World Fuel Services 2012 Annual Report Download - page 43

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Commission from fuel broker services is recognized when services are performed and collectability is
reasonably assured. When acting as a fuel broker, we are paid a commission by the supplier.
Revenue from card payment and processing transactions is recognized at the time the purchase is made
by the customer using the charge card. Revenue from charge card transactions is generated from
processing fees.
Share-Based Payment Awards
We account for share-based payment awards on a fair value basis. Under fair value accounting, the
grant-date fair value of the share-based payment award is amortized as compensation expense, on a
straight-line basis, over the vesting period for both graded and cliff vesting awards. Annual
compensation expense for share-based payment awards is reduced by an expected forfeiture amount
on the outstanding share-based payment awards.
The estimated fair value of stock awards, such as restricted stock and RSUs is based on the grant-date
market value of our common stock, as defined in the respective plans under which the awards were
granted. To determine the estimated fair value of SSAR Awards, we use the Black-Scholes option pricing
model. The estimation of the fair value of SSAR Awards on the date of grant using an option-pricing
model is affected by our stock price as well as assumptions regarding a number of complex and
subjective variables. These variables include our expected stock price volatility over the term of the
awards, actual and projected employee stock option exercise behaviors, risk-free interest rates and
expected dividends. The expected term of SSAR Awards represents the estimated period of time from
grant until exercise or conversion and is based on vesting schedules and expected post-vesting, exercise
and employment termination behavior. Expected volatility is based on the historical volatility of our
common stock over the period that is equivalent to the award’s expected life. Any adjustment to the
historical volatility as an indicator of future volatility would be based on the impact to historical volatility of
significant non-recurring events that would not be expected in the future. Risk-free interest rates are
based on the U.S. Treasury yield curve at the time of grant for the period that is equivalent to the award’s
expected life. Dividend yields are based on the historical dividends of World Fuel over the period that is
equivalent to the award’s expected life, as adjusted for stock splits.
Cash flows from income tax benefits resulting from income tax deductions in excess of the
compensation cost recognized for share-based payment awards (excess income tax benefits) are
classified as financing cash flows. These excess income tax benefits are credited to capital in excess of
par value.
Accounts Receivable and Allowance for Bad Debt
Credit extension, monitoring and collection are performed for each of our business segments. Each
segment has a credit committee that is responsible for approving credit limits, setting and maintaining
credit standards and managing the overall quality of the credit portfolio. We perform ongoing credit
evaluations of our customers and adjust credit limits based upon a customer’s payment history and
creditworthiness, as determined by our review of our customer’s credit information. We extend credit on
an unsecured basis to most of our customers. Accounts receivable are deemed past due based on
contractual terms agreed to with our customers.
We continuously monitor collections and payments from our customers and maintain a provision for
estimated credit losses based upon our historical experience with our customers, current market and
industry conditions affecting our customers and any specific customer collection issues that we have
identified. Historical payment trends may not be a useful indicator of current or future credit worthiness
of our customers, particularly in these difficult economic and financial markets. Accounts receivable are
reduced by an allowance for bad debt.
If credit losses exceed established allowances, our business, financial condition, results of operations
and cash flows may be adversely affected. For additional information on the credit risks inherent in our
business, see ‘‘Item 1A – Risk Factors’’ in this 2012 10-K Report.
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