New Accounting Pronouncements

Recently Adopted Accounting Pronouncements

Effective July 1, 2018, the Company adopted ASU 2014-09, “Revenue from Contracts with Customers (ASC 606)” on a retrospective basis. ASU 2014-09 requires an entity to recognize revenue depicting the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 resulted in enhanced revenue-related disclosures. The standard primarily impacted the manner in which it treats certain costs to fulfill contracts (i.e., implementation costs) and costs to acquire new contracts (i.e., selling costs). The provisions of the new standard require the Company to capitalize and amortize additional implementation costs than those capitalized and amortized under previous U.S. GAAP. Under previous U.S. GAAP, the Company immediately expensed all selling expenses. The adoption of the provisions of the new standard did not materially impact the timing or amount of revenue the Company recognized and did not result in significant changes in its business processes or systems. Refer to Note 3 for further details. Refer to the table below for a summary of the restatements required, as a result of this change, on the Company's statements of consolidated earnings for the three and six months ended December 31, 2017, consolidated balance sheets as of June 30, 2018, and consolidated cash flows for the six months ended December 31, 2017.

Effective July 1, 2018, the Company adopted ASU 2017-07, “Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Post-retirement Benefit Cost.” ASU 2017-07 requires reporting the service cost component in the same line item or items as other compensation costs arising during the period in the Statements of Consolidated Earnings. The other components of net periodic pension cost are required to be presented in the Statements of Consolidated Earnings separately from the service cost component. The Company retrospectively adopted the new standard, and as a result reclassified the non-service cost components of the net periodic benefit cost from within the respective line items of our Statements of Consolidated Earnings to Other income, net. Refer to the table below for a summary of the reclassification required, as a result of this change, on the Company's consolidated results of operations for the three and six months ended December 31, 2017. The adoption of the new accounting rules only impacted the classification of expenses on the Statements of Consolidated Earnings and did not impact the Company’s consolidated earnings, balance sheets, or cash flows.

Adoption of ASC 606 and ASU 2017-07 impacted the Company's prior period Statements of Consolidated Earnings, Consolidated Balance Sheets, and Consolidated Cash Flows as follows:

Statements of Consolidated Earnings



	Three Months Ended
	December 31, 2017
	As reported			Adjustments ASC 606			Adjustments ASU 2017-07			As restated
Revenues, other than interest on funds held for clients and PEO revenues	$	2,188.8		$	1.5		$	—		$	2,190.3
Interest on funds held for clients	106.7			—			—			106.7
PEO revenues	939.9			1.4			—			941.3
TOTAL REVENUES	3,235.4			2.9			—			3,238.3
Operating expenses	1,719.3			(19.4		)	9.3			1,709.2
Systems development and programming costs	158.1			—			1.3			159.4
Depreciation and amortization	69.3			—			—			69.3
Selling, general, and administrative expenses	717.2			0.5			5.9			723.6
Interest expense	27.5			—			—			27.5
Total Expenses	2,691.4			(18.9		)	16.5			2,689.0
Other income, net	(21.7		)	—			(16.5		)	(38.2		)
EARNINGS BEFORE INCOME TAXES	565.7			21.8			—			587.5
Provision / (benefit) for income taxes	98.2			(181.1		)	—			(82.9		)
NET EARNINGS	$	467.5		$	202.9		$	—		$	670.4



	Six Months Ended
	December 31, 2017
	As reported			Adjustments ASC 606			Adjustments ASU 2017-07			As restated
Revenues, other than interest on funds held for clients and PEO revenues	$	4,269.8		$	(0.6	)	$	—		$	4,269.2
Interest on funds held for clients	206.1			—			—			206.1
PEO revenues	1,838.3			1.9			—			1,840.2
TOTAL REVENUES	6,314.2			1.3			—			6,315.5
Operating expenses	3,366.0			(44.7		)	18.6			3,339.9
Systems development and programming costs	315.1			—			2.5			317.6
Depreciation and amortization	131.9			—			—			131.9
Selling, general, and administrative expenses	1,379.6			7.5			11.9			1,399.0
Interest expense	55.5			—			—			55.5
Total Expenses	5,248.1			(37.2		)	33.0			5,243.9
Other income, net	(47.8		)	—			(33.0		)	(80.8		)
EARNINGS BEFORE INCOME TAXES	1,113.9			38.5			—			1,152.4
Provision for income taxes	244.9			(175.5		)	—			69.4
NET EARNINGS	$	869.0		$	214.0		$	—		$	1,083.0

Consolidated Balance Sheets



	June 30,					June 30,
	2018		Adjustments ASC 606			2018
	As reported		Adjustments ASC 606			As restated
Assets
Current assets:
Other current assets	$	758.0	$	(226.7	)	$	531.3
Total current assets	32,050.0		(226.7		)	31,823.3
Deferred contract costs	—		2,377.4			2,377.4
Other assets	1,089.6		(390.3		)	699.3
Total assets	$	37,088.7	$	1,760.4		$	38,849.1

