Company: DLX
Filing Date: 2025-02-21
Form Type: 10-K
Source: 0000027996-25-000051
Chunk: 77

Company: DELUXE CORP
Filing Date: 2025-02-21
Form: 10-K
Item: Item 7
Chunk 77
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 and have determined that we are the principal in these transactions, recording revenue for the gross amount of consideration. Within Merchant Services, we present revenue net of the interchange fees retained by the card issuing financial institutions and the fees charged by the payment networks.

 Certain costs incurred to obtain customer contracts must be recognized as assets and amortized in line with the transfer of goods or services to the customer. We defer costs related to obtaining check supply, treasury management solutions, and merchant services contracts. These amounts, which totaled $19 million as of December 31, 2024, are included in other non-current assets on the consolidated balance sheets and are amortized on the straight-line basis as SG&A expense. The straight-line amortization approximates the timing of the transfer of goods or services to the customer, generally over periods of two to five years. Costs are expensed as incurred when the amortization period is one year or less.

Accounting for customer contracts can be complex and may involve various techniques to estimate total contract revenue. Some contracts for data-driven marketing solutions include variable consideration that depends on the success of the marketing campaign, commonly referred to as pay-for-performance. We recognize revenue for estimated variable consideration as services are rendered, based on the most likely amount to be realized. As of December 31, 2024, the amount of conditional contract assets included in revenue in excess of billings on the consolidated balance sheet was $17 million. Estimates regarding the recognition of variable consideration are based on assumptions projecting the outcome of future events. Typically, the final amount of consideration for these contracts is determined within three to four months. We regularly review and update our contract-related estimates and do not expect that revisions to our estimates will have a material impact on our results of operations, financial position, or cash flows.

Goodwill Impairment

As of December 31, 2024, our goodwill totaled $1.42 billion, representing 50.3% of our total assets. We test goodwill for impairment annually as of July 31, or more frequently if events or changes in circumstances indicate a possible impairment.

To assess goodwill for impairment, we assign it to individual reporting units. Identification of reporting units involves analyzing the components that comprise each of our operating segments, considering factors such as the manner in which we operate our business and the availability of discrete financial information. Components of an operating segment are aggregated to form a reporting unit if they have similar economic characteristics. We periodically review our reporting units to ensure they continue to reflect the manner in which we operate our business.