Basis of presentation

Effective December 2014, The Brink’s Company (along with its subsidiaries, “Brink’s” or “we”) has nine operating segments:


•	Each of the five countries within Largest 5 Markets (U.S., France, Mexico, Brazil and Canada)


•	Each of the three regions within Global Markets (Latin America, EMEA and Asia)


•	Payment Services

Our unaudited interim consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial reporting and applicable quarterly reporting regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, the unaudited consolidated financial statements do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for interim periods are not necessarily indicative of the results that may be expected for the full year. These unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and notes in our Annual Report on Form 10-K for the year ended December 31, 2014.

We have made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these consolidated financial statements. Actual results could differ materially from these estimates. The most significant estimates are related to goodwill and other long-lived assets, pension and other retirement benefit obligations, legal contingencies, foreign currency translation and deferred tax assets.

The consolidated financial statements include the accounts of Brink’s and the subsidiaries it controls. Control is determined based on ownership rights or, when applicable, based on whether we are considered to be the primary beneficiary of a variable interest entity. Our interest in 20% to 50% owned companies that are not controlled are accounted for using the equity method, unless we do not sufficiently influence the management of the investee. Other investments are accounted for as cost-method investments or as available-for-sale. All significant intercompany accounts and transactions have been eliminated in consolidation.

Foreign Currency Translation

Our consolidated financial statements are reported in U.S. dollars. Our foreign subsidiaries maintain their records primarily in the currency of the country in which they operate.

The method of translating local currency financial information into U.S. dollars depends on whether the economy in which our foreign subsidiary operates has been designated as highly inflationary or not. Economies with a three-year cumulative inflation rate of more than 100% are considered highly inflationary.

Assets and liabilities of foreign subsidiaries in non-highly inflationary economies are translated into U.S. dollars using rates of exchange at the balance sheet date. Translation adjustments are recorded in other comprehensive income (loss). Revenues and expenses are translated at rates of exchange in effect during the year. Transaction gains and losses are recorded in net income.

Foreign subsidiaries that operate in highly inflationary countries use the U.S. dollar as their functional currency. Local-currency monetary assets and liabilities are remeasured into U.S. dollars using rates of exchange as of each balance sheet date, with remeasurement adjustments and other transaction gains and losses recognized in earnings. Non-monetary assets and liabilities do not fluctuate with changes in local currency exchange rates to the dollar.

Venezuela

The economy in Venezuela has had significant inflation in the last several years. We consolidate our Venezuelan results using our accounting policy for subsidiaries operating in highly inflationary economies.

Brink’s Venezuela accounted for $32.7 million or 2% of total Brink’s revenues in the six months ended June 30, 2015 and $153.6 million or 8% of total Brink’s revenues in the six months ended June 30, 2014.

Since 2003, the Venezuelan government has controlled the exchange of local currency into other currencies, including the U.S. dollar. During this period, the Venezuelan government has required that currency exchanges be made at official rates established by the government instead of allowing open markets to determine currency rates. Different official rates existed for different industries and purposes. The government has not approved all requests to convert bolivars to other currencies.

Late in 2013, the government added another official exchange process, known as SICAD, for travel and certain other purposes, made available at government discretion. The published rate for this process in 2014 ranged from 10 to 12 bolivars to the U.S. dollar. We were only able to obtain dollars once using the SICAD process.

In March 2014, the government initiated another exchange mechanism known as SICAD II. Conversions under this mechanism were also subject to specific eligibility requirements. Transactions were reported in a range of 49 to 52 bolivars to the U.S. dollar. From March 2014 through December 31, 2014, we received approval to obtain a total of $1.2 million (at a weighted average exchange rate of 51 bolivars to the dollar) through the SICAD II mechanism.

In February 2015, the government replaced the SICAD II process with a new process, known locally as SIMADI. The rates published since mid-February 2015 have ranged from 170 to 200 bolivars to the U.S. dollar. To date, we have received only minimal U.S. dollars through this exchange mechanism.

As a result of the restrictions on currency exchange, our Venezuelan operations have in the past been unable to obtain sufficient U.S. dollars to purchase certain imported supplies and fixed assets. Consequently, our Venezuelan operations have occasionally purchased more expensive, bolivar-denominated supplies and fixed assets. Furthermore, there is a risk that the new SIMADI process will be discontinued or not accessible when needed in the future, which may continue to prevent us from repatriating dividends or obtaining U.S. dollars to operate our Venezuela operations.

