ManpowerGroup 2004 Annual Report Download - page 67

MANPOWER INC. 2004 Annual Report65
Accounts Receivable Securitization
We account for the securitization of accounts receivable in accordance with SFAS No. 140, “Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities” (“SFAS 140”). Accordingly, transfers of receivables
are evaluated for sale accounting treatment and if such a transfer qualifies as a sale under SFAS 140, the related receivable
balance is removed from our consolidated balance sheets and the loss related to the transfer is recorded as other
expense. If the transfer of receivables does not qualify for sale accounting, the related receivable balance remains on our
consolidated balance sheets, the corresponding advance is recorded as debt and the related cost of the transaction is
recorded as interest expense. (See note 5 for further information.)
Goodwill and Intangible Assets
We have goodwill, amortizable intangible assets and indefinite-lived intangible assets, as follows:
2004 2003
Accumulated Accumulated
December 31 Gross Amortization Net Gross Amortization Net
Goodwill $ 999.0 $ 49.1 $ 949.9 $ 592.9 $ 52.4 $ 540.5
Intangible assets:
Amortizable intangible assets 171.3 15.9 155.4 4.6 1.2 3.4
Indefinite-lived intangible assets 191.7 — 191.7 0.4 — 0.4
Total intangible assets 363.0 15.9 347.1 5.0 1.2 3.8
Goodwill and intangible assets $ 1,362.0 $ 65.0 $ 1,297.0 $ 597.9 $ 53.6 $ 544.3
The increase in Goodwill and Intangible Assets from 2003 to 2004 is primarily a result of the acquisition of Right
Management Consultants, Inc. (“RMC”). (See note 2 for further information.)
Amortization expense related to intangibles was $12.3 in 2004 and immaterial in 2003 and 2002. Amortization expense
expected in each of the next five years is as follows: 2005 – $14.1, 2006 – $14.1, 2007 – $14.1, 2008 – $14.1, and
2009 – $10.0.
In connection with SFAS No. 142, “Goodwill and Other Intangible Assets,” we are required to perform goodwill and
indefinite-lived intangible asset impairment reviews, at least annually, using a fair-value-based approach. The majority of
our Goodwill and indefinite-lived intangible assets result from our acquisition of RMC. Our remaining Goodwill relates
primarily to our acquisitions of Elan and Jefferson Wells.
As part of our impairment reviews, we estimate fair value primarily by using a discounted cash flow analysis and, for
certain larger reporting units, we may also consider market comparables. Significant assumptions used in our discounted
cash flow analysis include: expected future revenue growth rates, operating unit profit margins, and working capital levels;
a discount rate; and a terminal value multiple.
We completed our annual impairment review for 2004 and determined there to be no impairment of either goodwill or
indefinite-lived intangible assets. We plan to perform our next annual impairment review during the third quarter of 2005.
We may be required to perform an impairment review prior to our scheduled annual review if certain events occur,
including lower-than-forecasted earnings levels for various reporting units. In addition, changes to other assumptions
could significantly impact our estimate of the fair value of our reporting units. Such a change may result in an impairment
charge, which could have a significant impact on the reportable segments that include the related reporting units and
our consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
in millions, except share and per share data