Equifax 2003 Annual Report Download - page 28

M ANAGEM ENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
EQUIFAX. INFORMATION THAT EMPOWERS. 25
Our determination of pension income and expense is based on a
market-related valuation of assets, which reduces year-to-year
volatility. This market-related valuation of assets recognizes invest-
ment gains and losses over a five-year period from the year in
which they occur. Investment gains and losses for this purpose are
the difference between expected return calculated using the
market value of assets and the actual return on the market value of
assets. Since the market-related value of assets recognizes gains
or losses prospectively over five years, the future value of assets
will be affected as previously deferred gains or losses are recog-
nized. Our U.S. cumulative unrecognized actuarial losses at Decem-
ber 31, 2003 and 2002 were $194.3 million and $202.0 million,
respectively. These unrecognized losses will result in an increase
in our future net periodic pension benefit cost, depending on several
factors including their relative size to our projected benefit obli-
gation and market-related value of plan assets.
The discount rate we utilize for determining future pension obli-
gations is based on the yield associated with Moody’s Long-Term
Aa-rated Corporate Bond Index. The discount rate determined on
this basis has decreased from 6.75% at December 31, 2002 to
6.25% at December 31, 2003.
OTHER
We have an outstanding tax-related matter with a Canadian
tax authority totaling $31.3 million. During 2003, we deposited
$5.3 million, representing a portion of one of the reassessment
positions. The $5.3 million deposit is pursuant to a statutory
requirement in Canada and is not indicative of the estimated expo-
sure of the matter. It is the opinion of our outside legal and tax
experts that we should prevail.
INFLATION
We do not believe that the rate of inflation has had a material
effect on our operating results. However, inflation could adversely
affect our future operating results if it were to result in a substan-
tial weakening in economic conditions.
RECENT ACCOUNTING PRONOUNCEMENTS. In November 2002, the EITF
reached a consensus on Issue No. 00-21, “Revenue Arrangements
with Multiple Deliverables.” EITF Issue No. 00-21 provides guid-
ance pertaining to the revenue recognition accounting methodol-
ogy to apply to revenue arrangements that involve the delivery or
performance of multiple products, services, and/or rights to use
assets. The provisions of EITF Issue No. 00-21 apply to revenue
arrangements entered into in fiscal periods beginning after June 15,
2003. We adopted EITF Issue No. 00-21 on July 1, 2003, and it did
not have a material impact on our financial position or results
of operations.
In November 2002, the FASB issued FASB Interpretation No. 45,
“Guarantor’s Accounting and Disclosure Requirements for Guaran-
tees, Including Indirect Guarantees of Indebtedness of Others,” or
FIN 45. FIN 45 currently requires that a liability be recorded in the
guarantor’s balance sheet upon issuance of a guarantee. In addi-
tion, as of December 31, 2002, FIN 45 requires disclosures about
the guarantees that an entity has issued, including a roll-forward of
the entity’s product warranty liabilities. We adopted the disclosure
requirements of FIN 45 effective December 31, 2002 and the remain-
ing provisions on January 1, 2003, and have included the required
disclosures in the “Notes to Consolidated Financial Statements.”
In December 2002, the FASB issued SFAS No. 148, “Accounting for
Stock-Based Compensation, Transition and Disclosure.” SFAS 148
provides alternative methods of transition for a voluntary change
to the fair value based method of accounting for stock-based
employee compensation. In addition, SFAS 148 amends the dis-
closure provisions of SFAS 123 “Accounting for Stock Based
Compensation” to currently require disclosure in the summary of
significant accounting policies of the effects of an entity’s account-
ing policy with respect to stock-based employee compensation on
reported net income and earnings per share in annual and interim
financial statements. SFAS 148 does not amend SFAS 123 to
require companies to account for their employee stock-based
awards using the fair value method; however, it does require
adoption of the disclosure provisions for all companies with stock-
based employee compensation, regardless of whether they utilize
the fair value method of accounting described in SFAS 123 or the
intrinsic value method described in APB Opinion No. 25, “Account-
ing for Stock Issued to Employees.” We continue to use the intrin-
sic value method. We adopted SFAS 148 on January 1, 2003 and
have included the required disclosures in our “ Notes to Consolidated
Financial Statements.”
In April 2003, the FASB issued SFAS No. 149, “Amendment of
Statement 133 on Derivative Instruments and Hedging Activities.”
SFAS 149 requires that contracts with comparable characteristics
be accounted for similarly. In particular, SFAS 149 clarifies under
what circumstances a contract with an initial net investment meets
the characteristic of a derivative, clarifies when a derivative con-
tains a financing component, and amends the meaning of the term
“an underlying” to conform it to language used in FASB Interpreta-
tion No. 45, “Guarantor Accounting and Disclosure Requirements
for Guarantees, Including Indirect Guarantees of Indebtedness of
Others.” SFAS 149 is effective, on a prospective basis, for contracts
entered into or modified after June 30, 2003, and for hedging relation-
ships designated after June 30, 2003. We have adopted SFAS 149
and it has not had a material impact on our financial position or
results of operations.