our broad customer base. We have four reporting segments: Financial Solutions, Payment Solutions, International and Corporate and Other. A description of these segments is included above in Item 1. Revenues by Segment and the results of operations of our segments are discussed below in Segment Results of Operations. Business Trends and Conditions
Increases in deposit and card transactions can positively affect our business and thus the condition of the overall economy can have an effect on growth.
We compete for both licensing and outsourcing business, and thus are affected by the decisions of financial institutions to utilize our services under an outsourced arrangement or to process in-house under a software license and maintenance agreement. As a provider of outsourcing solutions, we benefit from multi-year recurring revenue streams. Generally, demand for outsourcing solutions has increased over time as service providers such as us realize economies of scale and improve their ability to provide services that improve customer efficiencies and reduce costs.
Card transactions continue to increase as a percentage of total point-of-sale payments, which fuels continuing demand for card-related services. We continue to launch new services aimed at accommodating this demand. In recent years, we have introduced a variety of stored-value card types, Internet banking, and electronic bill presentment/payment services, as well as a number of card enhancement and loyalty/reward programs. The common theme among these offerings continues to be convenience and security for the consumer coupled with value to the financial institution.
Consolidation within the banking industry may be beneficial or detrimental to our businesses. When consolidations occur, merger partners often operate disparate systems licensed from competing service providers. The newly formed entity generally makes a determination to migrate its core systems to a single platform. When a financial institution processing client is involved in a consolidation, we may benefit by expanding the use of our services if such services are chosen to survive the consolidation and support the newly combined entity. Conversely, we may lose market share if a customer of ours is involved in a consolidation and our services are not chosen to survive the consolidation and support the newly combined entity.
We believe that we are facing one of the most difficult times that has ever existed for financial institutions, retailers and other businesses in the United States and internationally. We expect there to be a significant number of bank failures in the next few years, which may be offset to a degree by somewhat decreased bank acquisition activity. However, we believe that our potential exposure to bank failures and forced government actions that have occurred to date is less than one half of one percent of our revenues. Additionally this exposure does not consider any incremental revenues we may generate from potential license fees or service associated with assisting surviving institutions with integrating acquired assets resulting from financial failures. We believe that software sales will be the most at risk as far as discretionary purchases that financial institutions may defer. However, software sales represent approximately 5% of our revenues and thus any decrease should not have a significant impact on our results of operations. While we believe that we are well positioned to withstand the current financial crisis, there are factors outside our control that might impact our operating results that we may not be able to fully anticipate as to timing and severity, including but not limited to adverse effects if banks are nationalized, continued global economic conditions worsening, causing further slowdown in consumer spending and lending and the impact on our ability to access capital should any or our lenders fail. Critical Accounting Policies
The accounting policies described below are those we consider critical in preparing our Consolidated Financial Statements. These policies require management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and disclosures with respect to contingent liabilities and assets at the date of the Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting periods. Actual amounts could differ from those estimates. See Note 3 of Notes to the Consolidated Financial Statements for a more detailed description of the significant accounting policies that have been followed in preparing our Consolidated Financial Statements.
Revenue Recognition
The Company generates revenues from the delivery of bank processing and credit and debit card processing services, professional services, software licensing and software related services and products. Revenues are recognized when evidence of an arrangement exists, delivery has occurred, fees are fixed or determinable and collection is considered probable. Occasionally, we are party to multiple concurrent contracts with the same customer. These situations require judgment to determine whether the individual contracts should be aggregated or evaluated separately for purposes of revenue recognition. In making this determination we consider the timing of negotiating and executing the contracts, whether the different elements of the contracts are interdependent and whether any of the payment terms of the contracts are interrelated. Due to the large number, broad nature and average size of individual

