ADP 2014 Annual Report Download - page 51

are based upon preliminary estimates and assumptions and subject to revision when the Company receives final information, including appraisals and other
analysis. Accordingly, the measurement period for such purchase price allocations will end when the information, or the facts and circumstances, becomes
available, but will not exceed twelve months. The Company acquired one business during fiscal 2015 for approximately $10.1 million , net of cash acquired. The
Company did not acquire any businesses during fiscal 2014 and acquired two businesses during fiscal 2013 for approximately $40.4 million , net of cash acquired.
Purchase accounting has been finalized for all acquisitions completed to date. These acquisitions were not material, either individually or in the aggregate, to the
Company's operations, financial position, or cash flows.
Q. Income Taxes. The objectives of accounting for income taxes are to recognize the amount of taxes payable or refundable for the current year and deferred tax
liabilities and assets for the future tax consequences of events that have been recognized in an entity's financial statements or tax returns. The Company is subject
to the continuous examination of our income tax returns by the Internal Revenue Service (“IRS”) and other tax authorities.
There is a financial statement recognition threshold and measurement attribute for tax positions taken or expected to be taken in a tax return. Specifically, the
likelihood of an entity's tax benefits being sustained must be “more likely than not,” assuming that these positions will be examined by taxing authorities with full
knowledge of all relevant information prior to recording the related tax benefit in the financial statements. If a tax position drops below the “more likely than not”
standard, the benefit can no longer be recognized. Assumptions, judgment, and the use of estimates are required in determining if the “more likely than not”
standard has been met when developing the provision for income taxes. As of June 30, 2015 and 2014 , the Company's liabilities for unrecognized tax benefits,
which include interest and penalties, were $27.1 million and $56.5 million , respectively.
If certain pending tax matters settle within the next twelve months, the total amount of unrecognized tax benefits may increase or decrease for all open tax years
and jurisdictions. Based on current estimates, favorable settlements related to various jurisdictions and tax periods could increase earnings by up to $5 million .
Audit outcomes and the timing of audit settlements are subject to significant uncertainty. We continually assess the likelihood and amount of potential adjustments
and adjust the income tax provision, the current tax liability, and deferred taxes in the period in which the facts that give rise to a revision become known.
R. Workers' Compensation Costs. The Company employs a third-party actuary to assist in determining the estimated claim liability related to workers'
compensation and employer's liability coverage for PEO Services worksite employees. In estimating ultimate loss rates, we utilize historical loss experience,
exposure data, and actuarial judgment, together with a range of inputs which are primarily based upon the worksite employee's job responsibilities, their location,
the historical frequency and severity of workers' compensation claims, and an estimate of future cost trends. For each reporting period, changes in the actuarial
assumptions resulting from changes in actual claims experience and other trends are incorporated into our workers' compensation claims cost estimates. The
Company has secured specific per occurrence insurance that caps the exposure for each claim at $1 million per occurrence, and has also secured aggregate stop loss
insurance that caps aggregate losses at a certain level in certain policy years. Additionally, for fiscal 2015 , 2014 and 2013 , the Company entered into reinsurance
arrangements to cover substantially all losses incurred by the Company for the fiscal 2015 , 2014 and 2013 policy years up to the $1 million per occurrence related
to workers' compensation and employer's liability deductible reimbursement insurance protection for PEO services worksite employees.
S. Recently Issued Accounting Pronouncements. In April 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update
("ASU") 2015-05, "Customer's Accounting for Fees Paid in a Cloud Computing Arrangement." The update provides guidance on whether a cloud computing
arrangement includes a software license. If a cloud computing arrangement includes a software license, then the customer should account for the software license
element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the
customer should account for the arrangement as a service contract. ASU No. 2015-05 is effective for fiscal years, and interim periods within those fiscal years,
beginning after December 15, 2015. Early adoption is permitted. The Company has not yet determined the impact of A SU 2015-05 on its consolidated results of
operations, financial condition, or cash flows.
In April 2015, the FA SB issued ASU 2015-04, "Compensation - Retirement Benefits (Topic 715): Practical Expedient for the Measurement Date of an Employer's
Defined Benefit Obligation and Plan Assets." The update allows an entity to remeasure their pension and other post-retirement benefit plan assets and liabilities at
the month-end closest to a significant event such as a plan amendment, curtailment, or settlement. ASU 2015-04 is effective for fiscal years, and interim reporting
periods within those years, beginning after December 15, 2015. Early adoption is permitted. The impact of ASU 2015-04 is dependent upon the nature of future
significant events impacting the Company's pension plans, if any.
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