Equifax 2002 Annual Report Download - page 48

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1.
SIGNIFICANT ACCOUNTING AND REPORTING POLICIES
Accounting Principles Our financial statements and accompa-
nying notes are prepared in accordance with accounting principles
generally accepted in the United States of America.
Principles of Consolidation Our Consolidated Financial
Statements include the accounts of Equifax Inc. and its majority-
owned and controlled subsidiaries. All significant intercompany
transactions and balances have been eliminated. Certain prior year
amounts have been reclassified to conform with the current year
presentation. The 2000 financial statements presented have been
restated to reflect the spin-off of Certegy Inc. (Note 2).
Nature of Operations We provide information services to busi-
nesses to help them grant credit and market to their customers.
We also provide products via the Internet to individuals to enable
them to manage and protect their financial affairs (see Note 12 for
segment information). Our primary markets include retailers, banks
and other financial institutions, the transportation, telecommuni-
cations, utility, and manufacturing industries, as well as consumers
and government. Our operations are predominantly located within
the United States, with foreign operations principally located in
Canada, the United Kingdom, and Brazil.
Use of Estimates Our financial statements are prepared in con-
formity with accounting principles generally accepted in the United
States. Those principles require us to make estimates and assump-
tions. We believe that these estimates and assumptions are rea-
sonable based upon information available to us at the time they are
made. These estimates and assumptions affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements as well as reported
amounts of revenues and expenses during the reporting period.
Estimates and assumptions are used for, but not limited to, the
accounting for the allowance for doubtful accounts, goodwill
impairments, contingencies, restructuring costs, preliminary allo-
cation of purchase price of acquisitions, and valuation of pension
assets. Actual results could differ materially from these estimates.
Revenue Recognition and Deferred Revenue We recognize
revenue when persuasive evidence of an arrangement exists,
delivery has occurred or services have been rendered, the price is
fixed or determinable, and collectibility of the selling price is rea-
sonably assured. For sales contracts having multiple elements that
can be divided into separate units of accounting, we allocate rev-
enue to these separate units based on their relative fair values. If
relative fair values cannot be established, revenue recognition is
deferred until all elements under the contract have been delivered.
Multiple deliverable arrangements generally involve delivery of
multiple product lines. These product lines are distinct enough to
be separated into separate units of accounting. Each product line
does not impact the value or usage of other deliverables in the
arrangement, and each can be sold alone or purchased from another
vendor without affecting the quality of use or value to the
customer of the remaining deliverables. Delivery of product lines
generally occurs consistently over the contract period.
In conjunction with certain products and services, we charge a
non-refundable set-up fee which is recognized ratably on a pro-
rata basis over the term of the contract. Revenue from the sale of
decision or statistical models is recognized upon customer instal-
lation and acceptance. For certain products and services sold on a
subscription basis, we recognize revenue pro rata over the term of
the contract.
Amounts billed in advance are recorded as current or long-term
deferred revenue on the balance sheet, with current deferred rev-
enue reflecting services expected to be provided within the next
twelve months. Current deferred revenue is included with other
current liabilities in the accompanying consolidated balance sheets,
and as of December 31, 2002 and 2001, totaled $22.9 million and
$21.8 million, respectively. In 1996, we received a one-time payment
of $58.0 million related to a lottery subcontract and recognized
$5.4 million in revenue. The remaining balance was recognized as
revenue over the term of the contract, with $9.6 million per year
recognized in 1997 through 2001 and $4.4 million recognized in
2002. In conjunction with the divestiture of our risk management
collections businesses in the U.S. and Canada in October 2000
(Note 4), certain of the proceeds received related to contracts to
provide credit information products and services to the buyers over
the next five to six years and were recorded in current and long-
term deferred revenue. At December 31, 2002, $14.9 million
remained unrecognized, with $10.6 million included in long-term
deferred revenue in the accompanying consolidated balance
sheets. This deferred revenue will be recognized as the contracted
products and services are provided.
Trade Accounts Receivable The provision for losses on
trade accounts receivable was $17.3 million, write-offs were
$12.6 million and recoveries were $1 million for 2002, and were
included in the “selling, general and administrative expenses” line
item on the accompanying Consolidated Statements of Income.
Costs of Services Costs of services consist primarily of data
acquisition and royalties; customer service costs, which include:
personnel costs to collect, maintain and update our proprietary
databases, to develop and maintain software application plat-
forms, and to provide consumer and customer call center support;
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