Equifax 2010 Annual Report Download - page 45

of transactions or services provided during the subscription period,
generally one year. Revenue related to subscription-based contracts
having a preset number of transactions is recognized as the services
are provided, using an effective transaction rate as the actual
transactions are completed. Any remaining revenue related to
unfulfilled units is not recognized until the end of the related
contract’s subscription period. Revenue related to subscription-
based contracts having an unlimited volume is recognized ratably
during the contract term. Revenue is recorded net of sales taxes.
If at the outset of an arrangement, we determine that collectibility is
not reasonably assured, revenue is deferred until the earlier of when
collectibility becomes probable or the receipt of payment. If there is
uncertainty as to the customer’s acceptance of our deliverables,
revenue is not recognized until the earlier of receipt of customer
acceptance or expiration of the acceptance period. If at the outset of
an arrangement, we determine that the arrangement fee is not fixed
or determinable, revenue is deferred until the arrangement fee
becomes estimable, assuming all other revenue recognition criteria
have been met.
The determination of certain of our 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 reported 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. We have not experienced significant variances
between our estimates 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. Also within our TALX
operating segment, the fees for certain of our tax credits and incen-
tives revenue are based on a portion of the credit delivered to our
clients. Revenue for these arrangements is recognized based on the
achievement of milestones, upon calculation of the credit, or when
the credit is utilized by our client, depending on the provisions of the
client contract.
We have certain information solution offerings that are sold as
multiple element arrangements. The multiple elements may include
consumer or commercial information, file updates for certain solu-
tions, services provided by our decisioning technologies personnel,
training services, statistical models and other services. To account for
each of these elements separately, the delivered elements must have
stand-alone value to our customer, and there must exist objective
and reliable evidence of the fair value for any undelivered elements.
For certain customer contracts, the total arrangement fee is allocated
to the undelivered elements based on their fair values and to the initial
delivered elements using the residual method. If we are unable to
unbundle the arrangement into separate units of accounting, we
apply one of the accounting policies described above. This may lead
to the arrangement consideration being recognized as the final
contract element is delivered to our customer.
Many of our multiple element arrangements involve the delivery of
services generated by a combination of services provided by one or
more of our operating segments. No individual information service
impacts the value or usage of other information services included in
an arrangement and each service can be sold alone or, in most
cases, purchased from another vendor without affecting the quality
of use or value to the customer of the other information services
included in the arrangement. Some of our products require the
development of interfaces or platforms by our decisioning technolo-
gies personnel that allow our customers to interact with our
proprietary information databases. These development services
do not meet the requirement for having stand-alone value, thus any
related development fees are deferred when billed and are
recognized over the expected period that the customer will benefit
from the related decisioning technologies service. Revenue from
the provision of statistical models is recognized as the service is
provided and accepted, assuming all other revenue recognition
criteria are met.
We have some multiple element arrangements that include software.
We recognize the elements for which we have established vendor
specific objective evidence at fair value upon delivery, in accordance
with the applicable guidance.
We record revenue on a net basis for those sales in which we have in
substance acted as an agent or broker in the transaction. The direct
costs of set up of a customer are capitalized and amortized as a cost
of service during the term of the related customer contract.
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.
Cost of Services. Cost of services consist primarily of (1) data
acquisition and royalty fees; (2) customer service costs, which
include: personnel costs to collect, maintain and update our
proprietary databases, to develop and maintain software application
platforms and to provide consumer and customer call center support;
(3) hardware and software expense associated with transaction
processing systems; (4) telecommunication and computer network
expense; and (5) occupancy costs associated with facilities where
these functions are performed by Equifax employees.
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