ADP 2013 Annual Report Download - page 37

We operate and transact business in various foreign jurisdictions and are therefore exposed to market risk from changes in foreign
currency exchange rates that could impact our consolidated results of operations, financial position, or cash flows. We manage our exposure to
these market risks through our regular operating and financing activities and, when deemed appropriate, through the use of derivative financial
instruments. We use derivative financial instruments as risk management tools and not for trading purposes.
During fiscal 2013 , 2012 , and 2011 , Dealer Services earned 12.1% , 10.7% , and 8.8% , respectively, of its segment revenues from
continuing operations from one client. We did not have any customers that individually accounted for more than 10% of our consolidated
revenue from continuing operations.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In July 2012, the Company adopted the Financial Accounting Standards Board ("FASB") Accounting Standards Update ("ASU") 2011-
05, “Comprehensive Income (Topic 220): Presentation of Comprehensive Income.” ASU 2011-05 requires entities to present net income and
other comprehensive income in either a single continuous statement or in two separate, but consecutive, statements of net earnings, and other
comprehensive income. The Company has elected to present net earnings and other comprehensive income on two separate, but consecutive
statements. The adoption of ASU 2011-05 did not have an impact on the Company’s consolidated results of operations, financial condition, or
cash flows.
In July 2012, the Company adopted ASU 2011-08, “Intangibles—Goodwill and Other (Topic 350): Testing Goodwill for Impairment.”
ASU 2011-08 permits an entity to first perform a qualitative assessment to determine whether it is more likely than not that the fair value of a
reporting unit is less than its carrying value. If it is concluded that the fair value of a reporting unit is less than its carrying value based upon the
qualitative assessment, it is necessary to perform the currently prescribed two-step goodwill impairment test. ASU 2011-
08 does not change how
goodwill is calculated or assigned to reporting units, nor does it revise the requirement to test goodwill annually for impairment. The adoption of
ASU 2011-08 did not have an impact on the Company’s consolidated results of operations, financial condition, other comprehensive income, or
cash flows.
In February 2013, the FASB issued ASU 2013-02, “Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of
Accumulated Other Comprehensive Income.” ASU 2013-02 requires entities to disclose the amount of income (loss) reclassified out of
accumulated other comprehensive income to each respective line item on the income statement. The guidance allows companies to elect whether
to disclose the reclassification either on the face of the income statement or in the notes to the financial statements, including cross-referencing
other disclosures which provide additional details about these amounts. ASU 2013-02 is effective for fiscal years , and interim periods within
those years, beginning after December 15, 2012. The adoption of ASU 2013-02 will not have an impact on the Company's consolidated results
of operations, financial condition, or cash flows.
CRITICAL ACCOUNTING POLICIES
Our consolidated financial statements and accompanying notes have been prepared in accordance with accounting principles generally
accepted in the United States of America. The preparation of these financial statements requires management to make estimates, judgments, and
assumptions that affect reported amounts of assets, liabilities, revenues, and expenses. We continually evaluate the accounting policies and
estimates used to prepare the consolidated financial statements. The estimates are based on historical experience and assumptions believed to be
reasonable under current facts and circumstances. Actual amounts and results could differ from these estimates made by management. Certain
accounting policies that require significant management estimates and are deemed critical to our results of operations or financial position are
discussed below.
Revenue Recognition . Our revenues are primarily attributable to fees for providing services ( e.g. , Employer Services' payroll
processing fees) as well as investment income on payroll funds, payroll tax filing funds and other Employer Services' client-related funds. We
enter into agreements for a fixed fee per transaction ( e.g. , number of payees or number of payrolls processed). Fees associated with services are
recognized in the period services are rendered and earned under service arrangements with clients where service fees are fixed or determinable
and collectability is reasonably assured. Our service fees are determined based on written price quotations or service agreements having
stipulated terms and conditions that do not require management to make any significant judgments or assumptions regarding any potential
uncertainties. Interest income on collected but not yet remitted funds held for clients is recognized in revenues as earned, as the collection,
holding, and remittance of these funds are critical components of providing these services.
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