OPERATING SEGMENTS

12 Months Ended

Dec. 31, 2012

OPERATING SEGMENTS [Abstract]

OPERATING SEGMENTS

18.OPERATING SEGMENTS

The Company reports segment information based on the managerial responsibility for its client base. Because managerial responsibility for a particular client relationship generally correlates with the client’s geographic location, there is a high degree of similarity between client locations and the geographic boundaries of the Company’s reportable segments. In some specific cases, however, managerial responsibility for a particular client is assigned to a management team in another region, usually based on the strength of the relationship between client executives and particular members of EPAM’s senior management team. In a case like this, the client’s activity would be reported through the management team’s reportable segment.

The Company’s reportable segments are North America, Europe, Russia and Other. The Company’s Chief Operating Decision Maker (“CODM”) evaluates its performance and allocates resources based on segment revenues and operating profit. Segment operating profit is defined as income from operations before unallocated costs. Generally, operating expenses for each operating segment have similar characteristics and are subject to similar factors, pressures and challenges. Expenses included in segment operating profit consist principally of direct selling and delivery costs as well as an allocation of certain shared services expenses. Certain expenses are not allocated to specific segments, as management does not believe it is practical to allocate such costs to individual segments because they are not directly attributable to any specific segment. Further, stock-based compensation expense is not allocated to individual segments in internal management reports used by the CODM. Accordingly, these expenses are separately disclosed as “unallocated” and adjusted only against the Company’s total income from operations.

Revenues from external clients and segment operating profit, before unallocated expenses, for the North America, Europe, Russia and Other reportable segments were as follows:

	Year Ended December 31,
	2013		2012		2011
Total segment revenues:
North America	$	284,636	$	197,271	$	151,707
Europe		204,150		168,913		123,510
Russia		55,764		50,552		46,219
Other		10,493		16,986		12,851
Total segment revenues	$	555,043	$	433,722	$	334,287
Segment operating profit:
North America	$	66,814	$	38,671	$	33,744
Europe		34,573		32,750		25,098
Russia		7,077		9,049		10,445
Other		844		6,985		2,416
Total segment operating profit	$	109,308	$	87,455	$	71,703

During the years ended December 31, 2013 and 2012, there were no customers that represented at least 10% of total revenues. During the year ended December 31, 2011, revenues from one customer, Thomson Reuters, accounted for 10.7% of total revenues, or $35,903, and were included within our North America segment.

Intersegment transactions were excluded from the above on the basis they are neither included into the measure of a segment’s profit and loss by the chief operating decision maker, nor provided to the chief operating decision maker on a regular basis.

Reconciliation of reportable segment revenues and operating profit to the consolidated income before provision for income taxes is presented below:

	Year Ended December 31,
	2013			2012			2011
Total segment revenues	$	555,043		$	433,722		$	334,287
Unallocated revenue		74			77			241
Revenues	$	555,117		$	433,799		$	334,528
Total segment operating profit	$	109,308		$	87,455		$	71,703
Unallocated Amounts:
Other revenue		74			77			241
Stock-based compensation expense		(13,150	)		(6,826	)		(2,866	)
Non-corporate taxes		(3,201	)		(2,346	)		(2,722	)
Professional fees		(3,651	)		(2,850	)		(2,802	)
Depreciation and amortization		(2,829	)		(1,100	)		(810	)
Bank charges		(1,194	)		(1,136	)		(793	)
Goodwill impairment loss (Note 3)		—			—			(1,697	)
Stock charge		—			(640	)		—
Provision for bad debts		(36	)		—			—
Other corporate expenses		(8,828	)		(6,628	)		(5,246	)
Income from operations		76,493			66,006			55,008
Interest and other income, net		3,077			1,941			1,422
Foreign exchange loss		(2,800	)		(2,084	)		(3,638	)
Income before provision for income taxes	$	76,770		$	65,863		$	52,792

Geographic Area Information

Management has determined that it is not practical to allocate identifiable assets by segment since such assets are used interchangeably amongst the segments. Geographical information about the Company’s long-lived assets based on physical location of the assets follows:

	December 31, 2013		December 31, 2012
Belarus	$	38,697	$	40,095
Ukraine		5,525		5,357
Russia		3,414		3,234
United States		2,217		2,048
Hungary		2,644		1,744
Other		818		657
Total	$	53,315	$	53,135

Long-lived assets included property and equipment, net of accumulated depreciation and amortization.

Information about the Company’s revenues by client location is presented below:

	Year Ended December 31,
	2013		2012		2011
United States	$	247,979	$	197,593	$	163,068
United Kingdom		108,892		98,346		70,989
Russia		53,328		47,507		43,799
Switzerland		51,941		30,120		15,870
Canada		33,759		9,256		2,058
Germany		20,261		16,391		7,909
Kazakhstan		9,886		11,352		8,845
Netherlands		7,719		3,127		4,031
Sweden		5,742		4,913		5,292
Spain		1,957		1,710		1,893
Ukraine		681		4,733		891
Other locations		5,346		2,334		3,707
Reimbursable expenses and other revenues		7,626		6,417		6,176
Revenues	$	555,117	$	433,799	$	334,528

Service Offering Information

Information about the Company’s revenues by service offering is presented below:

	Year Ended December 31,
	2013		2012		2011
Software development	$	374,426	$	290,139	$	219,211
Application testing services		109,222		85,849		67,840
Application maintenance and support		45,971		36,056		29,287
Infrastructure services		14,433		12,424		8,488
Licensing		3,439		2,914		3,526
Reimbursable expenses and other revenues		7,626		6,417		6,176
Revenues	$	555,117	$	433,799	$	334,528