ManpowerGroup 2006 Annual Report Download - page 44

Manpower฀2006฀Annual฀Report
40
NOT ES฀TO฀CONSOLID AT ED฀FINA NCIAL ฀S TATEMENT S฀
in฀million s,฀except฀per฀sha re฀data
Notes฀to฀Consolidated฀Financial฀Statements฀
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.”฀Accordingly,฀transfers฀of฀receivables฀are฀evaluated฀for฀sale฀฀
accounting฀treatment฀and,฀if฀such฀a฀transfer฀qualifies฀as฀a฀sale฀under฀SFAS฀No.฀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฀sheet,฀the฀corre-
sponding฀advance฀is฀recorded฀as฀debt฀and฀the฀related฀cost฀of฀the฀transaction฀is฀recorded฀as฀interest฀expense.฀(See฀Note฀6฀for฀
further฀information.)
Fair฀Value฀of฀Financial฀Instruments
The฀carrying฀values฀of฀cash฀and฀cash฀equivalents,฀accounts฀receivable,฀accounts฀payable,฀and฀other฀current฀assets฀and฀liabilities฀
approximate฀their฀fair฀values฀because฀of฀the฀short-term฀nature฀of฀these฀instruments.฀The฀carrying฀value฀of฀Long-Term฀Debt฀฀
approximates฀fair฀value,฀except฀for฀the฀Euro-denominated฀notes฀for฀which฀fair฀value฀is฀estimated฀based฀on฀quoted฀market฀
prices฀for฀the฀same฀or฀similar฀issues.
Goodwill฀and฀Intangible฀Assets
We฀have฀goodwill,฀amortizable฀intangible฀assets฀and฀intangible฀assets฀that฀do฀not฀require฀amortization,฀as฀follows:
2006 2005
December฀31 Gross
Accumulated฀
Amortization Net Gross
Accumulated฀
Amortization Net
Goodwill $฀ 972.6 $฀ — $฀ 972.6 $฀ 923.9 $฀ — $฀ 923.9
Intangible฀Assets:
฀ Amortizable:
฀ ฀ Technology 19.6 11.5 8.1 19.6 7.7 11.9
฀ ฀ Franchise฀Agreements 18.0 5.3 12.7 18.0 3.5 14.5
฀ ฀ Customer฀Relationships 124.9 21.6 103.3 124.9 14.2 110.7
฀ ฀ Other 6.6 3.2 3.4 8.3 4.4 3.9
฀ Total 169.1 41.6 127.5 170.8 29.8 141.0
฀ Non-Amortizable:
฀ ฀ Tradename 193.5 — 193.5 191.5 — 191.5
฀ ฀ Other ——— 0.1 — 0.1
฀ Total 193.5 — 193.5 191.6 — 191.6
Intangible฀Assets $฀ 362.6 $฀ 41.6 $฀ 321.0 $฀ 362.4 $฀ 29.8 $฀ 332.6
Amortization฀expense฀related฀to฀intangibles฀was฀$13.1,฀$13.1฀and฀$12.3฀in฀2006,฀2005฀and฀2004,฀respectively.฀Amortization฀
expense฀expected฀in฀each฀of฀the฀next฀five฀years฀is฀as฀follows:฀2007฀–฀$14.3,฀2008฀–฀$14.3,฀2009฀–฀$10.6,฀2010฀–฀$9.2,฀and฀2011฀
–฀$9.2.฀The฀useful฀lives฀of฀the฀technology,฀franchise฀agreements,฀and฀customer฀relationships฀are฀5,฀10,฀and฀17฀years,฀respectively.฀
The฀majority฀of฀the฀non-amortizable฀tradename฀results฀from฀our฀acquisition฀of฀Right฀Management.฀The฀tradename฀has฀been฀฀
assigned฀an฀indefinite฀life฀based฀on฀our฀expectation฀of฀renewing฀the฀tradename,฀as฀required,฀without฀material฀modifications฀and฀
at฀a฀minimal฀cost,฀and฀our฀expectation฀of฀positive฀cash฀flows฀beyond฀the฀foreseeable฀future.
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฀Right฀Management.฀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.