Equifax 2007 Annual Report Download - page 61

EQUIFAX | 2007 ANNUAL REPORT 59
Income Taxes. In accordance with SFAS No. 109, “Accounting for
Income Taxes,” we account for income taxes under the liability
method. Deferred income tax assets and liabilities are determined
based on the estimated future tax effects of temporary differences
between the fi nancial statement and tax bases of assets and liabilities,
as measured by current enacted tax rates. We periodically assess
whether it is more likely than not that we will generate suffi cient
taxable income to realize our deferred tax assets. We record a
valuation allowance, as necessary, to reduce our deferred tax assets
to the amount of future tax benefi t that we estimate is more likely
than not to be realized.
In July 2006, the FASB issued FASB Interpretation No. 48,
“Accounting for Uncertainty in Income Taxes – an interpretation
of SFAS No. 109,” or FIN 48, which provides clarifi cation related
to the process associated with accounting for uncertain tax positions
recognized in the Company’s Consolidated Financial Statements.
FIN 48 prescribes a more likely than not threshold for fi nancial
statement recognition and measurement of a tax position taken,
or expected to be taken, in a tax return. FIN 48 also provides
guidance related to, among other things, classifi cation, accounting
for interest and penalties associated with tax positions, and
disclosure requirements. We adopted FIN 48 on January 1, 2007.
The impact of our reassessment of our tax positions in accordance
with the requirements of FIN 48 was immaterial to our Consolidated
Financial Statements.
Accordingly, we record tax benefi ts for positions that we believe
are more likely than not of being sustained under audit examinations.
Regularly, we assess the potential outcome of such examinations to
determine the adequacy of our income tax accruals. We adjust our
income tax provision during the period in which we determine that
the actual results of the examinations may differ from our estimates.
Changes in tax laws and rates are refl ected in our income tax
provision in the period in which they occur.
Earnings Per Share. In accordance with SFAS No. 128, “Earnings
per Share,” our basic earnings per share, or EPS, is calculated as
net income divided by the weighted-average number of common
shares outstanding during the reporting 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 exercised
and resulted in additional common shares outstanding. The income
amounts used in both our basic and diluted EPS calculations are
the same. A reconciliation of the weighted-average outstanding
shares used in the two calculations is as follows:
Twelve Months Ended December 31,
(In millions)
2007 2006 2005
Weighted-average shares
outstanding (basic) 132.0 127.1 129.7
Effect of dilutive securities:
Stock options 2.9 1.8 2.1
Long-term incentive plans 0.2 0.5 0.4
Weighted-average shares
outstanding (diluted) 135.1 129.4 132.2
We excluded 0.6 million stock options from our 2007 EPS
calculation because their effect on EPS was anti-dilutive. The
number of stock options excluded from the EPS calculation for
2006 and 2005 was not material.
Benefi t Plans. We sponsor various pension and defi ned contribution
plans covering substantially all our employees in the U.S., Canada
and U.K. We also maintain certain healthcare and life insurance
benefi t plans for eligible retired U.S. employees. Benefi ts under
the pension and other postretirement benefi t plans are generally
based on age at retirement and years of service and for some pension
plans, benefi ts are also based on the employee’s annual earnings.
The net periodic cost of our pension and other postretirement
plans is determined using several actuarial assumptions, the most
signifi cant of which are the discount rate, the long-term rate of
asset return, and medical trend data.
Effective January 1, 2007, we adopted SFAS No. 158,
“Employers’ Accounting for Defi ned Benefi t Pension and Other
Postretirement Plans – an amendment of FASB Statements
No. 87, 88, 106 and 132R,” which requires that our Consolidated
Balance Sheets reflect the funded status of the pension and
postretirement plans.
Cash Equivalents. We consider all highly liquid investments with
an original maturity of three months or less to be cash equivalents.
Trade Accounts Receivable and Allowance for Doubtful Accounts.
We do not recognize interest income on our trade accounts receivable.
Additionally, we generally do not require collateral from our
customers related to our trade accounts receivable.
The allowance for doubtful accounts for estimated losses on
trade accounts receivable is based on historical write-off experience,
an analysis of the aging of outstanding receivables, customer
payment patterns and the establishment of specifi c reserves for
customers in an adverse fi nancial condition. We reassess the
adequacy of the allowance for doubtful accounts each reporting
period. Increases to the allowance for doubtful accounts are
recorded as bad debt expense, which are included in selling,
general and administrative expenses on the accompanying
Consolidated Statements of Income. Bad debt expense was
$7.3 million, $5.2 million and $4.3 million during 2007, 2006,
and 2005, respectively.
Long-Lived Assets. Property and equipment are stated at cost less
accumulated depreciation and amortization. The cost of additions
is capitalized. Property and equipment are depreciated primarily
on a straight-line basis over assets’ estimated useful lives, which
are generally three to ten years for data processing equipment and
capitalized internal-use software and systems costs. Leasehold
improvements are depreciated over the shorter of their estimated
useful lives or lease terms that are reasonably assured. Buildings
are depreciated over a forty-year period. Other fi xed assets are
depreciated over three to seven years. Upon sale or retirement of
an asset, the related costs and accumulated depreciation are removed