contracts we are party to, the impact of judgements and assumptions that we apply in recognizing revenue for any single contract is not likely to have a material effect on our consolidated operations or financial position. However the broader accounting policy assumptions that we apply across similar arrangements or classes of customers could significantly influence the timing and amount of revenue recognized in our historical and future results of operations or financial position. Additional information about our revenue recognition policies is included in Note 3 to the Consolidated Financial Statements.
Allowance for Doubtful Accounts
The Company analyzes trade accounts receivable by considering historical bad debts, customer creditworthiness, current economic trends, changes in customer payment terms and collection trends when evaluating the adequacy of the allowance for doubtful accounts. Any change in the assumptions used in analyzing a specific account receivable may result in an additional allowance for doubtful accounts being recognized in the period in which the change occurs. The allowance for doubtful accounts was $40.6 million and $53.4 million at December 31, 2008 and 2007, respectively. The decrease in the allowance for doubtful accounts from 2007 is primarily related to the LPS spin-off.
Reserves for Check Guarantee Losses
In our check guarantee business, if a guaranteed check presented to a merchant customer is dishonored by the check writer's bank, we reimburse our merchant customer for the check's face value and pursue collection of the amount from the delinquent check writer. Loss reserves and anticipated recoveries are primarily determined by performing a historical analysis of our check loss and recovery experience and considering other factors that could affect that experience in the future. Such factors include the general economy, the overall industry mix of our customer volumes, statistical analysis of check fraud trends within our customer volumes, and the quality of returned checks. Once these factors are considered, we establish a rate for check losses that is calculated by dividing the expected check losses by dollar volume processed and a rate for anticipated recoveries that is calculated by dividing the anticipated recoveries by the total amount of related check losses. These rates are then applied against the dollar volume processed and check losses, respectively, each month and charged to costs of revenues. The estimated check returns and recovery amounts are subject to risk that actual amounts returned and recovered may be different than our estimates.
Historically, such estimation processes have proven to be materially accurate; however, our projections of probable check guarantee losses and anticipated recoveries are inherently uncertain, and as a result, we cannot predict with certainty the amount of such items. Changes in economic conditions, the risk characteristics and composition of our customers, and other factors could impact our actual and projected amounts. We recorded check guarantee losses, net of anticipated recoveries excluding service fees, of $98.1 million and $113.8 million, respectively, for the years ended December 31, 2008 and 2007. A ten percent difference in our estimated gross check guarantee losses and our estimated recoveries as of December 31, 2008 could impact 2008 net earnings by approximately $2.2 million after-tax.
Computer Software
Computer software includes the fair value of software acquired in business combinations, purchased software and capitalized software development costs. As of December 31, 2008 and 2007, computer software, net of accumulated amortization, was $617.0 million and $775.2 million, respectively. Purchased software is recorded at cost and amortized using the straight line method over its estimated useful life and software acquired in business combinations is recorded at its fair value and amortized using straight line and accelerated methods over their estimated useful lives, ranging from 3 to 10 years. In determining useful lives, management considers historical results and technological trends which may influence the estimate. Amortization expense for computer software was $149.9 million, $177.8 million and $130.2 million in 2008, 2007 and 2006, respectively. Included in discontinued operations in the Consolidated Statement of Earnings in those years was amortization expense on computer software of $14.8 million, $32.5 million, and $30.2 million for 2008, 2007 and 2006, respectively. We also assess the recorded value of computer software for impairment on a regular basis by comparing the carrying value to the estimated future cash flows to be generated by the underlying software asset. There are inherent uncertainties in determining the expected useful life or cash flows to be generated from computer software. While we have not historically experienced significant changes in these estimates we could be subject to such changes in the future.
Goodwill and Other Intangible Assets
We are required to allocate the purchase price of acquired businesses to the assets acquired and liabilities assumed in the transaction at their estimated fair values. The estimates used to determine the fair value of long-lived assets, such as intangible assets, are complex and require a significant amount of management judgment. We generally engage independent valuation specialists to assist us in making fair value determinations. We are also required to estimate the useful lives of intangible assets to determine the amount of acquisition-related intangible asset amortization expense to record in future periods. We periodically review the estimated useful lives

