Equifax 2008 Annual Report Download - page 45

28FEB200910255904
specific reserves for customers in an adverse financial con- 2008, to a local governmental authority in the U.S. to
dition. We reassess the adequacy of the allowance for receive a property tax abatement related to economic
doubtful accounts each reporting period. Increases to the development. The title to these assets will revert back to us
allowance for doubtful accounts are recorded as bad debt upon retirement or cancellation of the applicable bonds.
expense, which are included in selling, general and admin- These fixed assets are still recognized in the Company’s
istrative expenses on the accompanying Consolidated Consolidated Balance Sheet as all risks and rewards
Statements of Income. Bad debt expense was $11.0 mil- remain with the Company.
lion, $7.3 million and $5.2 million during the twelve months Impairment of Long-Lived Assets. In accordance with SFAS
ended December 31, 2008, 2007, and 2006, respectively. No. 144, ‘‘Accounting for the Impairment or Disposal of
Long-Lived Assets. Property and equipment are stated at Long-Lived Assets to be Disposed Of’’, or SFAS 144, we
cost less accumulated depreciation and amortization. The monitor the status of our long-lived assets in order to
cost of additions is capitalized. Property and equipment are determine if conditions exist or events and circumstances
depreciated primarily on a straight-line basis over assets’ indicate that an asset group may be impaired in that its
estimated useful lives, which are generally three to five carrying amount may not be recoverable. Significant factors
years for data processing equipment and capitalized inter- that are considered that could be indicative of an impair-
nal-use software and systems costs. Leasehold improve- ment include: changes in business strategy, market condi-
ments are depreciated over the shorter of their estimated tions or the manner in which an asset group is used;
useful lives or lease terms that are reasonably assured. underperformance relative to historical or expected future
Buildings are depreciated over a forty-year period. Other operating results; and negative industry or economic
fixed assets are depreciated over three to seven years. trends. If potential indicators of impairment exist, we esti-
Upon sale or retirement of an asset, the related costs and mate recoverability based on the asset group’s ability to
accumulated depreciation are removed from the accounts generate cash flows greater than the carrying value of the
and any gain or loss is recognized and included in income asset group. We estimate the undiscounted future cash
from continuing operations on the Consolidated Statements flows arising from the use and eventual disposition of the
of Income, with the classification of any gain or loss depen- related long-lived asset group. If the carrying value of the
dent on the characteristics of the asset sold or retired. long-lived asset group exceeds the estimated future undis-
counted cash flows, an impairment loss is recorded based
Certain internal-use software and system development on the amount by which the asset group’s carrying amount
costs are deferred and capitalized in accordance with exceeds its fair value. We utilize estimates of discounted
American Institute of Certified Public Accountants State- future cash flows to determine the asset group’s fair value.
ment of Position 98-1, ‘‘Accounting for the Costs of Com- During 2008, we recorded a $2.4 million impairment loss,
puter Software Developed or Obtained for Internal Use.’’ included in depreciation and amortization expense, related
Accordingly, the specifically identified costs incurred to to the write-down of certain internal-use software from
develop or obtain software which is intended for internal which we will no longer derive future benefit.
use are not capitalized until the determination is made as
to the availability of a technically feasible solution to solve Goodwill and Indefinite-Lived Intangible Assets. Good-
the predefined user and operating performance require- will represents the cost in excess of the fair value of the
ments as established during the preliminary stage of an net assets of acquired businesses. In accordance with
internal-use software development project. Costs incurred SFAS No. 142, ‘‘Goodwill and Other Intangible Assets’’, or
during a software development project’s preliminary stage SFAS 142, goodwill is not amortized. We are required to
and post-implementation stage are expensed. Application test goodwill for impairment at the reporting unit level on
development activities which are eligible for capitalization an annual basis or on an interim basis if an event occurs or
include software design and configuration, development of circumstances change that would reduce the fair value of a
interfaces, coding, testing, and installation. Capitalized reporting unit below its carrying value. We perform our
internal-use software and systems costs are subsequently annual goodwill impairment test as of September 30 each
amortized on a straight-line basis over a three- to ten-year year. In analyzing goodwill for potential impairment, we use
period after project completion and when the related projections of future discounted cash flows from our report-
software or system is ready for its intended use. ing units to determine whether the reporting unit’s esti-
mated fair value exceeds its carrying value. Our estimates
Depreciation and amortization expense related to property of fair value for each reporting unit are corroborated by
and equipment was $66.3 million, $62.0 million and market multiple comparables. If the fair value of a reporting
$51.5 million during the twelve months ended Decem- unit exceeds its carrying value, then no further testing is
ber 31, 2008, 2007, and 2006, respectively. required. However, if a reporting unit’s fair value were to be
less than its carrying value, we would then determine the
Industrial Revenue Bonds. Pursuant to the terms of the
amount of the impairment charge, if any, which would be
industrial revenue bonds, we transferred title of certain fixed
the amount that the carrying value of the reporting unit’s
assets with a cost of $28.4 million, as of December 31,
2008 ANNUAL REPORT 43