ManpowerGroup 2009 Annual Report Download - page 53

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Notes to Consolidated Financial Statements Manpower 2009 Annual Report
respective reporting unit’s fair value based on revenue and earnings multiples realized by similar public companies. The
market approach is more volatile as an indicator of fair value as compared to the income approach. We believe that each
approach has its merits. However in the instances where we have utilized both approaches, we have weighted the income
approach more heavily than the market approach because we believe that management’s assumptions generally provide
greater insight into the reporting unit’s fair value.
Signifi cant assumptions used in our annual goodwill impairment test during the third quarter of 2009 included: expected
revenue growth rates, operating unit profi t margins, and working capital levels; discount rates ranging from 10.7% to 22.2%;
and a terminal value multiple. The discount rate was impacted unfavorably by a 1% increase to our equity risk premium as a
result of current market conditions and economic uncertainty. The expected future revenue growth rates were determined
after taking into consideration our historical revenue growth rates, our assessment of future market potential, our expectations
of future business performance as well as an assumed modest economic recovery beginning in the middle of 2010.
If the reporting unit’s fair value is less than its carrying value as was the case for Jefferson Wells in 2009 and Right Management
in 2008, we are required to perform a second step. In the second step, we allocate the fair value of the reporting unit to all of
the assets and liabilities of the reporting unit, including any unrecognized intangibles 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 the current accounting guidance, we are also required to test our indefi nite-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. There was no signifi cant impairment of our indefi nite-lived intangible
assets recorded in 2009.
MARKETABLE SECURITIES
We account for our marketable security investments under the accounting guidance on certain investments in debt and
equity securities, and have determined that all such investments are classifi ed 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 Income (Loss), 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 2009, 2008 or 2007. As of December 31, 2009 and 2008, our available-for-sale
investments had a market value of $0.3 and $0.2, 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 $152.6 and
$131.8 as of December 31, 2009 and 2008, 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 classifi ed as available-for-sale.
Our share of net 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, 2009, 2008 and 2007, realized gains totaled
$2.4, $0.2 and $0.2, respectively, and realized losses totaled $1.2, $0.5 and $0.2, 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 Income (Loss), with the offsetting amount increasing or decreasing our investment in the franchise.
CAPITALIZED SOFTWARE FOR INTERNAL USE
We capitalize purchased software as well as internally developed software. Internal software development costs are
capitalized from the time the internal use software is considered probable of completion until the software is ready for use.
Business analysis, system evaluation, selection and software maintenance costs are expensed as incurred. Capitalized
software costs are amortized using the straight-line method over the estimated useful life of the software which ranges from
3 to 10 years. The net capitalized software balance of $24.6 and $33.6 as of December 31, 2009 and 2008, respectively, is
included in Other Assets in the consolidated balance sheets. Amortization expense related to the capitalized software costs
was $10.7, $12.1 and $10.7 for 2009, 2008 and 2007, respectively.