World Fuel Services 2012 Annual Report Download - page 78

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Revenue from fuel-related services is recognized when services are performed, the sales price is fixed
or determinable and collectability is reasonably assured. We record the gross sale of fuel-related
services as we generally have latitude in establishing the sales price, have discretion in supplier
selection, maintain credit risk and are the primary obligor in the sales arrangement.
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.
Vendor and Customer Rebates and Branding Allowances
We receive vendor rebates and branding allowances from a number of our fuel suppliers. Typically, a
portion of the rebates and allowances is passed on to our customers under the same terms as required
by our fuel suppliers. Generally, volume rebates are received from vendors under structured programs
based on the level of fuel purchased or sold as specified in the applicable vendor agreements. Many of
the vendor agreements require repayment of all or a portion of the amount received if we (or our
customers, typically branded dealers) elect to discontinue selling the specified brand of fuel at certain
locations. As of December 31, 2012, the estimated amount of fuel rebates and branding allowances that
would have to be repaid upon de-branding at these locations, net of the amount due to us from the
branded dealers under similar agreements between us and such dealers were not significant. No liability
is recorded for the amount of obligations which would become payable upon de-branding.
Some of these vendor rebate and branding allowance arrangements require that we make assumptions
and judgments regarding, for example, the likelihood of attaining specified levels of purchases or selling
specified volume of products. We routinely review the relevant, significant factors and make
adjustments when the facts and circumstances dictate that an adjustment is warranted.
Vendor volume rebates are recognized as a reduction of cost of revenue in the period earned when
realization is probable and estimatable and when certain other conditions are met. The rebates passed
on to our customers are recognized as a reduction of revenue in the period earned in accordance with the
applicable customer agreements. The rebate terms of the customer agreements are generally similar to
those of the vendor agreements. We also receive branding allowances from fuel suppliers to defray the
costs of branding and enhancing certain of our customer locations. The branding allowances received
are recorded as a reduction of cost of revenue. The amounts recorded as a reduction of revenue related
to volume rebates and branding allowance arrangements paid to our customers and the amounts
recorded as a reduction to cost of revenue related to volume rebates received from vendors were not
significant during each of the years presented on the consolidated statements of income and
comprehensive income.
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 outstanding share-based payment awards.
The estimated fair value of stock awards, such as restricted stock and restricted stock units (‘‘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 stock-settled stock
appreciation rights (‘‘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.
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