ADP 2009 Annual Report Download - page 31

In April 2008, the FASB issued FSP FAS 142-3, “Determination of the Useful Life of Intangible Assets” (“FSP FAS 142-3”). FSP FAS
142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a
recognized intangible asset under FASB Statement No. 142, “Goodwill and Other Intangible Assets”. FSP FAS 142-3 also requires expanded
disclosure related to the determination of intangible asset useful lives. FSP FAS 142-3 is effective for financial statements issued for fiscal
years beginning after December 15, 2008, and interim periods within those fiscal years. We are currently evaluating the impact that the
adoption of FSP FAS 142-3 will have on our results of operations, cash flows or financial condition.
In December 2007, the FASB issued Statement No. 141 (revised 2007), “Business Combinations” (“SFAS No. 141R”). SFAS No. 141R
establishes principles and requirements for how the acquirer in a business combination recognizes and measures in its financial statements the
identifiable assets acquired, the liabilities assumed, any controlling interest in the business and the goodwill acquired. SFAS No. 141R further
requires that acquisition-related costs and costs associated with restructuring or exiting activities of an acquired entity will be expensed as
incurred. SFAS No. 141R also establishes disclosure requirements that will require disclosure on the nature and financial effects of the business
combination. Additionally, in April 2009, the FASB issued FSP FAS 141(R)-1, “Accounting for Assets Acquired and Liabilities Assumed in a
Business Combination That Arise from Contingencies” (“FSP FAS 141(R)-1”). FSP FAS 141(R)-1 amends and clarifies SFAS No. 141R to
address application issues on initial recognition and measurement, subsequent measurement and accounting, and disclosure of assets and
liabilities arising from contingencies in a business combination. SFAS 141R and FSP FAS 141(R)-1 will impact business combinations that
may be completed by the Company on or after July 1, 2009. We do not know if the adoption of SFAS No. 141R and FSP FAS 141(R)-1 will
have a material impact on our results of operations and financial condition as the impact depends solely on whether we complete any business
combinations after July 1, 2009 and the terms of such transactions.
In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS No. 157”). SFAS No. 157 clarifies the definition
of fair value, establishes a framework for measuring fair value, and expands the disclosures on fair value measurements. SFAS No. 157 is
effective for fiscal years beginning after November 15, 2007, except for non-financial assets and liabilities recognized or disclosed at fair value
on a non-recurring basis, for which the effective date is fiscal years beginning after November 15, 2008. On July 1, 2008, we adopted SFAS
N
o. 157 for assets and liabilities recognized or disclosed at fair value on a recurring basis. The adoption of SFAS No. 157 did not have an
impact on our consolidated results of operations, cash flows or financial condition. We will adopt SFAS No. 157 for non-financial assets that
are recognized or disclosed on a non-recurring basis on July 1, 2009 and do not anticipate it will have a material impact on our results of
operations, cash flows or financial condition.
CRITICAL ACCOUNTING POLICIES
Our consolidated financial statements and accompanying notes have been prepared in accordance with accounting principles generally
accepted in the United States of America. The preparation of these financial statements requires management to make estimates, judgments and
assumptions that affect reported amounts of assets, liabilities, revenues and expenses. We continually evaluate the accounting policies and
estimates used to prepare the consolidated financial statements. The estimates are based on historical experience and assumptions believed to
be reasonable under current facts and circumstances. Actual amounts and results could differ from these estimates made by management.
Certain accounting policies that require significant management estimates and are deemed critical to our results of operations or financial
position are discussed below.
Revenue Recognition. Our revenues are primarily attributable to fees for providing services (e.g., Employer Services’ payroll processing
fees) as well as investment income on payroll funds, payroll tax filing funds and other Employer Services’ client-related funds. We enter into
agreements for a fixed fee per transaction (e.g., number of payees or number of payrolls processed). Fees associated with services are
recognized in the period services are rendered and earned under service arrangements with clients where service fees are fixed or determinable
and collectibility is reasonably assured. Our service fees are determined based on written price quotations or service agreements having
stipulated terms and conditions that do not require management to make any significant judgments or assumptions regarding any potential
uncertainties. Interest income on collected but not yet remitted funds held for clients is recognized in revenues as earned, as the collection,
holding and remittance of these funds are critical components of providing these services.
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