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OPERATING SEGMENTS | 12 Months Ended
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Dec. 31, 2014
Segment Reporting [Abstract] |
OPERATING SEGMENTS |
| OPERATING SEGMENTS
The Company determines its operating segments and reports segment information in accordance with the management approach, which designates internal reporting used by management to make operating decisions and assess performance as the source of the Company’s reportable segments. The Company manages its business primarily based on the geographic managerial responsibility for its client base. As 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 cases, managerial responsibility for a particular client is assigned to a management team in another region and is usually based on the strength of the relationship between client executives and particular members of EPAM’s senior management team. In such a case, 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 performance and allocates resources based on the segment's 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, such as stock-based compensation are not allocated to specific segments, as management does not believe it is practical as these expenses are not directly attributable to any specific segment and consequently are not allocated to individual segments in internal management reports used by the CODM. Such expenses are separately disclosed as “unallocated” and adjusted only against the Company’s total income from operations. Revenues from external customers and segment operating profit, before unallocated expenses, for the North America, Europe, Russia and Other reportable segments were as follows:
|  | For the years ended December 31,
|  | 2014 |  | 2013 |  | 2012
Total segment revenues: |  |  |  |  |  |
North America |  | $ | 374,509 |  |  | $ | 284,636 |  |  | $ | 197,271 |
Europe |  | 299,279 |  |  | 204,150 |  |  | 168,913 |
Russia |  | 50,663 |  |  | 55,764 |  |  | 50,552 |
Other |  | 5,552 |  |  | 10,493 |  |  | 16,986 |
Total segment revenues |  | $ | 730,003 |  |  | $ | 555,043 |  |  | $ | 433,722 |
Segment operating profit: |  |  |  |  |  |
North America |  | $ | 90,616 |  |  | $ | 66,814 |  |  | $ | 38,671 |
Europe |  | 50,189 |  |  | 34,573 |  |  | 32,750 |
Russia |  | 7,034 |  |  | 7,077 |  |  | 9,049 |
Other |  | (3,220 | ) |  | 844 |  |  | 6,985 |
Total segment operating profit |  | $ | 144,619 |  |  | $ | 109,308 |  |  | $ | 87,455 |
Intersegment transactions were excluded from the above on the basis that they are neither included into the measure of a segment’s profit and loss by the CODM, nor provided to the CODM on a regular basis. During the year ended December 31, 2014, revenues from one customer, UBS AG, were $97,872 and accounted for more than 10% of total revenues. Revenue from this customer is reported in the Company’s Europe segment and includes reimbursable expenses. Trade accounts receivable and unbilled revenues are generally dispersed across our clients in proportion to their revenues. There were no customers individually exceeding 10% of our trade receivables billed as of December 31, 2014. As of December 31, 2014, unbilled trade receivables from one customer, UBS AG, individually exceeded 10% and accounted for 16.5% of our total unbilled trade receivables as of that date. Reconciliation of segment revenues and operating profit to consolidated income before provision for income taxes is presented below:
|  | For the Years Ended December 31,
|  | 2014 |  | 2013 |  | 2012
Total segment revenues |  | $ | 730,003 |  |  | $ | 555,043 |  |  | $ | 433,722 |
Unallocated revenue |  | 24 |  |  | 74 |  |  | 77 |
Revenues |  | $ | 730,027 |  |  | $ | 555,117 |  |  | $ | 433,799 |
Total segment operating profit: |  | $ | 144,619 |  |  | $ | 109,308 |  |  | $ | 87,455 |
Unallocated amounts: |  |  |  |  |  |
Other revenues |  | 24 |  |  | 74 |  |  | 77 |
Stock-based compensation expense |  | (24,620 | ) |  | (13,150 | ) |  | (6,826 | )
Non-corporate taxes |  | (6,882 | ) |  | (3,201 | ) |  | (2,346 | )
Professional fees |  | (5,312 | ) |  | (3,651 | ) |  | (2,850 | )
Depreciation and amortization |  | (7,988 | ) |  | (2,829 | ) |  | (1,100 | )
Bank charges |  | (1,049 | ) |  | (1,194 | ) |  | (1,136 | )
Asset impairment |  | (5,983 | ) |  | — |  |  | — |
Stock charge |  | — |  |  | — |  |  | (640 | )
Provision for bad debts |  | — |  |  | (36 | ) |  | — |
Other corporate expenses |  | (6,626 | ) |  | (8,828 | ) |  | (6,628 | )
