Equifax 2003 Annual Report Download - page 46

NOTES TO CONSOLIDATED FINANCIAL STATEM ENTS
EQUIFAX. INFORMATION THAT EMPOWERS. 43
A reconciliation of 2001 reported earnings with pro forma earnings
excluding goodwill amortization is shown on the table below
(in millions, except per share amounts):
As Amortization
Year Ended December 31, 2001: Reported (Net of Tax) Pro Forma
Income from continuing
operations $117.3 $18.5 $135.8
Income from continuing
operations per share
(diluted) $ 0.84 $0.13 $ 0.98
Net income $122.5 $22.0 $144.5
Net income per share
(diluted) $ 0.88 $0.16 $ 1.04
Purchased Data Files Purchased data files, as recorded on the
accompanying consolidated balance sheets, represent the invest-
ment cost of acquired credit, demographic, and other related informa-
tion used in our products and services. The costs are amortized on a
straight-line basis primarily over fifteen years. Amortization expense
was $42.6 million in 2003, $26.3 million in 2002, and $21.8 million in
2001. As of December 31, 2003 and 2002, accumulated amortization
balances were $192.3 million and $147.5 million, respectively.
Impairment of Long-Lived Assets We review the status of our
long-lived assets annually or more frequently, if necessary, in order
to determine if conditions exist or events and circumstances indi-
cate that an asset may be impaired in that its carrying amount may
not be recoverable. If potential indicators of impairment exist, we
estimate recoverability using undiscounted future cash flows arising
from the use and eventual disposition of the related long-lived asset
group. If the carrying value of the long-lived asset group exceeds the
estimated future undiscounted cash flows, an impairment loss is
recorded based on the amount by which the asset’s carrying amount
exceeds its fair value. We utilize the discounted present value of the
associated future estimated cash flows to determine the asset’s fair
value. See Note 6 for the impairment of certain long-lived assets.
Other Assets Other assets at December 31, 2003 and 2002
consist of the following:
(In millions) 2003 2002
Systems development and other
deferred costs $101.0 $102.8
Purchased software 19.0 22.1
Prepaid pension cost 17.0 13.3
Investments in unconsolidated
companies 28.5 27.4
Intangible assets, net 50.3 59.5
Other 32.4 22.2
$248.2 $247.3
As discussed above under “ Impairment of Long-Lived Assets,” we
regularly review these assets to determine if conditions or circum-
stances exist or events have occurred that would indicate that an asset
could be impaired, and, if appropriate, w e recognize the impairment in
our financial results. We believe that the long-lived assets, as reflected
in the above table and the accompanying consolidated balance sheets,
are appropriately valued at December 31, 2003 and 2002. Amortization
expense for other assets was $36.9 million in 2003, $39.7 million in
2002, and $38.7 million in 2001. As of December 31, 2003 and 2002,
related accumulated amortization balances were $141.7 million
and $123.9 million, respectively.
Internal use software and systems development cost, and pur-
chased software cost are deferred and capitalized in accordance
with AICPA Statement of Position 98-1, “ Accounting for the Costs
of Computer Software Developed or Obtained for Internal Use,” or
SOP 98-1. Specifically, SOP 98-1 states that costs to develop or obtain
software and accompanying hardware which is intended for inter-
nal use cannot be capitalized until after the determination is made
as to the availability of a technically feasible solution to solve the
pre-defined user and operating performance requirements as estab-
lished during the “ preliminary stage” of an internal use software
development project. Costs incurred during a software development
project’s preliminary stage are expensed. “Application development”
activities which are eligible for capitalization include software
design, software configuration, development of interfaces, coding,
testing, development of data migration programs, development
of training materials, and installation. The capitalization criteria
also require the implicit or explicit obtainment of authorization for
project completion and funding from the requisite level of manage-
ment possessing the relevant approval authority and knowledge.
Accordingly, we monitor the activities undertaken in our various
software and systems development projects and analyze the associ-
ated costs, making appropriate distinction between and accounting
for costs to be capitalized and costs to be expensed. Internal use
software and systems development projects and purchased software
costs that are deferred and capitalized, are subsequently being
amortized on a straight-line basis over a five- to ten-year period after
project completion and the related software and systems are put
into use.
We have entered into strategic investments in privately held
companies which are reflected as “investments in unconsolidated
companies” in the above table. These investments are accounted
for using the cost method, as we do not exercise significant influence
over the investment entities or hold significant levels of ownership.
Included in these investments is a note receivable from a company
in the amount of $20.0 million which is due November 2006.