Equifax 2008 Annual Report Download - page 43

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year. Revenue related to subscription-based contracts hav- unbundle the arrangement into separate elements for
ing a preset number of transactions is recognized as the accounting, we apply one of the accounting policies
services are provided, using an effective transaction rate as described above. This may lead to the arrangement con-
the actual transactions are completed. Any remaining reve- sideration being recognized as the final contract element is
nue related to unfulfilled units is not recognized until the delivered to our customer.
end of the related contract’s subscription period. Revenue Many of our multiple element arrangements involve the
related to subscription-based contracts having an unlimited delivery of services generated by a combination of services
volume is recognized ratably during the contract term. Rev- provided by one or more of our operating segments. No
enue is recorded net of sales taxes. individual information service impacts the value or usage of
If at the outset of an arrangement, we determine that col- other information services included in an arrangement and
lectibility is not reasonably assured, revenue is deferred each service can be sold alone or, in most cases, pur-
until the earlier of when collectibility becomes probable or chased from another vendor without affecting the quality of
the receipt of payment. If there is uncertainty as to the use or value to the customer of the other information ser-
customer’s acceptance of our deliverables, revenue is not vices included in the arrangement. Some of our products
recognized until the earlier of receipt of customer accept- require the development of interfaces or platforms by our
ance or expiration of the acceptance period. If at the out- enabling technologies personnel that allow our customers
set of an arrangement, we determine that the arrangement to interact with our proprietary information databases.
fee is not fixed or determinable, revenue is deferred until These development services do not meet the requirement
the arrangement fee becomes estimable, assuming all for having stand-alone value, thus any related development
other revenue recognition criteria have been met. fees are deferred when billed and are recognized over the
expected period of benefit of the related customer con-
The determination of certain of our marketing information tract. Revenue from the provision of statistical models is
services and tax management services revenue requires recognized as the service is provided and accepted,
the use of estimates, principally related to transaction assuming all other revenue recognition criteria are met.
volumes in instances where these volumes are reported to
us by our clients on a monthly basis in arrears. In these We record revenue on a net basis for those sales in which
instances, we estimate transaction volumes based on aver- we have in substance acted as an agent or broker in the
age actual reported volumes reported in the past. Differ- transaction. The direct costs of set up of a customer are
ences between our estimates and actual final volumes capitalized and amortized as a cost of service during the
reported are recorded in the period in which actual term of the related customer contract.
volumes are reported. We have not experienced significant Deferred revenue consists of amounts billed in excess of
variances between our estimates and actual reported revenue recognized on sales of our information services
volumes in the past. We monitor actual volumes to ensure relating generally to the deferral of subscription fees and
that we will continue to make reasonable estimates in the arrangement consideration from elements not meeting the
future. If we determine that we are unable to make reason- criteria for having stand-alone value discussed above.
able future estimates, revenue may be deferred until actual Deferred revenues are subsequently recorded as revenue in
customer data is obtained. Also within our TALX operating accordance with our revenue recognition policies.
segment, the fees for certain of our tax credits and incen-
tives revenue are based on a portion of the credit delivered Cost of Services. Cost of services consist primarily of
to our clients. Revenue for these arrangements is recog- (1) data acquisition and royalty fees; (2) customer service
nized based on the achievement of milestones, upon cal- costs, which include: personnel costs to collect, maintain
culation of the credit, or when the credit is utilized by our and update our proprietary databases, to develop and
client, depending on the provisions of the client contract. maintain software application platforms and to provide con-
sumer and customer call center support; (3) hardware and
We have certain information solution offerings that are sold software expense associated with transaction processing
as multiple element arrangements. The multiple elements systems; (4) telecommunication and computer network
may include consumer or commercial information, file expense; and (5) occupancy costs associated with facilities
updates for certain solutions, services provided by our ena- where these functions are performed by Equifax
bling technologies personnel, training services, statistical employees.
models and other services. To account for each of these
elements separately, the delivered elements must have Selling, General and Administrative Expenses. Selling,
stand-alone value to our customer, and there must exist general and administrative expenses consist primarily of
objective and reliable evidence of the fair value for any personnel-related costs, restructuring costs, corporate
undelivered elements. For certain customer contracts, the costs, fees for professional and consulting services, adver-
total arrangement fee is allocated to the undelivered ele- tising costs, and other costs of administration.
ments based on their fair values and to the initial delivered
elements using the residual method. If we are unable to
2008 ANNUAL REPORT 41