SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	12 Months Ended
Sep. 30, 2012
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract]
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation. These financial statements and the accompanying notes are prepared in accordance with U.S. generally accepted accounting principles, and conform to Regulation S-X under the Securities Exchange Act of 1934, as amended. Principles of Consolidation. The financial statements include the accounts of Official Payments Holdings, Inc. and its subsidiary. Intercompany transactions and balances have been eliminated. Use of Estimates. Preparing financial statements requires management to make estimates and assumptions that affect the amounts reported on our Consolidated Financial Statements and accompanying notes. We believe that near-term changes could reasonably affect the following estimates: collectability of receivables; share-based compensation; valuation of goodwill, intangibles and investments; contingent liabilities; effective tax rates; and deferred taxes and the associated valuation allowance. Although we believe the estimates and assumptions used in preparing our Consolidated Financial Statements and notes thereto are reasonable in light of known facts and circumstances, actual results could differ materially. Cash and Cash Equivalents. Cash is federally insured funds maintained in demand deposit accounts. Cash equivalents are highly liquid investments with maturities of three months or less at the date of purchase and are stated at amounts that approximate fair value, based on quoted market prices. Cash equivalents consist principally of investments in interest-bearing demand deposit accounts with financial institutions and U.S. Treasury bills. Revenue Recognition and Credit Risk. Payment Solutions revenues are primarily attributable to fees for processing incoming payment obligations electronically. We recognize revenue when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable, and collectability is reasonably assured. We assess collectability based upon our Clients' financial condition and prior payment history, as well as our performance under the arrangement. Our Payment Solutions operations offer services that allow our Clients to offer their Constituents (individuals or businesses) the ability to pay certain financial obligations with credit or debit cards, electronic check, cash or money order, depending on the terms of the arrangement. Our revenue is generated in the form of the convenience fee we are permitted to charge for the electronic payment solutions service provided. Depending on the agreement with the Client, the convenience fee can be a fixed fee or a percentage of the payment processed. In over 90% of our arrangements, this fee is charged directly to the Constituent and is added to their payment obligation when it is processed. In the remainder of arrangements, our Clients pay the convenience fees we receive. We recognize the revenue in the month in which the service is provided. During fiscal 2012, our VSA operations included software maintenance and support and non-essential training and consulting support. When we provide ongoing maintenance and support services, the associated revenue is deferred and recognized on a straight-line basis over the life of the related contract—typically one year. Generally, we recognize the revenues earned for non-essential training and consulting support when the services are performed. Allowance for Doubtful Accounts. The allowance for doubtful accounts reflects our best estimate of probable losses inherent in the accounts receivable balance. We determine the allowance for doubtful accounts based on known troubled accounts, historical experience and other currently available evidence. Additions to the allowance for doubtful accounts are included in General and administrative on our Consolidated Statements of Operations. Settlements receivable. Individuals and businesses settle their obligations to our various Clients, primarily utility and other public sector Clients, using credit or debit cards or via ACH payments. We create a receivable for the amount due from the credit or debit card company or bank and an offsetting payable to the Client. Once we receive confirmation the funds have been received, we settle the obligation to the Client. Convenience fees are charged to cardholders on a per transaction basis and are reinstated to cardholders upon an approved payment reversal. Accrued Discount Fees. Our direct costs for our Payment Solutions operations primarily consist of credit card discount fees, in addition to assessments and other costs passed onto us by our processors. Collectively, these fees and costs are considered to be discount fees. Discount fees are charged to us as a percentage of the dollar volume we transact plus a fixed fee, and for expense purposes, are incurred during the month that the related transaction is authorized for payment. Accrued discount fees represent the total amount of discount fees that have been incurred by us on authorized transactions, but have yet to be remitted by us as of the reporting date. Discount fees are typically remitted by us in the calendar month which follows the date of transaction authorization. Fair Value of Financial Instruments. The carrying amounts of certain financial instruments, including cash equivalents, restricted cash, accounts receivable, accounts payable and accrued liabilities, approximate fair value due to their short maturities. Advertising Expense. We expense advertising costs, net of cooperative advertising cash contributions received from partners, during the period the advertising takes place. We incurred net advertising expenses from Continuing Operations of $1.6 million during fiscal 2012, $1.3 million during fiscal year 2011, and $0.7 million during fiscal year 2010. Property, Equipment and Software. Property, equipment and software are stated at cost and depreciated using the straight-line method over the shorter of the estimated useful lives of the assets or the lease terms, ranging from two to seven years. When assets are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is reflected in operations in the period realized. We expense the costs incurred for software that we expect to use internally until the preliminary project stage has