ManpowerGroup 2008 Annual Report Download - page 51

49Manpower Annual Report 2008 Notes to Consolidated Financial Statements
material modifications and at a minimal cost, and our expectation of positive cash flows beyond the foreseeable future. The
reacquired franchise rights result from our franchise acquisitions in the U.S. These rights entitle us to operate permanently in
particular territories, and have therefore been assigned an indefinite life.
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 results from our acquisitions of Right Management, Elan,
Jefferson Wells, U.S. franchises and Vitae.
SFAS 142 requires a two-step method for determining goodwill impairment. In the first step, we determine the fair value of
each reporting unit, generally by utilizing an income approach derived from a discounted cash flow methodology and, for
certain larger reporting units, a combination of the income approach and the market approach derived from comparable
public companies. Significant assumptions used in this analysis include: expected future revenue growth rates, operating
unit profit margins, and working capital levels; a discount rate; and a terminal value multiple. The fair value of the reporting unit
is then compared to its carrying value. If the reporting unit’s fair value is less than its carrying value, we are required to perform
the second step. In this step, we allocate the fair value of the reporting unit to all of the assets and liabilities of the reporting
unit, including any unrecognized intangible assets, in a “hypothetical” calculation to determine the implied fair value of the
goodwill. The impairment charge, if any, is measured as the difference between the implied fair value of the goodwill and its
carrying value.
Under SFAS 142, we are also required to test our indefinite-lived intangible assets for impairment by comparing the fair value
of the intangible asset with its carrying value. If the intangible asset’s fair value is less than its carrying value, an impairment
loss is recognized for the difference.
We completed our annual impairment review during the third quarter of 2008. In the first step, the fair value for each reporting
unit other than Right Management exceeded its carrying value. For Right Management, we were required to perform the
second step. As a result of deteriorating market conditions and general economic uncertainty, market comparables and
forecasted cash flows for the Right Management reporting unit were lower than in previous years, which led to a determination
that the goodwill recorded for Right Management was partially impaired. For the year ended December 31, 2008, we
recognized an impairment loss of $140.8 related to goodwill. There was no tax benefit associated with this impairment loss.
At the same time, we also determined that the tradename intangible asset for Right Management was partially impaired as a
result of a decrease in forecasted royalties. As a result, we recognized an impairment loss of $22.3 related to our tradename
intangible asset for the year ended December 31, 2008. We recognized a deferred tax benefit of $8.5 associated with this
impairment loss.
The goodwill and intangible asset impairment charge is a non-cash charge.
MARKETABLE SECURITIES
We account for our marketable security investments under FASB Statement No. 115, “Accounting for Certain Investments in
Debt and Equity Securities,” and have determined that all such investments are classified as available-for-sale. Accordingly,
unrealized gains and unrealized losses that are determined to be temporary, net of related income taxes, are included in
Accumulated Other Comprehensive (Loss) Income, which is a separate component of Shareholders’ Equity. Realized gains
and losses, and unrealized losses determined to be other-than-temporary, are recorded in our consolidated statements of
operations. No realized gains or losses were recorded in 2008, 2007 or 2006. As of December 31, 2008 and 2007, our
available-for-sale investments had a market value of $0.2 and $0.3, respectively, and an adjusted cost basis of $0.1, and
none had unrealized losses.
We hold a 49% interest in our Swiss franchise, which maintains an investment portfolio with a market value of $131.8 and
$144.9 as of December 31, 2008 and 2007, respectively. This portfolio is comprised of a wide variety of European and U.S.
debt and equity securities as well as various professionally-managed funds, all of which are classified as available-for-sale.
Our net share of realized gains and losses, and declines in value determined to be other-than-temporary, are included in our
consolidated statements of operations. For the years ended December 31, 2008, 2007 and 2006, realized gains totaled
$0.2, $0.2 and $1.5, respectively, and realized losses totaled $0.5, $0.2 and $0.9, respectively. Our share of net unrealized
gains and unrealized losses that are determined to be temporary related to these investments are included in Accumulated
Other Comprehensive (Loss) Income, with the offsetting amount increasing or decreasing our investment in the franchise.