ManpowerGroup 2006 Annual Report Download - page 42

Manpower฀2006฀Annual฀Report
38 Notes฀to฀Consolidated฀Financial฀Statements฀
01.
SUM MARY฀OF฀SIG NIFIC ANT฀ACC OUNTI NG฀POLI CIES
Nature฀of฀Operations
Manpower฀Inc.฀is฀a฀world฀leader฀in฀the฀employment฀services฀industry.฀Our฀worldwide฀network฀of฀nearly฀4,400฀offices฀in฀73฀฀
countries฀and฀territories฀enables฀us฀to฀meet฀the฀needs฀of฀our฀customers฀in฀all฀industry฀segments.฀Our฀largest฀operations,฀based฀
on฀revenues,฀are฀located฀in฀the฀United฀States,฀France,฀Italy฀and฀the฀United฀Kingdom.฀We฀specialize฀in฀permanent,฀temporary฀
and฀contract฀recruitment;฀employee฀assessment฀and฀selection;฀training;฀outsourcing;฀and฀outplacement฀and฀consulting฀฀
services.฀We฀provide฀services฀to฀a฀wide฀variety฀of฀customers,฀none฀of฀which฀individually฀comprise฀a฀significant฀portion฀of฀฀
revenues฀for฀us฀as฀a฀whole.
Use฀of฀Estimates
The฀preparation฀of฀financial฀statements฀in฀conformity฀with฀accounting฀principles฀generally฀accepted฀in฀the฀United฀States฀฀
requires฀us฀to฀make฀estimates฀and฀assumptions฀that฀affect฀the฀reported฀amounts฀of฀assets฀and฀liabilities฀and฀disclosure฀of฀฀
contingent฀assets฀and฀liabilities฀at฀the฀date฀of฀the฀financial฀statements฀and฀the฀reported฀amounts฀of฀revenues฀and฀expenses฀for฀
the฀reporting฀period.฀Actual฀results฀could฀differ฀from฀these฀estimates.
In฀France,฀we฀settled฀an฀audit฀of฀payroll฀tax฀remittances฀made฀during฀2001,฀2002฀and฀2003.฀As฀a฀result,฀we฀reduced฀our฀liability฀
related฀to฀these฀remittances฀by฀$9.0฀in฀the฀fourth฀quarter฀of฀2005.฀During฀2004,฀based฀on฀the฀status฀of฀the฀audit฀at฀that฀time,฀we฀
increased฀our฀estimated฀liability฀related฀to฀these฀remittances฀by฀$12.8.
Reclassifications
Our฀French฀business฀tax฀and฀profit฀sharing฀expenses,฀previously฀reported฀as฀Selling฀and฀Administrative฀Expenses,฀are฀now฀฀
reported฀in฀Cost฀of฀Services,฀as฀we฀believe฀this฀presentation฀is฀more฀appropriate฀given฀the฀nature฀of฀these฀expenses.฀These฀
amounts฀total฀$117.4,฀$94.9฀and฀$93.8฀for฀the฀years฀ended฀December฀31,฀2006,฀2005฀and฀2004,฀respectively.฀In฀addition,฀we฀
have฀reclassified฀certain฀prior฀period฀financial฀results฀into฀discontinued฀operations฀as฀well฀as฀reclassified฀certain฀segment฀฀
operations฀due฀to฀a฀change฀in฀management฀structure.฀See฀Notes฀2฀and฀9฀for฀further฀discussion฀relating฀to฀these฀reclassifications.
Basis฀of฀Consolidation
The฀consolidated฀financial฀statements฀include฀our฀operating฀results฀and฀the฀operating฀results฀of฀all฀of฀our฀subsidiaries.฀For฀฀
subsidiaries฀in฀which฀we฀have฀an฀ownership฀interest฀of฀50%฀or฀less,฀but฀more฀than฀20%,฀the฀consolidated฀financial฀statements฀฀
reflect฀our฀ownership฀share฀of฀those฀earnings฀using฀the฀equity฀method฀of฀accounting.฀These฀investments,฀as฀well฀as฀certain฀
other฀relationships,฀are฀also฀evaluated฀for฀consolidation฀under฀FASB฀(Financial฀Accounting฀Standards฀Board)฀Interpretation฀No.฀
46R,฀“Consolidation฀of฀Variable฀Interest฀Entities.”฀These฀investments฀were฀$92.5฀and฀$86.7฀as฀of฀December฀31,฀2006฀and฀
2005,฀respectively,฀and฀are฀included฀as฀Other฀Assets฀in฀the฀consolidated฀balance฀sheets.฀Included฀in฀Shareholders’฀Equity฀as฀of฀
December฀31,฀2006฀and฀2005฀are฀$50.1฀and฀$48.0฀of฀unremitted฀earnings฀from฀investments฀accounted฀for฀using฀the฀equity฀
method.฀All฀significant฀intercompany฀accounts฀and฀transactions฀have฀been฀eliminated฀in฀consolidation.
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฀as฀services฀are฀performed.฀The฀majority฀of฀our฀revenues฀are฀
generated฀by฀our฀recruitment฀business,฀where฀billings฀are฀generally฀negotiated฀and฀invoiced฀on฀a฀per-hour฀basis.฀Accordingly,฀
as฀contingent฀employees฀are฀placed,฀we฀record฀revenue฀based฀on฀the฀hours฀worked.฀Permanent฀recruitment฀revenues฀are฀฀
recorded฀as฀placements฀are฀made.฀Provisions฀for฀sales฀allowances,฀based฀on฀historical฀experience,฀are฀recognized฀at฀the฀time฀
the฀related฀sale฀is฀recognized.฀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฀$35.7,฀$35.8฀and฀$34.5฀for฀the฀years฀ended฀
December฀31,฀2006,฀2005฀and฀2004,฀respectively.
In฀our฀outplacement฀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฀outplacement฀business,฀we฀defer฀and฀recognize฀revenue฀over฀the฀period฀within฀which฀the฀contracts฀are฀
completed.฀In฀our฀consulting฀business,฀revenue฀is฀recognized฀upon฀the฀performance฀of฀the฀obligations฀under฀the฀consulting฀
service฀contract.฀The฀amount฀billed฀for฀outplacement฀and฀consulting฀services฀in฀excess฀of฀the฀amount฀recognized฀as฀revenue฀is฀
recorded฀as฀Deferred฀Revenue฀and฀included฀in฀Accrued฀Liabilities฀in฀our฀consolidated฀balance฀sheets.฀We฀had฀$46.4฀and฀$42.7฀
recorded฀as฀Deferred฀Revenue฀as฀of฀December฀31,฀2006฀and฀2005,฀respectively.
NOT ES฀TO฀CONSOLID AT ED฀FINA NCIAL ฀S TATEMENT S฀
in฀million s,฀except฀per฀sha re฀data