Equifax 2001 Annual Report Download - page 40

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Equifax
Notes to Consolidated Financial Statements
1.
Significant Accounting and Reporting Policies
Principles of Consolidation The consolidated
financial statements include the accounts of
the Company and its majority-owned and con-
trolled subsidiaries. All significant intercom-
pany transactions and balances have been
eliminated. Certain prior year amounts have
been reclassified to conform with the current
year presentation. The historical financial
statements presented have been restated to
reflect the spin-off of Certegy Inc. (Note 2).
Nature of OperationsThe Company principally
provides information services to businesses to
help them grant credit and market to their cus-
tomers (see Note 12 for segment information).
The primary markets include retailers, banks
and other financial institutions, the transpor-
tation, telecommunications, utility, and manu-
facturing industries, as well as consumers and
government. The Company’s operations are
predominantly located within the United States,
with foreign operations principally located in
Canada, the United Kingdom and Brazil.
Use of EstimatesThe preparation of financial
statements in conformity with accounting prin-
ciples generally accepted in the United States
requires management to make estimates and
assumptions. These estimates and assumptions
affect the reported amounts of assets and lia-
bilities and disclosure of contingent assets and
liabilities at the date of the financial statements
as well as reported amounts of revenues and
expenses during the reporting period. Actual
results could differ from these estimates.
Revenue Recognition and Deferred Revenue
Revenues from the delivery of consumer and
commercial credit information and related
products and services are recognized at the
time of delivery based on a fixed unit price or,
in the case of subscription contracts, which
provide credit reports or products to customers
for a specified period of time, revenues are
recognized over the subscription term.
Revenues from credit marketing services are
based on the number of records sold and are
recognized as data is delivered and accepted by
the customer.
Revenues from direct marketing products and
services are based on the number of records
processed or delivered and are recognized when
products are delivered or services are performed.
The Company also licenses its direct marketing
data to customers and recognizes revenues when
the data is delivered. For arrangements that
include ongoing data updates and other signifi-
cant obligations throughout the license term,
revenues are recognized over the license term.
Amounts billed in advance are recorded as
current or long-term deferred revenue on the
balance sheet, with current deferred revenue
reflecting services expected to be provided
within the next 12 months. Current deferred
revenue is included with other current liabilities
in the accompanying consolidated balance
sheets, and as of December 31, 2001, and 2000,
totaled $21.8 million and $32.2 million, respec-
tively. In 1996, the Company received a one-time
payment of $58 million related to a lottery sub-
contract and recognized $5.4 million in revenue.
The remaining balance is being recognized as
revenue over the term of the contract, with
$9.6 million per year recognized in 1997 through
2001. The unrecognized balance at December 31,
2001, totaled $4.4 million. In conjunction with
the divestiture of the Company’s U.S. risk man-
agement and Canadian risk management busi-
nesses in October 2000 (Note 4), certain of the
proceeds received related to contracts to pro-
vide credit information products and services
to the buyers over the next five to six years and
were recorded in current and long-term deferred
revenue. At December 31, 2001, $19.0 million
remained unrecognized, with $14.7 million
included in long-term deferred revenue in the
accompanying consolidated balance sheets.
This deferred revenue will be recognized as the
contracted products and services are provided.