ManpowerGroup 2009 Annual Report Download - page 52

Notes To Consolidated Financial Statements
in millions, except share and per share data
50 Manpower 2009 Annual Report Notes to Consolidated Financial Statements
GOODWILL AND INTANGIBLE ASSETS
We have goodwill, amortizable intangible assets and intangible assets that do not require amortization, as follows:
2009 2008
December 31 Gross
Accumulated
Amortization Net Gross
Accumulated
Amortization Net
Goodwill $ 959.1 $ – $ 959.1 $ 972.9 $ – $ 972.9
Intangible Assets:
Amortizable:
Technology $ 19.6 $ 19.6 $ – $ 19.6 $ 19.4 $ 0.2
Franchise Agreements 18.0 10.7 7.3 18.0 8.9 9.1
Customer Relationships 173.8 58.8 115.0 170.7 43.1 127.6
Other 18.4 11.4 7.0 17.5 7.0 10.5
229.8 100.5 129.3 225.8 78.4 147.4
Non-Amortizable:
Tradename 171.2 – 171.2 171.2 – 171.2
Reacquired franchise rights 97.9 – 97.9 96.6 – 96.6
269.1 – 269.1 267.8 – 267.8
Total Intangible Assets $ 498.9 $ 100.5 $ 398.4 $ 493.6 $ 78.4 $ 415.2
Amortization expense related to intangibles was $22.1 in 2009, $22.3 in 2008 and $14.5 in 2007. Amortization expense
expected in each of the next fi ve years related to acquisitions completed as of December 31, 2009 is as follows: 2010 –
$19.1, 2011 – $16.9, 2012 – $15.7, 2013 – $12.3 and 2014 – $9.9. The weighted-average useful lives of the technology,
franchise agreements, client relationships and other are 5, 10, 15 and 3 years, respectively. The majority of the non-
amortizable tradename results from our acquisition of Right Management. The tradename has been assigned an indefi nite
life based on our expectation of renewing the tradename, as required, without material modifi cations and at a minimal cost,
and our expectation of positive cash fl ows beyond the foreseeable future. The reacquired franchise rights result from our
franchise acquisitions in the U.S. completed prior to 2009.
In accordance with the accounting guidance on goodwill and other intangible assets, we perform an annual impairment test
of goodwill at our reporting unit level and indefi nite-lived intangible assets at our unit of account level during the third quarter,
or more frequently if events or circumstances change that would more likely than not reduce the fair value of our reporting
units below their carrying value.
We performed our annual impairment test of our goodwill and indefi nite-lived intangible assets during the third quarter of
2009 as well as 2008, which resulted in non-cash impairment charges of $61.0 in 2009 for goodwill associated with our
Jefferson Wells reporting unit and $163.1 in 2008 for goodwill ($140.8) and tradename ($22.3) associated with our Right
Management reporting unit. We also recorded a deferred tax asset of $8.5 related to the tradename impairment in 2008.
The 2009 impairment was due in part to continued deterioration in market conditions, which has resulted in Jefferson Wells
experiencing a signifi cant revenue decline during the current and prior year. The discount rate was also impacted unfavorably
by a 1% increase to our equity risk premium as a result of current market conditions and economic uncertainty.
The 2008 impairment was a result of deteriorating market conditions and general economic uncertainty. Market comparables
and forecasted cash fl ows for the Right Management reporting unit were lower than in previous years, which led to a
determination that the goodwill and tradename recorded for Right Management was impaired.
The accounting guidance requires a two-step method for determining goodwill impairment. In the fi rst step, we determined
the fair value of each reporting unit, generally by utilizing an income approach derived from a discounted cash fl ow
methodology. For certain of our reporting units, a combination of the income approach (weighted 75%) and the market
approach (weighted 25%) derived from comparable public companies was utilized. The income approach is developed from
management’s forecasted cash fl ow data. Therefore, it represents an indication of fair market value refl ecting management’s
internal outlook for the reporting unit. The market approach utilizes the Guideline Public Company Method to quantify the