ManpowerGroup 2011 Annual Report Download - page 55

Notes to Consolidated Financial Statements ManpowerGroup 2011 Annual Report 53
GOODWILL AND OTHER INTANGIBLE ASSETS
We have Goodwill, amortizable Intangible assets and Intangible assets that do not require amortization, as follows:
2011 2010
December 31 Gr o s s
Accumulated
Amortization N et G ro ss
Accumulated
Amortization N e t
Goodwill $ 984.7 $ – $ 984.7 $ 954.1 $ – $ 954.1
Intangible Assets:
Amortizable:
Technology $ 19.6 $ 19.6 $ – $ 19.6 $ 19.6 $ –
Franchise Agreements 18.0 14.3 3.7 18.0 12.5 5.5
Customer Relationships 328.0 130.1 197.9 309.4 94.3 215.1
Other 13.5 12.1 1.4 14.0 11.7 2.3
379.1 176.1 203.0 361.0 138.1 222.9
Non-Amortizable:
Tradenames(1) 54.0 – 54.0 55.3 – 55.3
Reacquired Franchise Rights 97.9 – 97.9 98.0 – 98.0
151.9 – 151.9 153.3 – 153.3
Total Intangible Assets $ 531.0 $ 176.1 $ 354.9 $ 514.3 $ 138.1 $ 376.2
(1) Balances were net of accumulated impairment loss of $139.5 as of both December 31, 2011 and 2010.
Amortization expense related to intangibles was $38.9, $39.3 and $21.9 in 2011, 2010 and 2009, respectively. Amortization
expense expected in each of the next five years related to acquisitions completed as of December 31, 2011 is as follows:
2012 — $35.8, 2013 — $31.0, 2014 — $26.1, 2015 — $22.3 and 2016 — $19.3. The weighted-average useful lives of the
technology, franchise agreements, customer relationships and other are 5, 10, 14 and 3 years, respectively. The tradenames
have been assigned an indefinite life based on our expectation of renewing the tradenames, as required, without 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. 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 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 indefinite-lived intangible as a result of our annual test.
The accounting guidance requires a two-step method for determining goodwill impairment. In the first step, we determined
the fair value of each reporting unit, generally by utilizing an income approach derived from a discounted cash flow
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 flow data. Therefore, it represents an indication of fair market value reflecting
management’s internal outlook for the reporting unit. The market approach utilizes the Guideline Public Company Method
to quantify the respective reporting unit’s fair value based on revenues 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.
Significant assumptions used in our goodwill impairment tests during 2011, 2010 and 2009 included: expected revenue
growth rates, operating unit profit margins, working capital levels, discount rates ranging from 12.3% to 20.0% for 2011,
and a terminal value multiple. The expected future revenue growth rates and the expected operating unit profit margins
were determined after considering our historical revenue growth rates and operating unit profit margins, our assessment
of future market potential, and our expectations of future business performance.