ManpowerGroup 2008 Annual Report Download - page 35

33Manpower Annual Report 2008 Management’s Discussion & Analysis
the operating segment in which it is reported. Other than France, we have not had any significant adjustments to the amounts
recorded as a result of any payroll tax audits, and we do not expect any significant adjustments to the recorded amounts in
the near term.
In France, we currently maintain a reserve for the unaudited years of 2006 through 2008, which has been estimated based on
the results of past audits and changes in business volumes. We do not expect any significant adjustments to the recorded
amount in the near term, however we have received notification that these years will be audited during 2009, and we are
expecting an assessment for at least 2006 before the end of 2009.
DEFERRED REVENUE
We recognize revenue under the provisions of Staff Accounting Bulletin No. 104, “Revenue Recognition” (“SAB 104”). SAB
104 generally provides that revenue for time-based services be recognized over the average length of the services being
provided. For the outplacement line of business, we recognize revenue from individual programs over the estimated period in
which services are rendered to candidates. For group programs and large projects within the outplacement and consulting
lines of business, we recognize revenue over the period in which the contracts are completed. In our consulting business,
revenue is recognized upon the performance of the obligations under the consulting service contract. The amount billed for
outplacement and consulting services in excess of the amount recognized as revenue is recorded as Deferred Revenue and
included in Accrued Liabilities in our consolidated balance sheets.
Significant factors impacting Deferred Revenue are the type of programs sold and the volume of current billings for new
programs and projects. Over time, an increasing volume of new billings will generally result in higher amounts of Deferred
Revenue, while decreasing levels of new billings will generally result in lower amounts of Deferred Revenue. As of December
31, 2008 and 2007, we had $48.1 million and $46.3 million of Deferred Revenue, respectively.
INCOME TAXES
We account for income taxes in accordance with Financial Accounting Standards Board (“FASB”) Statement 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.
We adopted the provisions of FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an interpretation of
FASB Statement No. 109” (“FIN 48”) as of January 1, 2007. FIN 48 requires an evaluation process for all tax positions taken
that involves a review of probability for sustaining a tax position. If the probability for sustaining a tax position is more likely than
not, which is a 50% threshold, then the tax position is warranted and the largest amount that would be realized upon ultimate
settlement is recognized. An uncertain tax position will not be recognized in the financial statements unless it is more likely
than not of being sustained.
Our judgment is required in determining our deferred tax assets and liabilities, and any valuation allowances recorded. Our
net deferred tax assets may need to be adjusted in the event that tax rates are modified, or our estimates of future taxable
income change, such that deferred tax assets or liabilities are expected to be recovered or settled at a different tax rate than
currently estimated. In addition, valuation allowances may need to be adjusted in the event that our estimate of future taxable
income changes from the amounts currently estimated. We have unrecognized tax benefits related to items in various
countries. To the extent these items are settled for an amount different than we currently expect, the unrecognized tax benefit
will be adjusted.
We provide for income taxes on a quarterly basis based on an estimated annual tax rate. In determining this rate, we make
estimates about taxable income for each of our largest locations worldwide, as well as the tax rate that will be in effect for
each location. To the extent these estimates change during the year, or actual results differ from these estimates, our estimated
annual tax rate may change between quarterly periods and may differ from the actual effective tax rate for the year.
GOODWILL AND INDEFINITE-LIVED INTANGIBLE ASSET IMPAIRMENT
In connection with FASB Statement No. 142, “Goodwill and Other Intangible Assets” (“SFAS 142”), 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 acquisitions of Right Management, Elan and
Jefferson Wells, U.S. franchises and Vitae.