AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Business and Summary of Significant Accounting Policies
Description of business and basis of presentation
We are a Fortune 500 company comprised of more than 40,000 people in nearly 100 countries. We operate in three business
segments: commercial, state and local governments and federal government, and provide business process, technology
outsourcing, and system integration solutions to our clients. We were incorporated on June 8, 1988.
The consolidated financial statements are comprised of our accounts and our majority owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated in consolidation. Our fiscal year ends on June 30. The
accompanying consolidated financial statements have been prepared in accordance with accounting principles generally
accepted in the United States of America that require management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, the disclosure of contingent assets and liabilities, the reported amount of revenues and
expenses during the reporting period, as well as the accompanying notes. These estimates are based on information available to
us as of the date of the financial statements. Actual results could differ from these estimates.
Cash and cash equivalents
Cash and cash equivalents consist primarily of cash, short term investments in commercial paper, and money market investments
that have an initial maturity of three months or less. Cash equivalents are valued at cost, which approximates market.
Allowance for doubtful accounts
We make estimates of the collectibility of our accounts receivable. We specifically analyze accounts receivable and historical
bad debts, customer credit worthiness, current economic trends, and changes in our customer payment terms and collection
trends when evaluating the adequacy of our allowance for doubtful accounts. Any change in the assumptions used in analyzing
a specific account receivable may result in additional allowance for doubtful accounts being recognized in the period in which
the change occurs.
Inventories consist primarily of micrographic supplies and equipment, bindery materials, photo enforcement equipment,
network computer hardware and computer maintenance parts, which are generally recorded at the lower of cost or market (net
realizable value) using the first in, first out method.
Property, equipment and software, net
Property and equipment are recorded at cost. Depreciation is computed using the straight line method over the estimated useful
lives of the assets, which for equipment ranges primarily from three to twelve years and for buildings and improvements up to
forty years. Leasehold improvements are depreciated over the shorter of the term of the lease or the estimated life.
Depreciation expense on property and equipment was approximately $98.8 million, $74.5 million and $50.7 million for the
fiscal years ended June 30, 2003, 2002 and 2001, respectively.
Costs incurred to develop computer software to be sold as a separate product are capitalized only after technological feasibility
has been established. Purchased computer software is amortized using the straight line method over expected useful lives,
which range from two to five years. Amortization of computer software was approximately $23.8 million, $13.9 million and
$6.0 million in fiscal years 2003, 2002 and 2001, respectively.