Summary of Significant Accounting Policies and Recent Accounting Pronouncements (Policies)

6 Months Ended

Jun. 30, 2011

Summary of Significant Accounting Policies and Recent Accounting Pronouncements [Abstract]

Recurring Revenues

Recurring revenues consist of subscription revenues recognized from our SaaS Offering, as well as customer support and maintenance revenues.

SaaS subscription revenues are principally derived from per employee per month (“PEPM”) fees earned from the SaaS Offering and from sales of hosting services on a stand-alone basis to customers who already own a perpetual license (“Base Hosting”). To the extent there are upfront or setup fees associated with our SaaS Offering, the related SaaS subscription revenues are recognized ratably over the term of the related contract, commencing when the customer goes Live. Ongoing PEPM fees from the SaaS Offering and Base Hosting are recognized as subscription revenues as the services are delivered commencing when the customer goes Live.

ii)

Customer support and maintenance revenues are derived from maintaining, supporting, and providing periodic updates of our software for our hosting services.

Under our SaaS Offering, our customers do not have the right to take possession of our software and these arrangements are considered service contracts. Fair value of multiple elements in SaaS arrangements is derived for each element based on the guidance provided by ASU 2009-13. The multiple elements that typically exist in SaaS arrangements include hosting services, the right to use UltiPro, maintenance of UltiPro (i.e., product enhancements, updates and customer support) and professional services (i.e., primarily implementation services).

The pricing for the three elements that pertain to recurring revenues (i.e., hosting services, the right to use UltiPro and maintenance of UltiPro) is bundled. Since these three bundled elements are components of recurring revenues in the unaudited condensed consolidated statements of income, allocation of fair values to each of the three elements is not necessary and they are not reported separately. Fair value for the bundled elements, as a whole, is determined on the basis of renewal pricing, without taking into consideration potential price increases or changes in the number of underlying employees caused by potential changes in the size of the customer in the future due to the uncertainties surrounding these potential occurrences. These bundled elements are provided on an ongoing basis, represent undelivered elements and are recognized on a monthly basis as the related services are performed, commencing once the customer goes Live.

Services Revenues

Services revenues primarily include revenues from fees charged for consulting services in connection with the implementation of our product solutions and, to a lesser extent, training of customers in the use of our products and fees for other services, including the provision of payroll-related forms, sales of time clocks and the printing of W-2 forms for certain customers, as well as certain reimbursable out-of-pocket expenses. Revenues from implementation consulting services comprise the majority of total services revenues.

Revenues from implementation consulting services, billed on a time and materials basis (at an hourly rate), are recognized as these services are performed. The total arrangement consideration is allocated to services elements in the arrangement based on their relative fair values, using the prices established when the services are sold on a stand-alone basis. Other services are recognized as the product is shipped or as the services are rendered, depending on the specific terms of the related arrangement.

Revenues from implementation consulting services sold on a fixed-fee basis are recognized using the percentage of completion accounting method, which involves the use of estimates. Percentage of completion is measured at each reporting date based on progress made to date compared to the total estimate to complete the implementation job.

License Revenues

From our inception through March 31, 2009, we sold perpetual licenses of UltiPro, which resulted in license revenues recognized for that period of time. Customer support and maintenance revenues, from previously sold perpetual licenses, are derived from maintaining, supporting, and providing periodic updates of our software. Customer support and maintenance revenues are recognized ratably over the service period, generally one year, and are included in recurring revenues. Annual maintenance renewal fees which occur subsequent to the initial contract period are also recognized ratably over the related service period.

While we still sell on-site licenses of UltiPro on an infrequent basis, sales to new customers are only on a subscription basis (priced and billed to our customers on a PEPM basis). We no longer sell our on-site UltiPro solutions to new customers on a perpetual license basis. We do sell licenses to existing license customers but only in relation to the customer's employee growth or for products complementary to UltiPro for which the customer already has a perpetual license. Any such licenses are recognized as license revenues in our unaudited condensed consolidated financial statements upon the delivery of the related software product when all significant contractual obligations have been satisfied.

- Definition

Disclosure of accounting policy for revenue recognition. If the entity has different policies for different types of revenue transactions, the policy for each material type of transaction is generally disclosed. If a sales transaction has multiple element arrangements (for example, delivery of multiple products, services or the rights to use assets) the disclosure may indicate the accounting policy for each unit of accounting as well as how units of accounting are determined and valued. The disclosure may encompass important judgment as to appropriateness of principles related to recognition of revenue. The disclosure also may indicate the entity's treatment of any unearned or deferred revenue that arises from the transaction.

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