Green Dot 2015 Annual Report Download - page 43

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Reserve for Uncollectible Overdrawn Accounts
Our cardholder accounts may become overdrawn as a result of maintenance fee assessments or from purchase
transactions that we honor, in each case in excess of the funds in the cardholder’s account. While we decline
authorization attempts for amounts that exceed the available balance in a cardholder’s account, the application of card
association rules, the timing of the settlement of transactions and the assessment of the card’s monthly maintenance
fee, among other things, can result in overdrawn accounts. Overdrawn account balances are deemed to be our
receivables due from cardholders, and we include them as a component of accounts receivable, net, on our consolidated
balance sheets. We generally recover overdrawn account balances from those cardholders that perform a reload
transaction. In addition, we recover some overdrawn account balances related to purchase transaction through
enforcement of payment network rules, which allow us to recover the amounts from the merchant where the purchase
transaction was conducted. However, we are exposed to losses from any unrecovered overdrawn account balances.
The probability of recovering these amounts is primarily related to the number of days that have elapsed since an
account had activity, such as a purchase, ATM transaction or fee assessment. Generally, we recover 50-60% of
overdrawn account balances in accounts that have had activity in the last 30 days, less than 15% in accounts that
have had activity in the last 30 to 60 days, and less than 10% when more than 60 days have elapsed.
We establish a reserve for uncollectible overdrawn accounts. We classify overdrawn accounts into age groups
based on the number of days since the account last had activity. We then calculate a reserve factor for each age group
based on the average recovery rate for the most recent six months. These factors are applied to these age groups to
estimate our overall reserve. We rely on these historical rates because they have remained relatively consistent for
several years. When more than 90 days have passed without any activity in an account, we consider recovery to be
remote and charge off the full amount of the overdrawn account balance against the reserve for uncollectible overdrawn
accounts. Our actual recovery rates and related estimates thereof may change in the future in response to factors such
as customer behavior, product pricing and features that impact the frequency and velocity of reloads and other deposits
to such accounts.
We include our provision for uncollectible overdrawn accounts related to maintenance fees and purchase
transactions as an offset to card revenues and other fees and in other general and administrative expenses, respectively,
in our consolidated statements of operations.
Goodwill and Intangible Assets
We review the recoverability of goodwill at least annually or whenever significant events or changes occur, which
might impair the recovery of recorded costs. Factors that may be considered a change in circumstances indicating
that the carrying value of our goodwill may not be recoverable, include a decline in our stock price and market
capitalization, declines in the market conditions of our products, reductions in our future cash flow estimates, and
significant adverse industry or economic market trends, amongst others. We test for impairment of goodwill by assessing
various qualitative factors with respect to developments in our business and the overall economy and calculating the
fair value of a reporting unit using the discounted cash flow method, as necessary. In the event that the carrying value
of assets is determined to be unrecoverable, we would estimate the fair value of the reporting unit and record an
impairment charge for the excess of the carrying value over the fair value. The estimate of fair value requires
management to make a number of assumptions and projections, which could include, but would not be limited to, future
revenues, earnings and the probability of certain outcomes.
Intangible and other long lived-assets subject to amortization are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount may not be recoverable. Certain factors which may occur
and indicate that an impairment exists include, but are not limited to the following: significant underperformance relative
to expected historical or projected future operating results; significant changes in the manner of use of the underlying
assets; and significant adverse industry or market economic trends. In reviewing for impairment, we compare the
carrying value of such assets to the estimated undiscounted future net cash flows expected from the use of the assets
and their eventual disposition. In the event that the carrying value of assets is determined to be unrecoverable, we
would estimate the fair value of the assets and record an impairment charge for the excess of the carrying value over
the fair value. The estimate of fair value requires management to make a number of assumptions and projections,
which could include, but would not be limited to, future revenues, earnings and the probability of certain outcomes.
During the three months ended December 31, 2015, we completed our annual goodwill impairment test as of
September 30, 2015. Based on the results of step one of the annual goodwill impairment test, we determined that step
two was not required for each of our reporting units as their fair values exceeded their carrying values indicating there
was no impairment. No impairment charges were recognized related to goodwill or intangible assets for the years
ended December 31, 2015, 2014, and 2013.