Magazine article American Banker

Concord Reporting Move Quiets Critics

Magazine article American Banker

Concord Reporting Move Quiets Critics

Article excerpt

After months of criticism from investors and analysts for including interchange income with overall revenue, Concord EFS Inc. said it will break out the numbers in earnings reports from now on.

Concord said the change was precipitated by new guidelines from the Financial Accounting Standards Board's Emerging Issues Task Force, but the extra transparency probably could not hurt a potential sale of the Memphis company. Some observers see First Data Corp. making a bid for Concord, but First Data will not comment on the situation.

Concord, which runs the nation's largest electronic funds transfer network, collects interchange in the course of processing a transaction but ultimately must pass it along to the issuing bank involved in the transaction. Thus, investors and analysts have questioned its practice of lumping interchange with revenue.

According to a 10-K filed Thursday with the Securities and Exchange Commission, Concord will no longer include interchange fees as part of revenue in its Star Systems network operation. In its payment services division, interchange from acquired transactions still will appear as part of revenue.

Melinda Mercurio, a Concord spokeswoman, said that network services signature debit interchange fees represent amounts paid by the card associations to Concord as the signature debit card processor. These fees reimburse Concord for its payments to card issuers. In accordance with the new FASB guidelines, network services revenue is recorded as a net figure.

In contrast, payment services interchange fees are collected from Concord's merchant customers, not the card association or network vendor. …

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