been completed. Subsequently, we capitalize direct service and material costs, as well as direct payroll and payroll‑related costs and interest costs incurred during development. Once the software is ready for its intended use in accordance with ASC 350-40, we amortize it on a straight-line basis over its estimated useful life. Goodwill. Goodwill is not amortized, but instead is tested for impairment at least annually at the reporting unit level. We perform this impairment test by first comparing the fair value of our Payment Solutions reporting units to their carrying amount. If an indicator of impairment exists, we would then compare the implied fair value of our goodwill to the carrying amount in order to determine the amount of the impairment, if any. We determine fair value of our reporting units using various methodologies including: 1) comparable public companies; 2) merger and acquisitions precedents; and 3) discounted cash flows No impairment existed during fiscal 2012. Intangible Assets. We amortize intangible assets with finite lives over their estimated benefit period, ranging from five to ten years, in a manner consistent with the estimated pattern in which the asset is consumed. We evaluate the recoverability of intangible assets periodically and take into account events or circumstances that warrant revised estimates of useful lives or that indicate that impairment exists. No impairment existed during fiscal 2012. Loss Per Share. Basic loss per share is computed by dividing net loss by the weighted-average number of shares of common stock outstanding for the period. Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock to the extent such securities or other contracts are not anti-dilutive. Share-Based Compensation. Share-based compensation cost for an option award is measured at the grant date based on the fair value of the award and is recognized as expense over the applicable vesting period of the award (typically three to five years) using the ratable method. We also issue restricted stock units and performance stock units. For the restricted stock units and performance stock units payable in cash, we record expense based on the fair value of the awards at the end of each financial reporting period, consistent with the recognition of awards classified as liabilities under US GAAP. Income Taxes. Deferred income taxes are provided for the tax effect of temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements. The liability method is used to account for income taxes, which requires deferred taxes to be recorded at the statutory rate expected to be in effect when the taxes are paid or the differences are reversed. Valuation allowances are established against net deferred tax assets when it is more likely than not that some portion or all of the deferred tax assets will not be realized. We recognize the tax benefit or liability of an uncertain tax position only if it is more-likely-than-not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. Accumulated Comprehensive (Loss) Income. Our accumulated comprehensive (loss) income is composed of net (loss) income and unrealized (losses) gains on marketable investment securities, net of related taxes. RECENT ACCOUNTING PRONOUNCEMENTS FASB ASU 2011-04. In May 2011, the FASB issued FASB ASU 2011-04, which clarifies some existing concepts, eliminates wording differences between US GAAP and International Financial Reporting Standards, or IFRS, and changes some of the principles and disclosures of fair value measurement to achieve convergence between US GAAP and IFRS. ASU 2011-04 also expands the disclosures for fair value measurements that are estimated using significant unobservable (Level 3) inputs. We adopted this ASU effective January 1, 2012. The initial adoption of this ASU did not have a material impact on our financial position or results of operations. FASB ASU 2011-08. In September 2011, the FASB issued FASB ASU 2011-08, which allows entities testing for impairment of goodwill the option of performing a qualitative assessment before calculating the fair value of a reporting unit in step 1 of the goodwill impairment test. If, after assessing the totality of events or circumstances, an entity determines it is more likely than not that the fair value of a reporting unit is more than its carrying amount, then performing the two-step impairment test is unnecessary. However, if an entity concludes otherwise, then it is required to perform the first step of the two-step impairment test. We will adopt this ASU effective October 1, 2012. We do not believe the adoption of this ASU will have a material impact on our financial position or results of operations. FASB ASU 2011-11. In December 2011, the FASB issued FASB ASU 2011-11, which requires entities to disclose information about offsetting and related arrangements to enable users of financial statements to understand the effect of those arrangements on an entity's financial position. The amendments require enhanced disclosures about financial instruments and derivative instruments that are either (i) offset in accordance with current literature or (ii) subject to an enforceable master netting arrangement or similar agreement, irrespective of whether they are offset in accordance with current literature. ASU 2011-11 is effective for fiscal years, and interim periods within those years, beginning on or after January 1, 2013. This standard will become effective for us beginning October 2013. The disclosures required by ASU 2011-11 will be applied retrospectively for all comparative periods presented. We are currently evaluating the impact of ASU 2011-11. FASB ASU 2012-02. In July 2012 the FASB issued FASB ASU 2012-02 regarding the testing of indefinite-lived intangible assets for impairment. An entity will have an option not to calculate annually the fair value of an indefinite-lived intangible asset if the entity determines that it is not more likely than not that the asset is impaired. Permitting an entity to assess qualitative factors when testing indefinite-lived intangible assets for impairment results in guidance that is similar to the goodwill impairment testing guidance. This is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. We do not believe the adoption of this standard will have any impact on our financial statements or results of operations.

NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES

SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation. These financial statements and the accompanying notes are prepared in accordance with U.S. generally accepted accounting principles, and conform to Regulation S-X under the Securities Exchange Act of 1934, as amended.

Principles of Consolidation. The financial statements include the accounts of Official Payments Holdings, Inc. and its subsidiary. Intercompany transactions and balances have been eliminated.

Use of Estimates. Preparing financial statements requires management to make estimates and assumptions that affect the amounts reported on our Consolidated Financial Statements and accompanying notes. We believe that near-term changes could reasonably affect the following estimates: collectability of receivables; share-based compensation; valuation of goodwill, intangibles and investments; contingent liabilities; effective tax rates; and deferred taxes and the associated valuation allowance. Although we believe the estimates and assumptions used in preparing our Consolidated Financial Statements and notes thereto are reasonable in light of known facts and circumstances, actual results could differ materially.

Cash and Cash Equivalents. Cash is federally insured funds maintained in demand deposit accounts. Cash equivalents are highly liquid investments with maturities of three months or less at the date of purchase and are stated at amounts that approximate fair value, based on quoted market prices. Cash equivalents consist principally of investments in interest-bearing demand deposit accounts with financial institutions and U.S. Treasury bills.

Revenue Recognition and Credit Risk. Payment Solutions revenues are primarily attributable to fees for processing incoming payment obligations electronically. We recognize revenue when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable, and collectability is

reasonably assured. We assess collectability based upon our Clients' financial condition and prior payment history, as well as our performance under the arrangement.

Our Payment Solutions operations offer services that allow our Clients to offer their Constituents (individuals or businesses) the ability to pay certain financial obligations with credit or debit cards, electronic check, cash or money order, depending on the terms of the arrangement. Our revenue is generated in the form of the convenience fee we are permitted to charge for the electronic payment solutions service provided. Depending on the agreement with the Client, the convenience fee can be a fixed fee or a percentage of the payment processed. In over 90% of our arrangements, this fee is charged directly to the Constituent and is added to their payment obligation when it is processed. In the remainder of arrangements, our Clients pay the convenience fees we receive. We recognize the revenue in the month in which the service is provided.

During fiscal 2012, our VSA operations included software maintenance and support and non-essential training and consulting support. When we provide ongoing maintenance and support services, the associated revenue is deferred and recognized on a straight-line basis over the life of the related contract—typically one year. Generally, we recognize the revenues earned for non-essential training and consulting support when the services are performed.

Allowance for Doubtful Accounts. The allowance for doubtful accounts reflects our best estimate of probable losses inherent in the accounts receivable balance. We determine the allowance for doubtful accounts based on known troubled accounts, historical experience and other currently available evidence. Additions to the allowance for doubtful accounts are included in General and administrative on our Consolidated Statements of Operations.

Settlements receivable. Individuals and businesses settle their obligations to our various Clients, primarily utility and other public sector Clients, using credit or debit cards or via ACH payments. We create a receivable for the amount due from the credit or debit card company or bank and an offsetting payable to the Client. Once we receive confirmation the funds have been received, we settle the obligation to the Client. Convenience fees are charged to cardholders on a per transaction basis and are reinstated to cardholders upon an approved payment reversal.

Accrued Discount Fees. Our direct costs for our Payment Solutions operations primarily consist of credit card discount fees, in addition to assessments and other costs passed onto us by our processors. Collectively, these fees and costs are considered to be discount fees. Discount fees are charged to us as a percentage of the dollar volume we transact plus a fixed fee, and for expense purposes, are incurred during the month that the related transaction is authorized for payment. Accrued discount fees represent the total amount of discount fees that have been incurred by us on authorized transactions, but have yet to be remitted by us as of the reporting date. Discount fees are typically remitted by us in the calendar month which follows the date of transaction authorization.

Fair Value of Financial Instruments. The carrying amounts of certain financial instruments, including cash equivalents, restricted cash, accounts receivable, accounts payable and accrued liabilities, approximate fair value due to their short maturities.

Advertising Expense. We expense advertising costs, net of cooperative advertising cash contributions received from partners, during the period the advertising takes place. We incurred net advertising expenses from Continuing Operations of $1.6 million during fiscal 2012, $1.3 million during fiscal year 2011, and $0.7 million during fiscal year 2010.

Property, Equipment and Software. Property, equipment and software are stated at cost and depreciated using the straight-line method over the shorter of the estimated useful lives of the assets or the lease terms, ranging from two to seven years. When assets are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is reflected in operations in the period realized.

We expense the costs incurred for software that we expect to use internally until the preliminary project stage has been completed. Subsequently, we capitalize direct service and material costs, as well as direct payroll

and payroll‑related costs and interest costs incurred during development. Once the software is ready for its intended use in accordance with ASC 350-40, we amortize it on a straight-line basis over its estimated useful life.

