NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)
The Company determined that straight-line amortization would best correspond to the transfer
of services to customers since services are transferred equally over time and have limited predictable volatility. The amortization periods range from 3 to 10 years and are based on the expected life of a customer. During the three months ended
March 31, 2019 and 2018, the amount of amortization was $2.6 million and $2.5 million, respectively, which is recorded in sales and marketing expense. There was no impairment loss in relation to the costs capitalized.
The Company recognizes incremental sales commission costs of obtaining a contract as expense when the amortization period for those assets is
one year or less per the practical expedient in ASC 606. These costs are included in sales and marketing expense.
represent signing bonuses paid to customers. Customer incentives are paid in connection with the acquisition or renewal of customer contracts, and are therefore deferred and amortized using the straight-line method based on the expected life of the
customer. As of March 31, 2019 and December 31, 2018, the Company had $75.8 million and $71.5 million, respectively, of customer incentives included in other assets in the Companys Consolidated Statements of Financial
Position. For the three months ended March 31, 2019, and 2018, the Company had $7.9 million and $6.2 million, respectively, of amortization expense related to these costs recorded as contra-revenue in the Companys Consolidated
Statements of Income.
The Company capitalizes conversion costs associated with enabling customers to receive its processing services. As
of March 31, 2019 and December 31, 2018, the Company had $56.5 million and $51.7 million, respectively, of capitalized conversion costs included in Intangible assetsnet in the Companys Consolidated Statements of
Financial Position. For the three months ended March 31, 2019, and 2018, the Company had, $3.2 million and $0.9 million, respectively, of amortization expense related to these costs, which is recorded in depreciation and amortization
expense in the Companys Consolidated Statements of Income. These costs are amortized over the average life of the customer.
Accounts receivable primarily represent processing revenues earned but not collected. For a majority of its customers, the Company has the
authority to debit the clients bank accounts; as such, collectibility is reasonably assured. Aside from debiting a clients bank account, the Company collects a majority of its revenue via net settlement with the remaining portion
collected via billing the customer. The Company records a reserve for doubtful accounts when it is probable that the accounts receivable will not be collected. The Company reviews historical loss experience and the financial position of its
customers when estimating the allowance. As of March 31, 2019 and December 31, 2018, the allowance for doubtful accounts was not material to the Companys Consolidated Statements of Financial Position.
liabilities, which relate to advance consideration received from customers (deferred income) before transfer of control occurs and therefore revenue is recognized, is not material to the Companys Consolidated Financial Statements.
Remaining Performance Obligations
606 requires disclosure of the aggregate amount of the transaction price allocated to unsatisfied performance obligations; however, as permitted by ASC 606, the Company has elected to exclude from this disclosure any contracts with an original
duration of one year or less and any variable consideration that meets specified criteria. As discussed above, the Companys core performance obligation consists of variable consideration under a stand-ready series of distinct days of service
and revenue from the Companys products and service arrangements are generally billed and recognized as the services are performed. The aggregate fixed consideration portion of customer contracts with an initial contract duration greater than
one year is not material.
- 15 -