Remeasurement rates during 2014. Through March 23, 2014, we used the official rate of 6.3 bolivars to the U.S. dollar to remeasure our bolivar-denominated monetary assets and liabilities into U.S. dollars and to translate our revenue and expenses. Effective March 24, 2014, we began to use the exchange rate published for the SICAD II process to remeasure bolivar-denominated monetary assets and liabilities and to translate our revenue and expenses. We recognized a $122.2 million net remeasurement loss in the first half of 2014 when we changed from the official rate of 6.3 to the SICAD II exchange rate, which averaged approximately 50 since opening on March 24, 2014 until implementation of the SIMADI process in February 2015. The after-tax effect of this loss attributable to noncontrolling interests was $39.8 million in the first half of 2014.

Remeasurement rates during 2015. Through February 11, 2015, we used the SICAD II rates to remeasure our bolivar-denominated monetary assets and liabilities into U.S. dollars and to translate our revenue and expenses. Effective February 12, 2015, we began to use the exchange rate published for the SIMADI process to remeasure bolivar-denominated monetary assets and liabilities and to translate our revenue and expenses. The SIMADI rate at June 30, 2015 was 197 bolivars to the dollar. As a result, we recognized an $18.2 million net remeasurement loss in the first six months of 2015. The after-tax effect of this loss attributable to noncontrolling interests was $5.6 million.

Remeasuring our Venezuelan results using the SIMADI rate has had the following effects on our reported results:


•	Brink’s Venezuela became a much smaller component of Brink’s consolidated revenues and operating profit.


•	Brink’s Venezuela’s profit margin percentage declined as the historical U.S. dollar nonmonetary assets were not remeasured to a lower U.S. dollar basis but instead retained a historical higher basis which was used for depreciation and other expense attribution. Our nonmonetary assets were $14.2 million at June 30, 2015, and $55.0 million at December 31, 2014.


•	Our investment in our Venezuelan operations on an equity-method basis has declined. Our investment was $24.5 million at June 30, 2015, and $59.6 million at December 31, 2014.


•	Accumulated other comprehensive losses attributable to Brink’s shareholders related to Brink’s Venezuela were $112.4 million at June 30, 2015 and $113.0 million at December 31, 2014.


•	Our bolivar-denominated net monetary assets included in our consolidated balance sheets have declined. Our bolivar-denominated net monetary assets were $4.3 million (including $3.7 million of cash and cash equivalents) at June 30, 2015 and $23.5 million (including $12.6 million of cash and cash equivalents) at December 31, 2014.

Impairment of Long-lived Assets in Venezuela

During the second quarter of 2015, Brink's elected to evaluate and pursue strategic options for the Venezuelan business. Our consideration of these strategic options is ongoing and, during the second quarter of 2015, required us to perform an impairment review of the carrying values of our Venezuelan long-lived assets in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 360, Property, Plant and Equipment. Our asset impairment analysis included management's best estimate of associated cash flows relating to the long-lived assets, and included fair value assumptions that reflect conditions that exist in a volatile economic environment. The actual outcomes of future events may result in further adjustments.

As a result of our analysis, we recognized a $34.5 million impairment charge in the second quarter of 2015. After the impairment charge, the carrying value of the long-lived assets of our Venezuelan operations is $3.7 million at June 30, 2015. We have not reclassified any of the $112.4 million of accumulated other comprehensive losses attributable to Brink’s shareholders related to Brink’s Venezuela into earnings.

New Accounting Standards

In April 2015, the FASB issued Accounting Standards Update (“ASU”) 2015-03, Simplifying the Presentation of Debt Issuance Costs, which will become effective for us on January 1, 2016. Under ASU 2015-3, certain debt issuance costs currently reported as assets will be reclassified and shown as direct adjustments to the reported debt liability. The adoption of this guidance will not have a material effect on our financial statements.

In May 2014, the FASB issued ASU 2014-09, Revenue From Contracts with Customers, a new standard related to revenue recognition which requires an entity to recognize an amount of revenue to which it expects to be entitled for the transfer of promised goods and services to customers. The new standard will replace most of the existing revenue recognition standards in U.S. GAAP. In April 2015, the FASB issued a proposed ASU that would defer the effective date of this new standard to January 1, 2018. Early adoption is not permitted. The new standard can be applied retrospectively to each reporting period presented or retrospectively with the cumulative effect of the change recognized at the date of the initial application in retained earnings. We are assessing the potential impact of this new standard on financial reporting and have not yet selected a transition method.