Equifax 2006 Annual Report Download - page 59

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Impairment of Long-Lived Assets. In accordance with SFAS
No. 144, “Accounting for the Impairment or Disposal of
Long-Lived Assets to be Disposed Of ” (“SFAS 144”), we
monitor the status of our long-lived assets in order to
determine if conditions exist or events and circumstances
indicate that an asset group may be impaired in that its
carrying amount may not be recoverable. Signifi cant factors
that are considered that could be indicative of an impair-
ment include: changes in business strategy, market
conditions or the manner in which an asset group is used;
underperformance relative to historical or expected future
operating results; and negative industry or economic
trends. If potential indicators of impairment exist, we esti-
mate recoverability based on the asset group’s ability to
generate cash fl ows greater than the carrying value of the
asset group. We estimate the undiscounted future cash
fl ows arising from the use and eventual disposition of the
related long-lived asset group. If the carrying value of the
long-lived asset group exceeds the estimated future undis-
counted cash fl ows, an impairment loss is recorded based
on the amount by which the asset group’s carrying amount
exceeds its fair value. We generally utilize estimates of dis-
counted future cash fl ows to determine the asset group’s
fair value.
Goodwill and Indefi nite-Lived Intangible Assets. Goodwill
represents the cost in excess of the fair value of the net
assets of acquired businesses. In accordance with SFAS No.
142, “Goodwill and Other Intangible Assets” (“SFAS 142”),
goodwill is not amortized. We are required to test goodwill
for impairment at the reporting unit level on an annual
basis or on an interim basis if an event occurs or circum-
stances change that would reduce the fair value of a
reporting unit below its carrying value. We perform our
annual goodwill impairment test as of September 30th. In
analyzing goodwill for potential impairment, we use projec-
tions of future discounted cash fl ows from our reporting
units to determine whether the reporting unit’s estimated
fair value exceeds its carrying value. Our estimates of fair
value for each reporting unit are corroborated by market
multiple comparables. If the fair value of a reporting unit
exceeds its carrying value, then no further testing is
required. However, if a reporting unit’s fair value were to be
less than its carrying value, we would then determine the
amount of the impairment charge, if any, which would be
the amount that the carrying value of the reporting unit’s
goodwill exceeded its implied value. In accordance with
SFAS 142, we are required to test goodwill at the reporting
unit level as defi ned by reference to our operating segments
determined under SFAS No. 131, “Disclosures about
Segments of an Enterprise and Related Information.” See
Note 15 for information about the change in our operating
segments in 2007, which will impact our reporting units.
Contractual/territorial rights represent the estimated
fair value of rights to operate in certain territories acquired
through the purchase of independent credit reporting
agencies in the U.S. and Canada. Our contractual/territo-
rial rights are perpetual in nature and, therefore, the useful
lives are considered indefi nite. Indefi nite-lived intangible
assets are not amortized. In accordance with SFAS 142, we
are required to test indefi nite-lived intangible assets for
impairment annually or whenever events and circum-
stances indicate that there may be an impairment of the
asset value. Our annual impairment test date is September
30th. We perform the impairment test for our indefi nite-
lived intangible assets by comparing the asset’s fair value to
its carrying value. We estimate the fair value based on pro-
jected discounted future cash fl ows. An impairment charge
is recognized if the asset’s estimated fair value is less than
its carrying value.
See Note 4 for additional information about our good-
will and contractual/territorial rights.
Purchased Intangible Assets. Purchased intangible assets
represent the estimated fair value of acquired intangible
assets used in our business. Purchased data fi les represent
the estimated fair value of fi les acquired primarily through
the purchase of independent credit reporting agencies in
the U.S. and Canada. We expense the cost of modifying and
updating credit fi les in the period such costs are incurred.
We generally amortize purchased data fi les, which primar-
ily consist of acquired credit fi les, on a straight-line basis.
All of our other purchased intangible assets are also amor-
tized on a straight-line basis. See Note 4 for additional
information about our purchased intangible assets.
Useful Life
Asset (in years)
Purchased Data Files 15
Acquired Software 3 to 10
Non-compete Agreements 2 to 5
Customer Relationships 7 to 8
Other Assets. Other assets on our Consolidated Balance
Sheets primarily represents the cash surrender value of life
insurance policies, employee benefi t trust assets, a statuto-
rily-required tax deposit and data purchases, net.
Foreign Currency Translation. The functional currency of
each of our foreign subsidiaries is that subsidiary’s local
currency. We translate the assets and liabilities of foreign
subsidiaries at the year-end rate of exchange and revenue
and expenses at the monthly average rates during the year.
We record the resulting translation adjustment in other
comprehensive income, a component of shareholders’
equity. We also record gains and losses resulting from the
translation of intercompany balances of a long-term invest-
ment nature in accumulated other comprehensive loss.
EQUIFAX 2006 ANNUAL REPORT 57