Equifax 2010 Annual Report Download - page 47

Certain internal-use software and system development costs are
deferred and capitalized. Accordingly, the specifically identified costs
incurred to develop or obtain software which is intended for internal
use are not capitalized until the determination is made as to the avail-
ability of a technically feasible solution to solve the predefined 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 and post-implementation stage are expensed. Application
development activities which are eligible for capitalization include
software design and configuration, development of interfaces, coding,
testing, and installation. Capitalized internal-use software and
systems costs 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.
Depreciation and amortization expense from continuing operations
related to property and equipment was $72.2 million, $65.0 million
and $59.5 million during the twelve months ended December 31,
2010, 2009, and 2008, respectively.
Industrial Revenue Bonds. Pursuant to the terms of certain industrial
revenue bonds, we transferred title to certain of our fixed assets with
costs of $47.9 million and $35.7 million as of December 31, 2010
and 2009, respectively, to a local governmental authority in the U.S.
to receive a property tax abatement related to economic develop-
ment. The title to these assets will revert back to us upon retirement
or cancellation of the applicable bonds. These fixed assets are still
recognized in the Company’s Consolidated Balance Sheets as all
risks and rewards remain with the Company.
Impairment of Long-Lived Assets. We monitor the status of our long-
lived assets in order to determine if conditions exist or events and
circumstances indicate that an asset group may be impaired in that
its carrying amount may not be recoverable. Significant 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 group is used; underperformance relative to historical
or expected future operating results; and negative industry or
economic trends. If potential indicators of impairment exist, we
estimate recoverability based on the asset group’s ability to generate
cash flows greater than the carrying value of the asset group. We
estimate the undiscounted future cash flows arising from the use and
eventual disposition of the related long-lived asset group. If the carry-
ing 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 group’s carrying amount exceeds its
fair value. We utilize estimates of discounted future cash flows to
determine the asset group’s fair value. During 2008, we recorded a
$2.4 million impairment loss, included in depreciation and amortiza-
tion expense, related to the write-down of certain internal-use
software from which we will no longer derive future benefit. We did
not record any impairment losses in 2010 or 2009.
Goodwill and Indefinite-Lived Intangible Assets. Goodwill
represents the cost in excess of the fair value of the net assets of
acquired businesses. Goodwill is not amortized. We are required to
test goodwill for impairment at the reporting unit level on an annual
basis or on an interim basis if an event occurs or circumstances
change that would reduce the fair value of a reporting unit below its
carrying value. We perform our annual goodwill impairment test as of
September 30 each year. In analyzing goodwill for potential impair-
ment, we use a combination of the income and market approaches
to estimate the reporting unit’s fair value. Under the income
approach, we calculate the fair value of a reporting unit based on
estimated future discounted cash flows. The assumptions we use are
based on what we believe a hypothetical marketplace participant
would use in estimating fair value. Under the market approach, we
estimate the fair value based on market multiples of revenue or earn-
ings before interest, income taxes, depreciation and amortization for
benchmark companies. If the fair value of a reporting unit exceeds its
carrying value, then no further testing is required. However, if a
reporting unit’s fair value were to be less than its carrying value, we
would then determine the amount of the impairment charge, if any,
which would be the amount that the carrying value of the reporting
unit’s goodwill exceeded its implied value.
Contractual/territorial rights represent the estimated fair value of rights
to operate in certain territories acquired through the purchase of
independent credit reporting agencies in the U.S. and Canada. Our
contractual/territorial rights are perpetual in nature and, therefore, the
useful lives are considered indefinite. Indefinite-lived intangible assets
are not amortized. We are required to test indefinite-lived intangible
assets for impairment annually or whenever events and
circumstances indicate that there may be an impairment of the asset
value. Our annual impairment test date is September 30. We perform
the impairment test for our indefinite-lived intangible assets by
comparing the asset’s fair value to its carrying value. We estimate the
fair value based on projected discounted future cash flows. An
impairment charge is recognized if the asset’s estimated fair value is
less than its carrying value.
We completed our annual impairment testing for goodwill and
indefinite-lived intangible assets during the twelve months ended
December 31, 2010, 2009, and 2008, and we determined that there
was no impairment in any of these years.
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