ManpowerGroup 2011 Annual Report Download - page 40

38 ManpowerGroup 2011 Annual Report Management’s Discussion & Analysis
MANAGEMENT’S DISCUSSION & ANALYSIS
of financial condition and results of oper ations
Significant factors impacting Deferred revenue are the type of programs and projects 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, 2011 and 2010, the current portion of Deferred revenue was $54.3 million and $53.8 million,
respectively, and the long-term portion of Deferred revenue was $28.6 million and $29.8 million, respectively.
INCOME TAXES
We account for income taxes in accordance with the accounting guidance on 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.
The accounting guidance related to uncertain tax positions 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 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 indefinite-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 indefinite-lived intangible assets during the third quarter of
2011, and there was no impairment of our Goodwill or our indefinite-lived intangible assets.
Significant assumptions used in our annual goodwill impairment test during the third quarter of 2011 included: expected
future revenue growth rates, operating unit profit margins, working capital levels, discount rates ranging from 12.3% to
20.0%, and a terminal value multiple. The expected future revenue growth rates and operating unit profit margins were
determined after taking into consideration our historical revenue growth rates and operating unit profit margins, our
assessment of future market potential, and our expectations of future business performance.
The table below provides a sample of our reporting units’ estimated fair values and carrying values, which were determined
as part of our annual goodwill impairment test performed in the third quarter ended September 30, 2011. Only those
reporting units that have a significant amount of goodwill have been included. The reporting unit formerly known as
Jefferson Wells has been included within the United States reporting unit.
(in millions) United States E l an
Netherlands
(Vitae)
Right
Management
Estimated fair values $ 1,197.3 $ 520.9 $ 248.7 $ 170.3
Carrying values 1,010.5 263.4 155.6 158.1