Business Context and Reporting Period
Company: Global Payments Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: July 17, 2002
Subject: Other Events regarding the adoption of Statement of Financial Accounting Standard No. 142 (SFAS 142) and the resulting impairment of a trademark asset.
Key Financial Metrics
This filing details a retrospective adjustment to the first quarter ended August 31, 2001, due to a change in accounting principle. The filing does not provide current period (2002) revenue, profit, or cash flow data.
| Financial Metric (Q1 2001) | As Reported | As Revised |
|---|---|---|
| Revenue | $110,955 | $110,955 |
| Operating Income | $22,687 | $22,687 |
| Net Income (Loss) | $12,874 | $(3,125) |
| Basic EPS | $0.35 | $(0.09) |
| Total Assets | $464,459 | $441,374 |
| Total Shareholders' Equity | $284,414 | $268,415 |
Note: All figures in thousands except per share data.
Material Changes
- Accounting Principle Change: The company discontinued the amortization of goodwill and indefinite-life intangible assets in accordance with SFAS 142, effective June 1, 2001.
- Asset Impairment: A trademark related to the "MAPP" program (acquired in 1996) with a carrying value of $24.6 million was deemed to have zero fair value as of June 1, 2001, due to the company's rebranding and plan to legally abandon the trademark.
- Financial Impact: A cumulative effect charge of $24.6 million ($16.0 million net of tax) was recorded. This reversed the previously reported net income for Q1 2001 into a net loss.
Outlook, Risks, and Management Commentary
Management Commentary: The impairment resulted from the company's spin-off from National Data Corporation and a subsequent rebranding effort under the Global Payments Inc. name. The company purchased MasterCard's remaining minority interest in the MAPP program effective June 1, 2001, ending marketing alliances and initiating the abandonment of the MAPP trademark.
Future Reporting: The effects of this accounting change will be reflected in the consolidated financial statements and notes to be filed in the Annual Report on Form 10-K in August 2002.
Risks/Contingencies: The filing highlights the risk associated with the valuation of intangible assets under new accounting standards and the strategic decision to abandon a previously significant trademark.
Investor Verification Checklist
- Verify the full impact of the SFAS 142 adoption in the upcoming Form 10-K filing (August 2002).
- Confirm the status of the legal abandonment of the MAPP trademark.
- Review the revised historical financial statements for the fiscal year ended May 31, 2002, to ensure all comparative periods are adjusted.
- Assess whether other intangible assets on the balance sheet require similar impairment testing under SFAS 142.