Equifax 2006 Annual Report Download - page 58

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
56 EQUIFAX 2006 ANNUAL REPORT
Changes in tax laws and rates are refl ected in our income
tax provision in the period in which they occur. See Note 7
for additional information about income taxes.
Earnings Per Share. In accordance with SFAS No. 128,
“Earnings per Share,” our basic earnings per share (“EPS”)
is calculated as income from continuing operations or net
income divided by the weighted-average number of common
shares outstanding during the reporting period. Diluted EPS
is calculated to refl ect the potential dilution that would occur
if stock options or other contracts to issue common stock
were exercised and resulted in additional common shares
outstanding. The income amounts used in both our basic
and diluted EPS calculations are the same. A reconciliation
of the weighted-average outstanding shares used in the two
calculations is as follows:
(In millions) 2006 2005 2004
Weighted-average shares
outstanding (basic) 127.1 129.7 131.3
Effect of dilutive securities:
Stock options 1.8 2.1 1.6
Long-term incentive plans 0.5 0.4 0.6
Weighted-average shares
outstanding (diluted) 129.4 132.2 133.5
For the twelve months ended December 31, 2006, 2005
and 2004, we excluded certain stock options from our EPS
calculation because their effect on EPS was anti-dilutive.
The number of stock options excluded from the EPS calcu-
lation was not material for all periods presented.
Cash Equivalents. We consider all highly liquid invest-
ments with an original maturity of three months or less
to be cash equivalents.
Trade Accounts Receivable and Allowance for Doubtful
Accounts. We do not recognize interest income on our
trade accounts receivable. Additionally, we generally do not
require collateral from our customers related to our trade
accounts receivable.
The allowance for doubtful accounts for estimated
losses on trade accounts receivable is based on historical
write-off experience, an analysis of the aging of outstanding
receivables, customer payment patterns and the establish-
ment of specifi c reserves for customers in adverse fi nancial
condition or for existing contractual disputes wherein we
are not assured of a favorable outcome. We reassess the
adequacy of the allowance for doubtful accounts each
reporting period. Increases to the allowance for doubtful
accounts are recorded as bad debt expense, which are
included in selling, general and administrative expenses
on the accompanying Consolidated Statements of Income.
Bad debt expense was $5.2 million, $4.3 million, and
$2.9 million during the twelve months ended December 31,
2006, 2005, and 2004, respectively.
Long-Lived Assets. Property and equipment are stated at
cost less accumulated depreciation and amortization. The
cost of additions is capitalized. Property and equipment are
depreciated primarily on a straight-line basis over estimated
assets’ useful lives, which are generally three to ten years for
data processing equipment and capitalized internal-use
software and systems costs. Leasehold improvements are
depreciated over the shorter of their estimated useful lives
or lease terms that are reasonably assured. Buildings are
depreciated over a forty-year period. Other fi xed assets are
depreciated over three to seven years. Upon sale or retire-
ment of an asset, the related costs and accumulated
depreciation are removed from the accounts and any gain or
loss is recognized and included in income from continuing
operations on the Consolidated Statements of Income, with
the classifi cation of any gain or loss dependent on the char-
acteristics of the asset sold or retired.
Depreciation expense related to property and equipment
was $19.0 million, $19.7 million and $16.6 million for the
twelve months ended December 31, 2006, 2005 and 2004,
respectively. Amortization expense related to property and
equipment is disclosed below.
Capitalized Internal-Use Software and Systems Costs.
Certain internal-use software and system development
costs are deferred and capitalized in accordance with
American Institute of Certified Public Accountants
Statement of Position 98-1, “Accounting for the Costs of
Computer Software Developed or Obtained for Internal
Use.” Accordingly, the specifi cally identifi ed costs incurred
to develop or obtain software and accompanying hard-
ware which is intended for internal use are not capitalized
until the determination is made as to the availability of a
technically feasible solution to solve the predefi ned user
and operating performance requirements as established
during the preliminary stage of an internal-use software
development project. Costs incurred during a software
development project’s preliminary stage and post-imple-
mentation stage are expensed. Application development
activities which are eligible for capitalization include soft-
ware design and confi guration, development of interfaces,
coding, testing, and installation. Capitalized internal-use
software and systems costs are subsequently amortized on
a straight-line basis over a three- to ten-year period after
project completion and when the related software or sys-
tem is ready for its intended use. Amortization expense
related to capitalized internal-use software and system
costs totaled $31.4 million, $28.7 million, and $27.8 mil-
lion during the twelve months ended December 31, 2006,
2005 and 2004, respectively.