Green Dot 2015 Annual Report Download - page 67

61
Note 2—Summary of Significant Accounting Policies (continued)
We regularly evaluate each fixed income security where the value has declined below amortized cost to assess
whether the decline in fair value is other-than-temporary. In determining whether an impairment is other-than-temporary,
we consider the severity and duration of the decline in fair value, the length of time expected for recovery, the financial
condition of the issuer, and other qualitative factors, as well as whether we either plan to sell the security or it is more-
likely-than-not that we will be required to sell the security before recovery of its amortized cost. If the impairment of
the investment security is credit-related, an other-than-temporary impairment is recorded in earnings. We recognize
non-credit-related impairment in accumulated other comprehensive income. If we intend to sell an investment security
or believe we will more-likely-than-not be required to sell a security, we record the full amount of the impairment as an
other-than-temporary impairment.
Interest on fixed income securities, including amortization of premiums and accretion of discounts, is included in
interest income.
Obligations to Customers and Settlement Assets and Obligations
At the point of sale, our retail distributors collect customer funds for purchases of new cards and balance reloads
and then remit these funds directly to the banks that issue our cards. During the first quarter of 2014, we transitioned
our card issuing program with GE Capital Bank to our subsidiary bank. Our retail distributors’ remittance of these funds
takes an average of two business days.
Settlement assets represent the amounts due from our retail distributors for customer funds collected at the point
of sale that have not yet been received by our subsidiary bank. Obligations to customers represent customer funds
collected from (or to be remitted by) our retail distributors for which the underlying products have not been activated.
Once the underlying products have been activated, the customer funds are reclassified as deposits in a bank account
established for the benefit of the customer. Settlement obligations represent the customer funds received by our
subsidiary bank that are due to third-party card issuing banks upon activation.
Accounts Receivable, net
Accounts receivable is comprised principally of receivables due from card issuing banks, overdrawn account
balances due from cardholders, trade accounts receivable, fee advances and other receivables. We record accounts
receivable net of reserves for estimated uncollectible accounts. Receivables due from card issuing banks primarily
represent revenue-related funds held at the third-party card issuing banks related to our gift card program that have
yet to be remitted to us. These receivables are generally collected within a short period of time based on the remittance
terms in our agreements with the third-party card issuing banks. Fee advances represent short-term advances to in-
person tax return preparation companies made prior to and during tax season. These advances are collateralized by
their clients' tax preparation fees and are generally collected within a short period of time as the in-person tax preparation
companies begin preparing and processing their clients' tax refunds.
Overdrawn Account Balances Due from Cardholders and 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 excess of the funds in a cardholder’s account. We are exposed to losses from any
unrecovered overdrawn account balances. We establish a reserve for uncollectible overdrawn accounts. We classify
overdrawn accounts into age groups based on the number of days that have elapsed since an account last had activity,
such as a purchase, ATM transaction or maintenance fee assessment. We 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. When more than 90 days have passed without activity in an account, we write
off the full amount of the overdrawn account balance. 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 the accompanying consolidated statements of operations.
Restricted Cash
At December 31, 2015 and 2014, restricted cash primarily consists of funds held in an escrow account under the
terms of a purchase agreement related to one of our business acquisitions, as well as funds required to collateralize
outstanding letters of credit related to our corporate facility lease. Additionally, we collect funds in advance from certain
retail distributors, which are recorded as restricted cash.