Equifax 2011 Annual Report Download - page 46

period. Revenue related to subscription-based contracts having an
unlimited volume is recognized ratably during the contract term.
Revenue is recorded net of sales taxes.
If at the outset of an arrangement, we determine that collectibility is
not reasonably assured, revenue is deferred until the earlier of when
collectibility becomes probable or the receipt of payment. If there is
uncertainty as to the customer’s acceptance of our deliverables,
revenue is not recognized until the earlier of receipt of customer
acceptance or expiration of the acceptance period. If at the outset of
an arrangement, we determine that the arrangement fee is not fixed
or determinable, revenue is deferred until the arrangement fee
becomes estimable, assuming all other revenue recognition criteria
have been met.
The determination of certain of our tax management services revenue
requires the use of estimates, principally related to transaction
volumes in instances where these volumes are reported to us by our
clients on a monthly basis in arrears. In these instances, we estimate
transaction volumes based on average actual volumes reported in the
past. Differences between our estimates and actual final volumes
reported are recorded in the period in which actual volumes are
reported. We have not experienced significant variances between our
estimates and actual reported volumes in the past. We monitor actual
volumes to ensure that we will continue to make reasonable
estimates in the future. If we determine that we are unable to make
reasonable future estimates, revenue may be deferred until actual
customer data is obtained. Also within our TALX Workforce Solutions
operating segment, the fees for certain of our tax credits and incen-
tives revenue are based on a portion of the credit delivered to our
clients. Revenue for these arrangements is recognized based on the
achievement of milestones, upon calculation of the credit, or when
the credit is utilized by our client, depending on the provisions of the
client contract.
We have certain offerings that are sold as multiple element arrange-
ments. The multiple elements may include consumer or commercial
information, file updates for certain solutions, services provided by
our decisioning technologies personnel, training services, statistical
models and other services. To account for each of these elements
separately, the delivered elements must have stand-alone value to
our customer, and there must exist objective and reliable evidence of
the fair value for any undelivered elements. For certain customer
contracts, the total arrangement fee is allocated to the undelivered
elements. If we are unable to unbundle the arrangement into separate
units of accounting, we apply one of the accounting policies
described above. This may lead to the arrangement consideration
being recognized as the final contract element is delivered to our
customer or ratably over the contract.
Many of our multiple element arrangements involve the delivery of
services generated by a combination of services provided by one or
more of our operating segments. No individual information service
impacts the value or usage of other information services included in
an arrangement and each service can be sold alone or, in most
cases, purchased from another vendor without affecting the quality of
use or value to the customer of the other information services
included in the arrangement. Some of our products require the
development of interfaces or platforms by our decisioning technolo-
gies personnel that allow our customers to interact with our
proprietary information databases. These development services do
not meet the requirement for having stand-alone value, thus any
related development fees are deferred when billed and are
recognized over the expected period that the customer will benefit
from the related decisioning technologies service. Revenue from the
provision of statistical models is recognized as the service is provided
and accepted, assuming all other revenue recognition criteria are
met. The direct costs of set up of a customer are capitalized and
amortized as a cost of service during the term of the related
customer contract.
We have some multiple element arrangements that include software.
We recognize the elements for which we have established vendor
specific objective evidence at fair value upon delivery, in accordance
with the applicable guidance.
We record revenue on a net basis for those sales in which we have in
substance acted as an agent or broker in the transaction.
Deferred revenue consists of amounts billed in excess of revenue
recognized on sales of our information services relating generally to
the deferral of subscription fees and arrangement consideration from
elements not meeting the criteria for having stand-alone value
discussed above. Deferred revenues are subsequently recognized as
revenue in accordance with our revenue recognition policies.
Cost of Services. Cost of services consist primarily of (1) data
acquisition and royalty fees; (2) customer service costs, which
include: personnel costs to collect, maintain and update our
proprietary databases, to develop and maintain software application
platforms and to provide consumer and customer call center support;
(3) hardware and software expense associated with transaction
processing systems; (4) telecommunication and computer network
expense; and (5) occupancy costs associated with facilities where
these functions are performed by Equifax employees.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses consist primarily of personnel-related costs,
restructuring costs, corporate costs, fees for professional and
consulting services, advertising costs, and other costs of
administration.
Advertising. Advertising costs from continuing operations, which
are expensed as incurred, totaled $42.0 million, $32.6 million and
$31.9 million during 2011, 2010 and 2009, respectively.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
EQUIFAX 2011 ANNUAL REPORT
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