EFTA Document EFTA01382787

S- I/A Table of Contents FIRST DATA CORPORATION NOTES TO TILE CONSOLIDATED FINANCIAL STATEMENTS (Continued) Services not specifically described above arc generally transaction based fees that arc recognized at the time the transactions arc processed or programming services that are recorded as work is performed. Stock-Based Compensation Stock-based compensation to employees is measured at the grant date fair values of the respective stock options and restricted stock awards. For awards without certain liquidity or employment triggers, expense is recognized over the requisite service periods and for awards with catain liquidity or employment triggers, expense is recognized upon the occurrence of such events. An estimate of forfeitures is applied when calculating compensation expense. The Company recognizes compensation cost on awards with graded vesting on a straight-line basis over the requisite service period for the entire award. Refer to Note I I "Stock Compensation Plans" of these consolidated financial statements for details regarding the Company's stock-based compensation plan. Foreign Currency Translation The U.S. dollar is the functional currency for most of the Company's U.S.-based businesses and certain foreign-based businesses. Significant operations with a local currency as their functional currency include operations in the United Kingdom, Australia. Germany. Ireland, Greece, and Argentina. Foreign currency-denominated assets and liabilities for these units and other less significant operations are translated into U.S. dollars based on exchange rates prevailing at the end of the period, and revenues and expenses arc translated at average exchange rates during each monthly period. The effects of foreign exchange gains and losses arising from the translation of assets and liabilities of those entities where the functional currency is not the U.S. dollar are included as a component of Other Comprehensive Income (OCI). Intercompany loans are generally not considered invested on a long-term basis and such foreign currency gains and losses arc recorded in income. Transaction gains and losses related to operating wets and liabilities are included in the "Cost of srn•ices' and "Selling, general. and administrative" lines of the Consolidated Statements of Operations and were immaterial. Non-operating transaction gains and losses derived from non-operating assets and liabilities are included in the "Other income (expense)" line of the Consolidated Statements of Operations and are separately disclosed in Note 7 "Supplemental Financial Information" of these consolidated financial statements. Derivative Financial Instruments The Company is exposed to various financial and market risks, including those related to changes in interest rates and foreign currency exchange rates, that exist as part of its ongoing business operations. The Company uses derivative instruments (i) to mitigate cash flow risks with respect to changes in interest rates (forecasted interest payments on variable rate debt). (ii) to maintain a desired ratio of fixed rate and floating rate debt, and (iii) to protect the net investment in certain foreign subsidiaries and/or affiliates with respect to changes in foreign currency exchange rates. The Company's objective is to engage in risk management strategies that provide adequate downside protection. Derivative instruments are entered into for periods consistent with related underlying exposures. The Company applies strict policies to manage each of these risks, including prohibition against derivatives trading. derivatives market-making or any other speculative activities. Although most of the Company's derivatives either do not qualify or arc not designate) for hedge aamunting. they are maintained for economic hedge purposes and are not considered speculative. The Company formally documents all relationships between hedging instruments and the underlying hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. This process includes linking all derivatives that have been designated as cash flow hedges to forecasted F-13 http://owseegov/Arehivesfedgar/datat883980/000119312515334479/d31022dsla.html10/14/20I5 9:06:38 AM] CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) CONFIDENTIAL DB-SDNY-0082277 SONY GM_00228461 EFTA01382787