ManpowerGroup 2007 Annual Report Download - page 33

Management’s Discussion & Analysis30 Manpower 2007 Annual Report
Management’s Discussion & Analysis
of financial condition and results of operations
Legal Regulations
The employment services industry is closely regulated in all of the major markets in which we operate except the U.S. and
Canada. Many countries impose licensing or registration requirements and substantive restrictions on employment services,
either on the provider of recruitment services or the ultimate client company, or minimum benefi ts to be paid to the temporary
employee either during or following the temporary assignment. Regulations also may restrict the length of assignments, the
type of work permitted or the occasions on which contingent workers may be used. Changes in applicable laws or regulations
have occurred in the past and are expected in the future to affect the extent to which employment services fi rms may operate.
These changes could impose additional costs, taxes, record keeping or reporting requirements; restrict the tasks to which
contingent workers may be assigned; limit the duration of or otherwise impose restrictions on the nature of the relationship (with
us or the client); or otherwise adversely affect the industry. All of our other service lines are currently not regulated.
In many markets, the existence or absence of collective bargaining agreements with labor organizations has a signifi cant
impact on our operations and the ability of clients to utilize our services. In some markets, labor agreements are structured on a
national or industry-wide (rather than a company-by-company) basis. Changes in these collective bargaining agreements have
occurred in the past, are expected to occur in the future, and may have a material impact on the operations of employment
services fi rms, including us.
In November 2004, French authorities commenced an investigation at our French headquarters. According to the search
warrant, the investigation stems from a complaint submitted during 2003 to the European Commission and subsequently
transferred to France’s Direction Generale de la Concurrence, de la Consommation et de la Repression des Fraudes (the
‘Competition Council’), a body of the French Financial Department that investigates frauds and competition violations. In
November 2007, we received a Statement of Objections from the Competition Council in connection with their investigation.
The Statement of Objections alleges illegal information sharing between us and certain of our competitors.
A Statement of Objections is a further step in the proceedings under French competition law with respect to the matter. We
have reviewed the allegations made in the Statement of Objections with our legal counsel, have responded to the Competition
Council and intend to vigorously defend our position as the proceedings continue. We have had discussions with representatives
of the Competition Council and with our legal counsel, and at this time, we are not able to predict the outcome of the proceedings,
the ultimate exposure or the timing of any resolution. However, based on the probability that we will incur liability and other
information currently available, we recorded a reserve of $15.0 million in the fourth quarter related to this matter. The fi nal resolution
of this matter could differ signifi cantly from the amount that we have recorded.
Recently Issued Accounting Standards
In January 2007, we adopted the Financial Accounting Standards Board (“FASB”) Interpretation No. 48, “Accounting for
Uncertainty in Income Taxes, and Related Implementation Issues” (“FIN 48”). FIN 48 prescribes a comprehensive model for
how a company should recognize, measure, present, and disclose in its fi nancial statements uncertain tax positions that the
company has taken or expects to take on a tax return. The net impact of the initial application of FIN 48 was a $4.3 million
increase in the net liability for unrecognized tax benefi ts, which was accounted for as an adjustment to Retained Earnings on
our consolidated balance sheet. (See Note 5 for further information regarding the application of FIN 48.)
In December 2007, the FASB issued Statement No. 141 (revised 2007), “Business Combinations” (“SFAS 141R”). SFAS 141R
changes the requirements for an acquirer’s recognition and measurement of the assets acquired and the liabilities assumed in a
business combination. SFAS 141R is effective for us in 2009. We are currently assessing the impact of the adoption of this
statement.
In September 2006, the FASB issued Statement No. 157, “Fair Value Measurements” (”SFAS 157”). SFAS 157 defi nes fair
value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and
expands disclosures about fair value measurements. Subsequently, in February 2007, the FASB issued Statement No. 159,
“The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS 159”). SFAS 159 permits entities to choose to
measure many fi nancial assets and fi nancial liabilities at fair value. Unrealized gains and losses on items for which the fair value
option has been elected are reported in earnings. Both SFAS 157 and SFAS 159 are effective for us in 2008. We do not expect
the adoption of these statements to have a material impact on our consolidated fi nancial statements.