assigned to our definite-lived intangible assets to determine whether such estimated useful lives continue to be appropriate. Additionally we review our indefinite lived intangible assets to determine if there is any change in circumstances that may indicate the asset's useful life is no longer indefinite.
We review the carrying value of goodwill and indefinite-lived intangible assets for impairment annually and whenever events or changes in circumstances indicate the carrying value may not be recoverable in accordance with SFAS No. 142, Goodwill and Other Intangible Assets ("SFAS 142"). SFAS 142 requires us to perform a two-step impairment test on goodwill. First, we compare the fair value of each reporting unit to its carrying value. We determine the fair value of our reporting units based on the present value of estimated future cash flows. If the fair value of a reporting unit exceeds the carrying value of the unit's net assets, goodwill is not impaired and further testing is not required. If the carrying value of the reporting unit's net assets exceeds the fair value of the unit, then we perform the second step of the impairment test to determine the implied fair value of the reporting unit's goodwill and any impairment charge. Additionally, we estimate the fair value of acquired intangible assets with indefinite lives and compare this amount to the underlying carrying value.
Determining the fair value of a reporting unit or acquired intangible assets with indefinite lives involves judgment and the use of significant estimates and assumptions, which include assumptions regarding the revenue growth rates and operating margins used to calculate estimated future cash flows, risk-adjusted discount rates and future economic and market conditions and other assumptions. During the fourth quarter of 2008, immediately prior to our annual measurement date for impairment testing, our market capitalization declined to a point below our book value. Our annual impairment test indicated that no impairment has occurred, based on our assumptions of discounted future cash flows using our current best estimate of future performance. In December of 2008, upon the change in our reporting segments and in light of the fact that our market capitalization continued to remain below our book value, we performed new impairment tests on a segment basis and determined that no impairments existed.
The Company has reconciled the aggregate estimated fair value of the reporting units to the market capitalization of the consolidated Company. We believe that the overall market conditions that existed at the measurement dates and continue to exist because of the financial crisis have led to a market capitalization well below the fair value of a controlling interest. Based on these factors, we concluded that the market capitalization does not represent the fair value of the Company.
Our analysis of indefinite lived intangible assets did indicate an impairment of our check trademark. Accordingly we recorded a charge of $52.0 million to reduce the intangible asset's carrying value to fair value (Note 11). Given the significance of our goodwill and intangible asset balances, an adverse change in fair value could result in an impairment charge, which could be material to our financial statements
Accounting for Income Taxes
As part of the process of preparing the Consolidated Financial Statements, we are required to determine income taxes in each of the jurisdictions in which we operate. This process involves estimating actual current tax expense together with assessing temporary differences resulting from differing recognition of items for income tax and accounting purposes. These differences result in deferred income tax assets and liabilities, which are included within the Consolidated Balance Sheets. We must then assess the likelihood that deferred income tax assets will be recovered from future taxable income and, to the extent we believe that recovery is not likely, establish a valuation allowance. To the extent we establish a valuation allowance or increase this allowance in a period, we must reflect this increase as an expense within income tax expense in the Statement of Earnings. Determination of the income tax expense requires estimates and can involve complex issues that may require an extended period to resolve. Further, changes in the geographic mix of revenues or in the estimated level of annual pre-tax income can cause the overall effective income tax rate to vary from period to period. We believe that our tax positions comply with applicable tax law and that we adequately provide for any known tax contingencies. We believe the estimates and assumptions used to support our evaluation of tax benefit realization are reasonable. However, final determination of prior-year tax liabilities, either by settlement with tax authorities or expiration of statutes of limitations, could be materially different than estimates reflected in assets and liabilities and historical income tax provisions. The outcome of these final determinations could have a material effect on our income tax provision, net income or cash flows in the period that determination is made.
Related Party Transactions
We are a party to certain historical related party agreements with FNF, LPS and other related parties (see Note 5 to the Consolidated Financial Statements included in Item 8 of Part II of this Report). Factors Affecting Comparability
Our Consolidated Financial Statements included in this report that present our financial condition and operating results reflect the following significant transactions:

• On July 2, 2008, we completed the LPS spin-off. The results of operations of the Lender Processing Services segment through the July 2, 2008 spin-off date are reflected as discontinued operations in the Consolidated Statements of Earnings, in accordance with SFAS 144, for all periods presented.

• On September 12, 2007, we acquired eFunds. eFunds provided risk management, EFT services, prepaid/gift card processing, and global outsourcing solutions to financial services companies in the U.S. and internationally. In connection with this acquisition, we borrowed an additional $1.6 billion under our bank credit facilities. The results of operations and financial position of eFunds are included in the Consolidated Financial Statements from and after the date of acquisition.

• On August 31, 2007, we completed the sale of one of our subsidiaries, Property Insight, to FNF, for $95.0 million in cash, realizing a pre-tax gain of $66.9 million ($42.1 million after-tax) which is reported as a discontinued operation in the consolidated statements of earnings in accordance with SFAS 144. Property Insight was a leading provider of title plant services to FNF, as well as to various national and regional title insurance underwriters. Property Insight primarily managed, maintained, and updated the title insurance plants that are owned by FNF.

• On April 25, 2007, the board of directors of Covansys entered into an agreement with Computer Sciences Corporation ("CSC") under which CSC agreed to acquire Covansys for $34.00 per share in an all-cash transaction. The merger closed on July 3, 2007, and we exchanged our remaining 6.9 million shares of stock in Covansys for cash, and 4.0 million warrants for cash, per the terms of the merger agreement. We realized a pre-tax gain on sales of Covansys securities of $274.5 million in 2007.

• On February 1, 2006, we completed the Certegy Merger. The transaction resulted in a reverse acquisition with a total purchase price of approximately $2.2 billion. Certegy provided credit card, debit card, and other transaction processing and check risk management services to financial institutions and merchants in the U.S. and internationally through two segments, Card Services and Check Services.

Although the legal entity that survived the Certegy Merger was Certegy (which has since been renamed Fidelity National Information Services, Inc.), for accounting purposes, our historical financial statements are those of FIS. Our Consolidated Financial Statements include the results of operations of Certegy from the date of the acquisition.
As a result of the above transactions, the results of operations in the periods covered by the Consolidated Financial Statements may not be directly comparable.