Liabilities and Stockholders' Equity
Current liabilities:
Short-term deferred revenues	226.5		(0.8		)	225.7
Total current liabilities	30,413.6		(0.8		)	30,412.7
Deferred income taxes	107.3		414.7			522.0
Long-term deferred revenues	377.8		70.2			448.1
Total liabilities	33,629.1		484.1			34,113.2

Stockholders' equity:
Retained earnings	15,271.3		1,275.3			16,546.6
Total stockholders’ equity	3,459.6		1,276.3			4,735.9
Total liabilities and stockholders’ equity	$	37,088.7	$	1,760.4		$	38,849.1

Statements of Consolidated Cash Flows



	Six Months Ended
	December 31,
	2017			Adjustments ASC 606			2017
	As reported			Adjustments ASC 606			As restated
Cash Flows from Operating Activities:
Net earnings	$	869.0		$	214.0		$	1,083.0
Adjustments to reconcile net earnings to cash flows provided by operating activities:
Amortization of deferred contract costs	—			412.3			412.3
Deferred income taxes	7.3			(170.1		)	(162.8		)
Changes in operating assets and liabilities, net of effects from acquisitions:
Increase in other assets	(244.7		)	(422.9		)	(667.6		)
Increase in accrued expenses and other liabilities	65.4			(33.3		)	32.1
Net cash flows provided by operating activities	$	675.1		$	—		$	675.1

Effective October 1, 2018, the Company prospectively adopted ASU 2018-15, “Intangibles - Goodwill and Other-Internal-Use Software.” ASU 2018-15 clarifies the accounting and capitalization of implementation costs in cloud computing arrangements that are service arrangements. The adoption of ASU 2018-15 did not have an impact on the Company’s consolidated results of operations, financial condition, or cash flows.

Recently Issued Accounting Pronouncements

The following table summarizes recent ASU's issued by the Financial Accounting Standards Board ("FASB") that could have a material impact on the Company's consolidated results of operations, financial condition, or cash flows.



Standard	Description	Effective Date	Effect on Financial Statements or Other Significant Matters
ASU 2018-14 Compensation-Retirement Benefits-Defined Benefit Plans	This update modifies the disclosure requirements for employers that sponsor defined benefit pension or other post-retirement plans by removing and adding certain disclosures for these plans. The eliminated disclosures include (a) the amounts in accumulated other comprehensive income expected to be recognized in net periodic benefit costs over the next fiscal year, and (b) the effects of a one percentage point change in assumed health care cost trend rates on the net periodic benefit costs and the benefit obligation for post-retirement health care benefits. Additional disclosures include descriptions of significant gains and losses affecting the benefit obligation for the period. The amendments in ASU 2018-14 would need to be applied on a retrospective basis.	July 1, 2021 (“Fiscal 2022”)	The adoption of this guidance will modify disclosures but will not have an impact on the Company's consolidated results of operations, financial condition, or cash flows.
ASU 2018-13 Fair Value Measurement	This update modifies the disclosure requirements on fair value measurements. Certain disclosures in ASU 2018-13 would need to be applied on a retrospective basis and others on a prospective basis.	July 1, 2020 (“Fiscal 2021”)	The adoption of this guidance will modify disclosures but will not have an impact on the Company's consolidated results of operations, financial condition, or cash flows.
ASU 2018-09 Codification Improvements	This amendment makes changes to a variety of topics to clarify, correct errors in, or make minor improvements to the Accounting Standards Codification. The transition guidance is based on the facts and circumstances of each amendment. Some of the amendments do not require transition guidance and will be effective immediately. However, many of the amendments do have transition guidance with effective dates for annual periods beginning after December 15, 2018.	The transition and effective date guidance is based on the facts and circumstances of each amendment.	Clarifications which were effective immediately were not applicable and for other amendments the Company determined the impact of this ASU did not have a material impact on its consolidated results of operations, financial condition, or cash flows.
ASU 2016-02 Leases (Topic 842)	This update amends the existing accounting standards for lease accounting and requires lessees to recognize most lease assets and lease liabilities on the balance sheet and to disclose key information about leasing arrangements. In July 2018, the FASB issued Accounting Standards Update 2018-10-Codification Improvements to Topic 842 (Leases), and Accounting Standards Update 2018-11-Leases (Topic 842)-Targeted Improvements, which (i) narrows amendments to clarify how to apply certain aspects of the new lease standard, (ii) provides entities with an additional transition method to adopt the new standard, and (iii) provides lessors with a practical expedient for separating components of a contract.	July 1, 2019 (“Fiscal 2020”)	The Company has been assessing the impact of the new leasing standard and is currently compiling an inventory of lease arrangements in order to determine the impact the new guidance will have on our financial statements and disclosures. The Company expects the provisions of the new standard will result in a material increase in lease-related assets and liabilities recognized on the Consolidated Balance Sheets and no impact to its consolidated results of operations. The Company plans to use the optional transition method with a cumulative adjustment to retained earnings.