist of card revenues and other fees, cash transfer revenues and interchange revenues.
We recognize revenue when the price is fixed or determinable, persuasive evidence of an arrangement exists, the
product is sold or the service is performed, and collectibility of the resulting receivable is reasonably assured.
Card revenues and other fees consist of monthly maintenance fees, ATM fees, new card fees and other revenues.
We charge maintenance fees on a monthly basis pursuant to the terms and conditions in the applicable cardholder
agreements. We recognize monthly maintenance fees ratably over the month for which they are assessed. We charge
ATM fees to cardholders when they withdraw money at certain ATMs in accordance with the terms and conditions in
our cardholder agreements. We recognize ATM fees when the withdrawal is made by the cardholder, which is the
same time our service is completed and the fees are assessed. We charge new card fees when a consumer purchases
a new card in a retail store. We defer and recognize new card fee revenues on a straight-line basis over our average
card lifetime, which is currently nine months for our GPR cards and six months for our gift cards. We determine the
average card lifetime based on our recent historical data for comparable products. We measure card lifetime for our
GPR cards as the period of time, inclusive of reload activity, between sale (or activation) of the card and the date of
the last positive balance. We measure the card lifetime for our gift cards as the redemption period during which
cardholders perform the substantial majority of their transactions. We reassess average card lifetime quarterly. We
report the unearned portion of new card fees as a component of deferred revenue in our consolidated balance sheets.
Other revenues consist primarily of fees associated with optional products or services, which we generally offer to
consumers during the card activation process. Optional products and services include providing a second card for an
account, expediting delivery of the personalized debit card that replaces the temporary card obtained at the retail store,
and upgrading a cardholder account to one of our upgrade programs. We generally recognize revenue related to
optional products and services when the underlying services are completed, but we treat revenues related to our
upgrade programs in a manner similar to new card fees and monthly maintenance fees.
We generate cash transfer revenues when consumers purchase our cash transfer products (reload services) in
a retail store. We recognize these revenues when the cash transfer transactions are completed, generally within two
business days from the time of sale of these products.
We earn interchange revenues from fees remitted by the merchant’s bank, which are based on rates established
by the payment networks, such as Visa and MasterCard, when cardholders make purchase transactions using our
cards. We recognize interchange revenues as these transactions occur.
We report our different types of revenues on a gross or net basis based on our assessment of whether we act as
a principal or an agent in the transaction. To the extent we act as a principal in the transaction, we report revenues on
a gross basis. In concluding whether or not we act as a principal or an agent, we evaluate whether we have the
substantial risks and rewards under the terms of the revenue-generating arrangements, whether we are the party
responsible for fulfillment of the services purchased by the cardholders, and other factors. For all of our significant
revenue-generating arrangements, including GPR and gift cards, we record revenues on a gross basis.