ManpowerGroup 2008 Annual Report Download - page 33

31Manpower Annual Report 2008 Management’s Discussion & Analysis
Under this amended agreement, if the accounting or regulatory standards change such that our bank is required to
consolidate the activities under the facility, then the total fee for this program increases to Libor plus 500 basis points (Libor +
5.0%). Under the previous agreement, we had a liquidity fee of 12.5 basis points (0.125%) and a program fee of 15 basis
points (0.15%).
OTHER
In addition to the previously mentioned facilities, we maintain separate bank credit lines with financial institutions to meet
working capital needs of our subsidiary operations. As of December 31, 2008, such uncommitted credit lines totaled $376.5
million, of which $325.5 million was unused. Under the credit agreement, total subsidiary borrowings cannot exceed $300.0
million in the first, second and fourth quarters, and $600.0 million in the third quarter of each year. Due to these limitations,
additional borrowings of $247.8 million could have been made under these lines as of December 31, 2008.
As of the date of this report, our credit rating from Moody’s Investors Service is Baa2 with a stable outlook and our credit
rating from Standard & Poor’s is BBB- with a negative outlook. Both of these credit ratings are investment grade.
Application Of Critical Accounting Policies
The preparation of our 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. A discussion of the more significant
estimates follows. Management has discussed the development, selection and disclosure of these estimates and
assumptions with the Audit Committee of our Board of Directors.
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 write-offs of Accounts Receivable balances.
Bad Debt Expense, which increases our Allowance for Doubtful Accounts, is recorded as a Selling and Administrative
Expense and was $23.4 million, $21.8 million and $27.4 million for 2008, 2007 and 2006, respectively. Factors that would
cause this provision to increase primarily relate to increased bankruptcies by our clients 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 $21.5 million, $20.8 million and $14.1 million for 2008, 2007 and 2006, respectively.
EMPLOYMENT-RELATED ITEMS
The employment of contingent workers and permanent staff throughout the world results in the recognition of liabilities
related to defined benefit pension plans, self-insured workers’ compensation, social program remittances and payroll tax
audit exposures that require us to make estimates and assumptions in determining the proper reserve levels. These reserves
involve significant estimates or judgments that are material to our financial statements.
Defined Benefit Pension Plans
We sponsor several qualified and nonqualified pension plans covering permanent employees. The most significant plans are
located in the U.S., France, the U.K., Japan and other European countries. Annual expense relating to these plans is recorded
as Selling and Administrative Expense. The consolidated annual expense is estimated to be approximately $6.9 million in
2009, compared to $15.5 million, $19.2 million and $16.8 million in 2008, 2007 and 2006, respectively. The relatively lower
expense is expected for 2009 as we terminated our Japanese plan in January 2009 and replaced it with a defined contribution plan.
The calculations of annual pension expense and the pension liability required at year-end include various actuarial assumptions
such as discount rates, expected rate of return on plan assets, compensation increases and employee turnover rates. We
determine our assumption for the discount rate to be used for purposes of computing annual service and interest costs
based on an index of high-quality corporate bond yields and matched-funding yield curve analysis as of the measurement
date. We review the actuarial assumptions on an annual basis and make modifications to the assumptions as necessary. We
review peer data and historical rates, on a country-by-country basis, to check for reasonableness in setting both the discount
rate and the expected return on plan assets. We estimate compensation increases and employee turnover rates for each