AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Revenues earned in excess of related billings are accrued, whereas billings in excess of revenues earned are deferred until the
related services are provided. Immediate recognition is made of any anticipated losses.
Deferred income taxes provided in the accompanying financial statements are determined based on the difference between
financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the years in which such
differences are expected to reverse. See Note 8 for discussion of income taxes.
Earnings per share
Basic earnings per share is computed using the weighted average number of common shares outstanding during the period.
Diluted earnings per share is computed using the combination of dilutive common share equivalents and the weighted average
number of common shares outstanding during the period. All share and per share information is presented giving effect to the
two for one stock split of our Class A and Class B common shares that occurred February 22, 2002 (see Note 9). See Note 11
for the computation of earnings per share.
Stock based compensation
In December 2002, the FASB issued Statement of Financial Accounting Standards No. 148 Accounting for Stock Based
Compensation Transition and Disclosure ( SFAS 148 ). SFAS 148 provides alternative methods of transition for a
voluntary change to the fair value method of accounting for stock based employee compensation. SFAS 148 also amends the
disclosure requirements of SFAS 123 to require prominent disclosures in both annual and interim financial statements about
the method of accounting for stock based employee compensation and the effect of the method used on reported results. We
adopted the disclosure requirements of SFAS 148 effective for the quarter ended March 31, 2003.
We follow Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, ("APB 25") in
accounting for our stock based compensation plans. Under APB 25, no compensation expense is recognized for our stock
based compensation plans since the exercise prices of awards under our plans are at current market prices of our stock on the
date of grant. Had compensation cost for our stock based compensation plans been determined based on the fair value at the
grant date under those plans consistent with the fair value method of SFAS 123, our net income and earnings per share would
have been reduced to the pro forma amounts indicated below:
For the year ended June 30,
2003 2002 2001
$ 306,842 $ 229,596
Less: Pro forma employee compensation cost of stock based
compensation plans, net of tax
$ 289,272 $ 217,660
Basic earnings per share
$ 2.32 $ 1.94
$ 2.18 $ 1.83
Diluted earnings per share