Equifax 2004 Annual Report Download - page 56

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N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
Income Taxes.
We base income tax expense on pre-tax
fi nancial accounting income, and recognize deferred tax
assets and liabilities for the expected tax consequences of
temporary differences between the tax bases of assets and
liabilities and their reported amounts. Signifi cant judgment
is required to determine our overall local, state, federal and
foreign income tax expense due to transactions and calcula-
tions where the ultimate tax consequence is uncertain. We
have recorded a valuation allowance to reduce our deferred
tax assets to the amount of future tax benefi t that we esti-
mate is likely to be received. We believe that our estimates
are reasonable, however, the fi nal outcome of tax matters
may be different than the estimates refl ected on our fi nan-
cial statements.
Earnings Per Share.
Our basic earnings per share, or
EPS, is calculated as income from continuing operations
or net income available to common stockholders divided
by the weighted average number of common shares
outstanding during the period. Diluted EPS is calculated
to refl ect the potential dilution that would occur if stock
options or other contracts to issue common stock were exer-
cised and resulted in additional common shares outstand-
ing. The income amount used in our EPS calculations is
the same for both basic and diluted EPS. A reconciliation
of the weighted average outstanding shares used in the two
calculations is as follows:
(in millions)
2004
2003 2002
Weighted average shares
outstanding (basic)
131.3
134.5 136.2
Effect of dilutive securities:
Stock options
1.6
2.0 2.3
Long-term incentive plans
0.6
0.2 –
Weighted average shares
outstanding (diluted)
133.5
136.7 138.5
Cash and Cash Equivalents.
We consider cash and cash
equivalents to be short-term cash investments with original
maturities of three months or less.
Property and Equipment.
The cost of property and
equipment is depreciated primarily on the straight-line
basis over estimated asset lives of 30 to 50 years for build-
ings; useful lives, not to exceed lease terms, for leasehold
improvements; three to ten years for data processing equip-
ment (including capitalized software); and fi ve to seven
years for other fi xed assets.
Certain internal use software and systems develop-
ment costs are deferred and capitalized in accordance
with American Institute of Certifi ed Public Accountants
Statement of Position 98-1, “Accounting for the Costs of
Computer Software Developed or Obtained for Internal
Use,” and Emerging Issues Task Force (“EITF”) 97-13,
“Accounting for Costs Incurred with a Business Process
Reengineering Project.” Accordingly the specifi cally iden-
tifi ed costs incurred to develop or obtain software and
accompanying hardware which is intended for internal use
are not capitalized until the determination is made as to
the availability of a technically feasible solution to solve the
pre-defi ned user and operating performance requirements
as established 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 eli-
gible for capitalization include software design and confi gura-
tion, development of interfaces, coding, testing, installation
and the development of training materials. Costs of business
process reengineering are expensed as incurred. We monitor
the activities undertaken in our various software and systems
development projects and analyze the associated costs, mak-
ing appropriate distinction between and accounting for costs
to be capitalized and costs to be expensed. Internal use soft-
ware and systems development project costs that are deferred
and capitalized are subsequently amortized on a straight-
line basis over a three to ten year period after project
completion and when the related software or system is ready
for its intended use.
Impairment of Long-Lived Assets.
We monitor the
status of our long-lived assets annually or more frequently
if necessary, in order to determine if conditions exist or
events and circumstances indicate that an asset may be
impaired in that its carrying amount may not be recover-
able. Signifi cant factors that are considered that could be
indicative of an impairment include: changes in business
strategy, market conditions or the manner in which an asset
is used; underperformance relative to historical or expected
future operating results; and negative industry or economic
trends. If potential indicators of impairment exist, we esti-
mate recoverability based on the asset’s ability to generate
cash fl ows greater than the carrying value of the asset. We
estimate the undiscounted future cash fl ows 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 fl ows, an
impairment loss is recorded based on the amount by which