Goodwill. Goodwill is not amortized, but instead is tested for impairment at least annually at the reporting unit level. We perform this impairment test by first comparing the fair value of our Payment Solutions reporting units to their carrying amount. If an indicator of impairment exists, we would then compare the implied fair value of our goodwill to the carrying amount in order to determine the amount of the impairment, if any. We determine fair value of our reporting units using various methodologies including: 1) comparable public companies; 2) merger and acquisitions precedents; and 3) discounted cash flows No impairment existed during fiscal 2012.

Intangible Assets. We amortize intangible assets with finite lives over their estimated benefit period, ranging from five to ten years, in a manner consistent with the estimated pattern in which the asset is consumed. We evaluate the recoverability of intangible assets periodically and take into account events or circumstances that warrant revised estimates of useful lives or that indicate that impairment exists. No impairment existed during fiscal 2012.

Loss Per Share. Basic loss per share is computed by dividing net loss by the weighted-average number of shares of common stock outstanding for the period. Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock to the extent such securities or other contracts are not anti-dilutive.

Share-Based Compensation. Share-based compensation cost for an option award is measured at the grant date based on the fair value of the award and is recognized as expense over the applicable vesting period of the award (typically three to five years) using the ratable method. We also issue restricted stock units and performance stock units. For the restricted stock units and performance stock units payable in cash, we record expense based on the fair value of the awards at the end of each financial reporting period, consistent with the recognition of awards classified as liabilities under US GAAP.

Income Taxes. Deferred income taxes are provided for the tax effect of temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements. The liability method is used to account for income taxes, which requires deferred taxes to be recorded at the statutory rate expected to be in effect when the taxes are paid or the differences are reversed. Valuation allowances are established against net deferred tax assets when it is more likely than not that some portion or all of the deferred tax assets will not be realized. We recognize the tax benefit or liability of an uncertain tax position only if it is more-likely-than-not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position.

Accumulated Comprehensive (Loss) Income. Our accumulated comprehensive (loss) income is composed of net (loss) income and unrealized (losses) gains on marketable investment securities, net of related taxes.

RECENT ACCOUNTING PRONOUNCEMENTS

FASB ASU 2011-04. In May 2011, the FASB issued FASB ASU 2011-04, which clarifies some existing concepts, eliminates wording differences between US GAAP and International Financial Reporting Standards, or IFRS, and changes some of the principles and disclosures of fair value measurement to achieve convergence between US GAAP and IFRS. ASU 2011-04 also expands the disclosures for fair value measurements that are estimated using significant unobservable (Level 3) inputs. We adopted this ASU effective January 1, 2012. The initial adoption of this ASU did not have a material impact on our financial position or results of operations.

FASB ASU 2011-08. In September 2011, the FASB issued FASB ASU 2011-08, which allows entities testing for impairment of goodwill the option of performing a qualitative assessment before calculating the fair value of a reporting unit in step 1 of the goodwill impairment test. If, after assessing the totality of events or circumstances, an entity determines it is more likely than not that the fair value of a reporting unit is more than its

carrying amount, then performing the two-step impairment test is unnecessary. However, if an entity concludes otherwise, then it is required to perform the first step of the two-step impairment test. We will adopt this ASU effective October 1, 2012. We do not believe the adoption of this ASU will have a material impact on our financial position or results of operations.

FASB ASU 2011-11. In December 2011, the FASB issued FASB ASU 2011-11, which requires entities to disclose information about offsetting and related arrangements to enable users of financial statements to understand the effect of those arrangements on an entity's financial position. The amendments require enhanced disclosures about financial instruments and derivative instruments that are either (i) offset in accordance with current literature or (ii) subject to an enforceable master netting arrangement or similar agreement, irrespective of whether they are offset in accordance with current literature. ASU 2011-11 is effective for fiscal years, and interim periods within those years, beginning on or after January 1, 2013. This standard will become effective for us beginning October 2013. The disclosures required by ASU 2011-11 will be applied retrospectively for all comparative periods presented. We are currently evaluating the impact of ASU 2011-11.

FASB ASU 2012-02. In July 2012 the FASB issued FASB ASU 2012-02 regarding the testing of indefinite-lived intangible assets for impairment. An entity will have an option not to calculate annually the fair value of an indefinite-lived intangible asset if the entity determines that it is not more likely than not that the asset is impaired. Permitting an entity to assess qualitative factors when testing indefinite-lived intangible assets for impairment results in guidance that is similar to the goodwill impairment testing guidance. This is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. We do not believe the adoption of this standard will have any impact on our financial statements or results of operations.