Equifax 2010 Annual Report Download - page 31

Deferred revenue consists of amounts billed in excess of revenue
recognized on sales of our information services relating generally to
the deferral of subscription fees and arrangement consideration from
elements not meeting the criteria for having stand-alone value
discussed above. Deferred revenues are subsequently recognized as
revenue in accordance with our revenue recognition policies.
Judgments and uncertainties — Each element of a multiple element
arrangement must be considered separately to ensure that appropri-
ate accounting is performed for these deliverables. These
considerations include assessing the price at which the element is
sold compared to its relative fair value; concluding when the element
will be delivered; and determining whether any contingencies exist in
the related customer contract that impact the prices paid to us for
the services.
In addition, the determination of certain of our marketing information
services and tax management services revenue requires the use of
estimates, principally related to transaction volumes in instances
where these volumes are reported to us by our clients on a monthly
basis in arrears. In these instances, we estimate transaction volumes
based on average actual volumes reported in the past. Differences
between our estimates and actual final volumes reported are
recorded in the period in which actual volumes are reported.
Effects if actual results differ from assumptions — We have not
experienced significant variances between our estimates of marketing
information services and tax management services revenues reported
to us by our customers and actual reported volumes in the past. We
monitor actual volumes to ensure that we will continue to make
reasonable estimates in the future. If we determine that we are unable
to make reasonable future estimates, revenue may be deferred until
actual customer data is obtained. However, if actual results are not
consistent with our estimates and assumptions, or if our customer
arrangements become more complex or include more bundled offer-
ings in the future, we may be required to recognize revenue differently
in the future to account for these changes. We do not believe there is
a reasonable likelihood that there will be a material change in the
future estimates or assumptions we use to recognize revenue.
Goodwill and Indefinite-Lived Intangible Assets
We review goodwill and indefinite-lived intangible assets for impair-
ment annually (as of September 30) and whenever events or changes
in circumstances indicate the carrying value of an asset may not be
recoverable. These events or circumstances could include a
significant change in the business climate, legal factors, operating
performance or trends, competition, or sale or disposition of a
significant portion of a reporting unit. We have nine reporting units
comprised of Consumer Information Solutions (which includes
Mortgage Solutions and Consumer Financial Marketing Services),
Europe, Latin America, Canada Consumer, North America Personal
Solutions, North America Commercial Solutions, The Work Number,
Tax Management Services and Talent Management Services.
The goodwill balance at December 31, 2010, for our nine reporting
units was as follows:
December 31,
(In millions) 2010
Consumer Information Solutions
(including Mortgage Solutions and
Consumer Financial Marketing Services) $ 628.5
Europe 96.2
Latin America 219.8
Canada Consumer 30.9
North America Personal Solutions 1.8
North America Commercial Solutions 37.6
The Work Number 752.2
Tax Management Services 121.6
Talent Management Services 26.1
Total goodwill $1,914.7
Judgments and Uncertainties — In determining the fair value of our
reporting units, we used a combination of the income and market
approaches to estimate the reporting unit’s business enterprise value.
Under the income approach, we calculate the fair value of a reporting
unit based on estimated future discounted cash flows which require
assumptions about short and long-term revenue growth rates,
operating margins for each reporting unit, discount rates, foreign cur-
rency exchange rates and estimates of capital charges. The
assumptions we use are based on what we believe a hypothetical
marketplace participant would use in estimating fair value. Under the
market approach, we estimate the fair value based on market
multiples of revenue or earnings before income taxes, depreciation
and amortization, for benchmark companies. We believe the
benchmark companies used for each of the reporting units serve as
an appropriate input for calculating a fair value for the reporting unit
as those benchmark companies have similar risks, participate in
similar markets, provide similar services for their customers and
compete with us directly. The companies we use as benchmarks are
outlined in our ‘‘Competition’’ discussion in Item I of our 2010 Annual
Report on Form 10-K. Data for the benchmark companies was
obtained from publicly available information. Latin America has
benchmark companies that conduct operations of businesses of a
similar type and scope, such as Experian Group Limited and The Dun
& Bradstreet Corporation. The Work Number, Tax Management
Services and Talent Management Services share a different set of
benchmark companies, notably ADP and Paychex Inc., as the
markets they serve are different than those served by our other
reporting units. Valuation multiples were selected based on a financial
benchmarking analysis that compared the reporting unit’s operating
result with the comparable companies’ information. In addition to
these financial considerations, qualitative factors such as variations in
growth opportunities and overall risk among the benchmark
companies were considered in the ultimate selection of the multiple.
The values separately derived from each of the income and market
approach valuation techniques were used to develop an overall
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