ManpowerGroup 2007 Annual Report Download - page 42

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Manpower 2007 Annual Report
Notes to Consolidated Financial Statements
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 specifi c 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 is recorded as Selling and Administrative Expenses in our consolidated statements of operations and was
$21.8, $27.4 and $22.9 in 2007, 2006 and 2005, respectively. Factors that would cause this provision to increase primarily
relate to increased bankruptcies by our clients and other diffi culties 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 were $20.8, $14.1 and
$18.3, for 2007, 2006 and 2005, respectively.
Advertising Costs
We expense production costs of advertising as they are incurred. Advertising expenses were $69.5, $69.4 and $45.8 in 2007,
2006 and 2005, respectively.
Employment-Related Items
In April 2007, we received a letter from the Central Agency for Social Security Organizations in France regarding a modifi cation
to the calculation of payroll taxes under certain French social programs aimed at encouraging the employment of low-wage
workers. This modifi cation reduced the amount of payroll taxes that we are required to remit, retroactive to January 1, 2006.
In July 2007, the French Senate passed an amendment to this social security legislation, which eliminates the payroll tax benefi t
resulting from the modifi cation effective October 1, 2007.
Included in 2007 is $149.6 ($88.6 after tax, or $1.05 per diluted share) of net benefi t related to this modifi cation, including an
increase to Gross Profi t of $157.1 and an increase to Selling and Administrative Expenses of $7.5. The proceeds related to this
modifi cation for a portion of 2006 and all of 2007 have been received. The remaining proceeds for 2006 are expected to be
received in early 2008.
Reorganization Costs
In the fourth quarter of 2007, we established reserves totaling $4.4 in France for offi ce closure costs and $4.0 at Jefferson Wells
for severances and other offi ce closure costs related to reorganizations at these entities. Of the $4.4 recorded in France, no
payment has been made as of December 31, 2007. We expect a majority of the $4.4 will be paid in 2008. Of the $4.0 recorded
at Jefferson Wells, $0.1 has been paid as of December 31, 2007. We expect a majority of the remaining $3.9 will be paid in 2008.
In the fi rst quarter of 2006, we recorded expenses totaling $9.5 in the U.K. and $1.2 at Right Management for severances and
other offi ce closure costs related to reorganizations at these entities. Of the $9.5 in the U.K., $7.3 has been paid as of December
31, 2007, of which $1.9 was paid in 2007. We expect a majority of the remaining $2.2 will be paid by 2009. 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. As of December 31, 2007, $4.8 has been paid, of which
$4.5 was paid in 2007. In the second half of 2007, we reversed $1.6 of this reserve as fewer than expected former employees
had claimed the severance. We expect the remaining $0.5 will be paid in 2008.
In 2005, we recorded total expenses of $15.3 in France and $4.0 at Right Management for severance costs related to
reorganizations in these entities. As of December 31, 2007, $13.6 of the amount recorded in France has been paid, of which
$5.0 was paid in 2007. We expect the remaining $1.7 will be paid in 2008. The full $4.0 recorded at Right Management was
paid in 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 fi nancial statement carrying amounts of existing assets and liabilities and their respective tax basis, 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.