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Ceridian To Inflate 2023 Operating Income By $36 Million
Software maker slashes future amortization expense with significant year-end accounting change.
March 21, 2023
Ceridian HCM Holdings (CDAY), a maker of human capital management (HCM) software, has increased its expected period of benefit of its deferred sales commissions from five to ten years. The change was implemented December 1, 2022 and revealed in Ceridian’s latest annual report. In explaining why its suddenly felt sales commissions should be amortized at twice the previous rate, Ceridian stated:
“This change in accounting estimate and related customer period of benefit is largely attributable to new evidence of longer customer relationships such as increases in the proportion of new customer contracts greater than three years as well as our continued high customer retention rates.”
The change is expected to reduce Ceridian’s amortization expense between $35-$37 million in 2023.
Based on a 2023 EBIT forecast of $278 million, the change will lift Ceridian’s operating income an estimated 14.87%.
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