ManpowerGroup 2004 Annual Report Download - page 66

2004 Annual Report MANPOWER INC.64
Revenues and Receivables
We generate revenues from sales of services by our company-owned branch operations and from fees earned on sales
of services by our franchise operations. Revenues are recognized on the accrual basis. The majority of our revenues
are generated by our staffing business, where billings are generally negotiated and invoiced on a per-hour basis.
Accordingly, as the temporary employees are placed, we record revenue based on the hours worked. Our franchise
agreements generally state that franchise fees are calculated based on a percentage of revenues. We record franchise
fee revenues monthly based on the amounts due under the franchise agreements for that month. Franchise fees, which
are included in Revenues from Services, were $34.5, $26.5, and $25.8 for the years ended December 31, 2004, 2003
and 2002, respectively.
In our career transition business, we recognize revenue from individual programs on a straight-line basis over the average
length of time for candidates to find jobs based on statistically valid data for the specific type of program. For group
programs and large projects within the career transition business, we defer and recognize revenue over the period within
which the contracts are completed. The difference between the amount billed for career transition services and the
amount recognized as revenue is recorded as Deferred Revenue and included in Accrued Liabilities on our consolidated
balance sheet. We had $43.8 recorded as Deferred Revenue as of December 31, 2004.
In our organizational consulting business, revenue is recognized upon the performance of the obligations under the con-
sulting service contract.
Allowance for Doubtful Accounts
We have an Allowance for Doubtful Accounts recorded as an estimate of the accounts receivable balance that may not be
collected. This allowance is calculated on an entity-by-entity basis with consideration for historical write-off experience,
the current aging of receivables and a specific review for potential bad debts. Items that affect this balance mainly
include bad debt expense and the write-off of accounts receivable balances.
Bad debt expense, which increases our Allowance for Doubtful Accounts, is recorded as a Selling and Administrative
Expense in our consolidated statements of operations and was $27.3, $16.7, and $18.2 in 2004, 2003, and 2002,
respectively. Factors that would cause this provision to increase primarily relate to increased bankruptcies by our customers
and other difficulties collecting amounts billed. On the other hand, an improved write-off experience and aging of receivables
would result in a decrease to the provision.
Write-offs, which decrease our allowance for doubtful accounts, are recorded as a reduction to our accounts receivable
balance and were $21.9, $19.5, and $18.4, for 2004, 2003, and 2002, respectively.
Advertising Costs
We generally expense production costs of advertising as they are incurred. Advertising expenses were $43.2, $28.1,
and $30.8 in 2004, 2003 and 2002, respectively.
Income Taxes
We account for income taxes in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 109,
“Accounting for Income Taxes” (“SFAS 109”). Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities
and their respective tax bases, net operating loss and tax credit carryforwards, and tax contingencies. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. We record a valuation allowance against deferred
tax assets for which utilization of the asset is not likely.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
in millions, except share and per share data