Green Dot 2014 Annual Report Download - page 71

Note 2—Summary of Significant Accounting Policies (continued)
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 six months for both our GPR and 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
revenue associated with our gift card program, transaction-based fees and fees associated with optional products or
services, which we offer to cardholders from time-to-time. We generally recognize these revenues as purchase
transactions occur or when the underlying services are completed.
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, among other factors. For all of our significant
revenue-generating arrangements, including GPR and gift cards, we record revenues on a gross basis.
We earn tax refund processing service revenues when a customer of a third party tax preparation company chooses
to pay their tax preparation fee through the use of our tax refund processing services. We recognize tax refund processing
service revenues as we remit tax return proceeds to the taxpayer. We act as an agent in these transactions and record
revenues on a net basis. Tax refund processing service revenues were included in the cash transfer revenues caption
on our consolidated statement of operations for the year ended December 31, 2014.
Generally, customers have limited rights to a refund of a new card fee or a cash transfer fee. We have elected to
recognize revenues prior to the expiration of the refund period, but reduce revenues by the amount of expected refunds,
which we estimate based on actual historical refunds.
On occasion, we enter into incentive agreements with our retail distributors and offer incentives to customers
designed to increase product acceptance and sales volume. We record incentive payments, including the issuance of
equity instruments, as a reduction of revenues and recognize them over the period the related revenues are recognized
or as services are rendered, as applicable.
Sales and Marketing Expenses
Sales and marketing expenses primarily consist of sales commissions, advertising and marketing expenses, and
the costs of manufacturing and distributing card packages, placards, and promotional materials to our retail distributors’
locations and personalized GPR cards to consumers who have activated their cards.
We pay our retail distributors and brokers commissions based on sales of our prepaid debit cards and cash transfer
products in their stores. We defer and expense commissions related to new cards sales ratably over the average card
lifetime, which is currently six months for both our GPR and our gift cards. Absent a new card fee, we expense the
related commissions immediately. We expense commissions related to cash transfer products when the cash transfer
GREEN DOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
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