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Manpower฀2006฀Annual฀Report ฀ 39
Notes฀to฀Consolidated฀Financial฀Statements฀
We฀record฀revenues฀from฀sales฀of฀services฀and฀the฀related฀direct฀costs฀in฀accordance฀with฀Emerging฀Issues฀Task฀Force฀(“EITF”)฀
Issue฀No.฀99-19,฀“Reporting฀Revenue฀Gross฀as฀a฀Principal฀versus฀Net฀as฀an฀Agent”฀(“EITF฀Issue฀No.฀99-19”).฀฀In฀situations฀
where฀we฀act฀as฀a฀principal฀in฀the฀transaction,฀we฀report฀gross฀revenues฀and฀direct฀costs.฀฀When฀we฀act฀as฀an฀agent,฀we฀report฀
the฀revenues฀on฀a฀net฀basis.
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฀Selling฀and฀Administrative฀Expenses฀
in฀our฀consolidated฀statements฀of฀operations฀and฀was฀$27.4,฀$22.9฀and฀$27.3฀in฀2006,฀2005฀and฀2004,฀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฀$14.1,฀$18.3฀and฀$21.9,฀for฀2006,฀2005฀and฀2004,฀respectively.
Advertising฀Costs
We฀expense฀production฀costs฀of฀advertising฀as฀they฀are฀incurred.฀Advertising฀expenses฀were฀$69.4,฀$45.8฀and฀$43.2฀in฀2006,฀
2005฀and฀2004,฀respectively.
Reorganization฀Costs
In฀the฀first฀quarter฀of฀2006,฀we฀recorded฀expenses฀totaling฀$9.5฀in฀the฀U.K.฀and฀$1.2฀at฀Right฀Management฀for฀฀
severances฀and฀other฀office฀closure฀costs฀related฀to฀reorganizations฀at฀these฀entities.฀Of฀the฀$9.5฀in฀the฀U.K.,฀$5.4฀was฀paid฀in฀
2006,฀and฀we฀expect฀a฀majority฀of฀the฀remaining฀$4.1฀will฀be฀paid฀in฀2007.฀All฀of฀the฀reorganization฀costs฀at฀Right฀Management฀
were฀paid฀during฀the฀three฀months฀ended฀March฀31,฀2006.฀In฀the฀fourth฀quarter฀of฀2006,฀we฀recorded฀expenses฀totaling฀$6.9฀at฀
Right฀Management฀for฀severances,฀$0.3฀of฀which฀as฀paid฀in฀2006,฀and฀we฀expect฀a฀majority฀of฀the฀remaining฀$6.6฀will฀be฀paid฀฀
in฀2007.
In฀2005,฀we฀recorded฀total฀expenses฀of฀$15.3฀in฀France฀and฀$4.0฀at฀Right฀Management฀for฀severance฀costs฀related฀to฀reorgani-
zations฀in฀these฀entities.฀As฀of฀December฀31,฀2006,฀$8.6฀of฀the฀amount฀recorded฀in฀France฀has฀been฀paid,฀$7.3฀of฀which฀was฀
paid฀in฀2006.฀The฀remaining฀$6.7฀will฀be฀paid฀in฀2007.฀The฀full฀$4.0฀recorded฀at฀Right฀Management฀was฀paid฀in฀2005.
In฀connection฀with฀the฀acquisition฀of฀Right฀Management฀in฀2004,฀we฀established฀reserves฀totaling฀$24.5฀for฀severance฀and฀
other฀office฀lease฀closure฀costs฀related฀to฀streamlining฀Right฀Management’s฀worldwide฀operations.฀As฀of฀December฀31,฀2006,฀
approximately฀$22.0฀has฀been฀paid฀from฀these฀reserves,฀of฀which฀$2.6฀was฀paid฀in฀2006.฀The฀remaining฀$2.5,฀which฀primarily฀
represents฀future฀operating฀lease฀costs,฀will฀be฀paid฀by฀2008.
In฀connection฀with฀a฀European฀acquisition฀completed฀during฀the฀first฀quarter฀of฀2004,฀we฀established฀a฀reserve฀of฀$16.7฀for฀sever-
ance฀and฀other฀exit฀costs฀related฀to฀the฀acquired฀company.฀The฀full฀amount฀was฀paid฀from฀this฀reserve฀as฀of฀December฀31,฀2005.
Income฀Taxes
We฀account฀for฀income฀taxes฀in฀accordance฀with฀Statement฀of฀Financial฀Accounting฀Standards฀(“SFAS”)฀No.฀109,฀“Accounting฀
for฀Income฀Taxes.”฀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,฀and฀net฀operating฀
loss฀and฀tax฀credit฀carryforwards.฀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.