Income from operations |  | 86,183 |  |  | 76,493 |  |  | 66,006 |
Interest and other income, net |  | 4,769 |  |  | 3,077 |  |  | 1,941 |
Change in fair value of contingent consideration |  | (1,924 | ) |  | — |  |  | — |
Foreign exchange loss |  | (2,075 | ) |  | (2,800 | ) |  | (2,084 | )
Income before provision for income taxes |  | $ | 86,953 |  |  | $ | 76,770 |  |  | $ | 65,863 |
Geographic Area Information Long-lived assets include property and equipment, net of accumulated depreciation and amortization, and management has determined that it is not practical to allocate these assets by segment since such assets are used interchangeably among the segments. Geographical information about the Company’s long-lived assets based on physical location of the assets was as follows:
| December 31, 2014 |  | December 31, 2013
Belarus | $ | 41,652 |  |  | $ | 38,697 |
Ukraine | 4,392 |  |  | 5,525 |
Hungary | 2,773 |  |  | 2,644 |
Russia | 2,196 |  |  | 3,414 |
United States | 2,001 |  |  | 2,217 |
Other | 2,120 |  |  | 818 |
Total | $ | 55,134 |  |  | $ | 53,315 |
Information about the Company’s revenues by client location is as follows:
|  | For the Years Ended December 31,
|  | 2014 |  | 2013 |  | 2012
United States |  | $ | 318,304 |  |  | $ | 247,979 |  |  | $ | 197,593 |
United Kingdom |  | 141,366 |  |  | 108,892 |  |  | 98,346 |
Switzerland |  | 87,111 |  |  | 51,941 |  |  | 30,120 |
Russia |  | 48,945 |  |  | 53,328 |  |  | 47,507 |
Canada |  | 49,193 |  |  | 33,759 |  |  | 9,256 |
Germany |  | 25,740 |  |  | 20,261 |  |  | 16,391 |
China |  | 13,445 |  |  | — |  |  | — |
Netherlands |  | 8,838 |  |  | 7,719 |  |  | 3,127 |
Sweden |  | 7,892 |  |  | 5,742 |  |  | 4,913 |
Kazakhstan |  | 5,238 |  |  | 9,886 |  |  | 11,352 |
Other locations |  | 15,545 |  |  | 7,984 |  |  | 8,777 |
Reimbursable expenses and other revenues |  | 8,410 |  |  | 7,626 |  |  | 6,417 |
Revenues |  | $ | 730,027 |  |  | $ | 555,117 |  |  | $ | 433,799 |
Service Offering Information Information about the Company’s revenues by service offering is as follows:
|  | For the Years Ended December 31,
|  | 2014 |  | 2013 |  | 2012
Software development |  | $ | 504,590 |  |  | $ | 374,426 |  |  | $ | 290,139 |
Application testing services |  | 140,363 |  |  | 109,222 |  |  | 85,849 |
Application maintenance and support |  | 58,840 |  |  | 45,971 |  |  | 36,056 |
Infrastructure services |  | 14,198 |  |  | 14,433 |  |  | 12,424 |
Licensing |  | 3,626 |  |  | 3,439 |  |  | 2,914 |
Reimbursable expenses and other revenues |  | 8,410 |  |  | 7,626 |  |  | 6,417 |
Revenues |  | $ | 730,027 |  |  | $ | 555,117 |  |  | $ | 433,799 |

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- Definition The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 29 -URI http://asc.fasb.org/extlink&oid=6534315&loc=d3e8864-108599 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 32 -URI http://asc.fasb.org/extlink&oid=6534315&loc=d3e8933-108599 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 26 -URI http://asc.fasb.org/extlink&oid=6534315&loc=d3e8844-108599 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 10 -URI http://asc.fasb.org/extlink&oid=6534315&loc=d3e8538-108599 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6534315&loc=d3e8380-108599 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 34 -URI http://asc.fasb.org/extlink&oid=6534315&loc=d3e8981-108599 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 35 -URI http://asc.fasb.org/extlink&oid=6534315&loc=d3e8984-108599 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 41 -URI http://asc.fasb.org/extlink&oid=6534315&loc=d3e9038-108599 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 30 -URI http://asc.fasb.org/extlink&oid=6534315&loc=d3e8906-108599 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 42 -URI http://asc.fasb.org/extlink&oid=6534315&loc=d3e9054-108599 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 31 -URI http://asc.fasb.org/extlink&oid=6534315&loc=d3e8924-108599 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 40 -URI http://asc.fasb.org/extlink&oid=6534315&loc=d3e9031-108599 Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 33 -URI http://asc.fasb.org/extlink&oid=6534315&loc=d3e8971-108599 Reference 14: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 12 -URI http://asc.fasb.org/extlink&oid=6534315&loc=d3e8595-108599 + Details
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