AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 

Revenue recognition 

Our policy follows the guidance from Securities and Exchange Commission ("SEC") Staff Accounting Bulletin 101 "Revenue 

Recognition in Financial Statements  ( SAB 101 ). SAB 101 provides guidance on the recognition, presentation, and 

disclosure of revenue in financial statements. We recognize revenues when persuasive evidence of an arrangement exists, the 

product has been shipped or the services have been provided to the client, the sales price is fixed or determinable, and 

collectibility is reasonably assured.  

During fiscal year 2003, approximately 60% of our revenue is recognized based on transaction volumes, approximately 12% is 

related to time and material contracts, approximately 14% is related to cost reimbursable contracts, approximately 7% of our 

revenues are recognized using percentage of completion accounting and the remainder is fixed fee based. 

Generally, information technology processing revenues are recognized as services are provided to the client. Revenues from 

annual maintenance contracts are deferred and recognized ratably over the maintenance period. Revenues from hardware sales 

are recognized upon delivery to the client and when uncertainties regarding customer acceptance have expired. Revenues for 

business process outsourcing services are recognized as services are rendered, generally on the basis of the number of accounts 

or transactions processed. 

In the federal government segment, our contracts are typically cost reimbursable, fixed price, unit price, or time and material 

contracts. Revenues on cost reimbursable contracts are recognized by applying an estimated factor to costs as incurred, such 

factor being determined by the contract provisions and prior experience. Revenues on unit price contracts are recognized at the 

contractual selling prices of work completed and accepted by the client. Revenues on time and material contracts are 

recognized at the contractual rates as the labor hours and direct expenses are incurred.  

Revenues on certain fixed price contracts where we provide information technology development and implementation services and 

certain contracts in our federal government segment are recognized over the contract term based on the percentage of development 

and implementation services that are provided during the period compared with the total estimated development and 

implementation services to be provided over the entire contract using Statement of Position 81 1,  Accounting for Performance of 

Construction Type and Certain Production Type Contracts  ( SOP 81 1 ). SOP 81 1 requires the use of percentage of completion 

accounting for long term contracts that are binding agreements between us and our customers in which we agree, for 

compensation, to perform a service to the customer's specifications.  Performance will often extend over long periods, and our 

right to receive payment depends on our performance in accordance with the agreement. The percentage of completion 

methodology involves recognizing revenue using the percentage of services completed, on a current cumulative cost to total cost 

basis, using a reasonably consistent profit margin over the period. Due to the long term nature of these contracts, developing the 

estimates of costs often requires significant judgment. 

Emerging Issues Task Force Issue 00 21 "Accounting for Revenue Arrangements with Multiple Deliverables" ("EITF 00 21") 

addresses the accounting treatment for an arrangement to provide the delivery or performance of multiple products and/or 

services where the delivery of a product or system or performance of services may occur at different points in time or over 

different periods of time. The Emerging Issues Task Force ("EITF") reached a consensus regarding, among other issues, the 

applicability of the provisions regarding separation of contract elements in EITF 00 21 to contracts where one or more 

elements fall within the scope of other authoritative literature, such as SOP 81 1. EITF 00 21 does not impact the use of SOP 

81 1 for contract elements that fall within the scope of SOP 81 1, such as the implementation or development of an 

information technology system to client specifications under a long term contract. Where an implementation or development 

project is contracted with a client, and we will also provide services or operate the system over a period of time, EITF 00 21 

provides the methodology for separating the contract elements and allocating total arrangement consideration to the contract 

elements. The provisions of EITF 00 21 will be applicable on a prospective basis to transactions entered into in fiscal years 

beginning after June 15, 2003. We believe that EITF 00 21 will not have a material impact on our financial position or results 

of operations. 

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