Automatic Data Processing Inc. (ADP)

Revenues are primarily attributable to fees for providing services (e.g., Employer Services’ payroll processing fees), investment income on payroll funds, payroll tax filing funds, other Employer Services’ client-related funds, and fees charged to implement clients on ADP’s solutions. ADP enters into agreements for a fixed fee per transaction (e.g., number of payees or number of payrolls processed). Fees associated with services are recognized in the period services are rendered and earned under service arrangements with clients where service fees are fixed or determinable and collectability is reasonably assured.

PEO provides a comprehensive human resources outsourcing solution, including offering benefits, providing workers’ compensation insurance, and administering state unemployment insurance, among other human resources functions. Amounts collected from PEO worksite employers include payroll, fees for benefits, and an administrative fee that also includes payroll taxes, fees for workers’ compensation and state unemployment taxes.

The payroll and payroll taxes collected from the worksite employers are presented in revenue net, as ADP is not the primary obligor with respect to this aspect of the PEO arrangement. With respect to the payroll and payroll taxes, the worksite employer is the primary obligor, has latitude in establishing price, selects suppliers, and determines the service specifications.

The fees collected from the worksite employers for benefits, workers’ compensation and state unemployment taxes are presented in revenues and the associated costs of benefits, workers’ compensation and state unemployment taxes are included in operating expenses, as ADP acts as a principal with respect to this aspect of the arrangement. With respect to the fees for benefits, workers’ compensation and state unemployment taxes, ADP is the primary obligor, has latitude in establishing price, selects suppliers, determines the service specifications and is liable for credit risk.

Interest income on collected but not yet remitted funds held for clients is recognized in revenues as earned, as the collection, holding and remittance of these funds are critical components of providing these services.

Client implementation fees are charged to set clients up on ADP’s platform and are deferred until the client has gone live on ADP’s solutions and services have begun. These fees are amortized to revenue over the longer of the contractual term or the expected client life, including estimated renewals of client contracts. Additionally, certain implementation costs are deferred until the client has gone live on ADP’s solution and services have begun and are then amortized over the longer of the contractual term or the expected client life, including estimated renewals of client contracts.

ADP assesses the collectability of revenues based primarily on the creditworthiness of the customer as determined by credit checks and analysis, as well as the customer’s payment history.

Source: 10-K (filing date: 2018-08-03).

Automatic Data Processing Inc., Income Statement, Revenues

USD $ in thousands

	12 months ended	Jun 30, 2018		Jun 30, 2017		Jun 30, 2016		Jun 30, 2015		Jun 30, 2014		Jun 30, 2013
	Employer Services
	PEO Services
	Dealer Services
	Other
	Foreign Exchange
	Client Fund Interest
	Reconciling Items
	Revenues from continuing operations

Based on: 10-K (filing date: 2018-08-03), 10-K (filing date: 2017-08-04), 10-K (filing date: 2016-08-05), 10-K (filing date: 2015-08-07), 10-K (filing date: 2014-08-08), 10-K (filing date: 2013-08-19).