Consolidated Results of Operations
(in millions, except per share amounts)

                                                            2008                  2007                2006
                                                               (In millions, except per share amounts)
Processing and services revenues                        $     3,446.0         $     2,921.0         $ 2,416.5
Cost of revenues                                              2,636.9               2,265.8           1,872.2

Gross profit                                                    809.1                 655.2             544.3

Selling, general, and administrative expenses                   389.4                 302.9             279.8
Research and development costs                                   84.8                  70.4              70.9

Operating income                                                334.9                 281.9             193.6

Other income (expense):
Interest income                                                   6.3                   3.0               1.3
Interest expense                                               (163.5 )              (190.2 )          (190.9 )
Gain on sale of investment in Covansys                              -                 274.5                 -
Other income (expense), net                                       1.5                  14.8               1.2

Total other income (expense)                                   (155.7 )               102.1            (188.4 )

Earnings before income taxes, equity in earnings
of unconsolidated entities, minority interest, and
discontinued operations                                         179.2                 384.0               5.2
Provision for income taxes                                       57.6                 136.2              (2.9 )

Earnings before equity in earnings of
unconsolidated entities, minority interest, and
discontinued operations                                         121.6                 247.8               8.1
Equity in (losses) earnings of unconsolidated
entities                                                         (0.2 )                 2.8               5.8
Minority interest (expense) income                               (4.0 )                 0.1               1.7

Net earnings from continuing operations                         117.4                 250.7              15.6
Earnings from discontinued operations, net of tax                97.4                 310.5             243.5

Net earnings                                            $       214.8         $       561.2         $   259.1

                                                            2008                 2007                 2006
                                                               (In millions, except per share amounts)
Net earnings per share - basic from continuing
operations                                              $       0.61         $       1.30         $       0.08
Net earnings per share - basic from discontinued
operations                                                      0.51                 1.61                 1.31

Net earnings per share - basic                          $       1.12         $       2.91         $       1.39

Weighted average shares outstanding - basic                    191.6                193.1                185.9

Net earnings per share - diluted from continuing
operations                                              $       0.61         $       1.28         $       0.08
Net earnings per share - diluted from discontinued
operations                                                      0.50                 1.58                 1.29

Net earnings per share - diluted                        $       1.11         $       2.86         $       1.37

Weighted average shares outstanding - diluted                  193.5                196.5                189.2

Processing and Services Revenues
Processing and services revenues totaled $3,446.0 million, $2,921.0 million and $2,416.5 million in 2008, 2007 and 2006, respectively. The increase in revenue during 2008 of $525.0 million, or 18.0% as compared to 2007 is primarily attributable to the impact of the eFunds acquisition, which contributed year over year incremental revenues of $396.3 million. Additionally our Brazilian card processing venture, the "Brazilian Venture" had a year over year increase in revenue of $87.7 million. The increase in revenue in 2007 of $504.5 million as compared to 2006 is primarily attributable to revenue increases from the eFunds and Certegy acquisitions along with organic growth. The eFunds acquisition contributed revenues of $166.6 million from its September 12, 2007 completion date through December 31, 2007 and the Certegy Merger contributed one additional month of revenue in the 2007 period, or approximately $96.4 million, as compared to the full year 2006. The Brazilian Venture contributed $49.2 million to revenue growth in 2007, with other growth in international revenues comprising most of the year over year organic growth.
Cost of Revenues and Gross Profit
Cost of revenues totaled $2,636.9 million, $2,265.8 million and $1,872.2 million in 2008, 2007 and 2006, respectively, resulting in gross profit of $809.1 million, $655.2 million and $544.3 million in 2008, 2007 and 2006, respectively. Gross profit as a percentage of revenues ("gross margin") was 23.5%, 22.4% and 22.5% in 2008, 2007 and 2006, respectively. The increase in cost of revenues of $371.1 million in the 2008 period as compared to the 2007 period is directly attributable to revenue growth across our three operating segments. The increase in gross margin of 1.1% for 2008 over 2007 was driven by the growth of higher product margin sales and gained efficiencies relating to the integration of eFunds. The increase in cost of revenues of $393.6 million in the 2007 period as compared to the 2006 period was attributable to growth in our three operating segments primarily driven by the eFunds acquisition. The gross margin decreased slightly due to the costs associated with the eFunds acquisition including restructuring and integration as well as increased amortization expense relating to purchased intangibles.
Selling, General and Administrative Expenses Selling, general and administrative expenses totaled $389.4 million, $302.9 million and $279.8 million for 2008, 2007 and 2006, respectively. The increase of $86.5 million in 2008 as compared to 2007 primarily relates to the incremental costs from the eFunds acquisition, as well as increased stock compensation costs, additional restructuring and integration charges, and charges associated with the LPS spin-off. Stock-based compensation increased from $24.9 million in 2007 to $51.6 million in 2008. The $26.7 million increase in stock-based compensation is mainly attributable to charges of $14.1 million . . .