ManpowerGroup 2011 Annual Report Download - page 75

Notes to Consolidated Financial Statements ManpowerGroup 2011 Annual Report 73
12.
Derivative Financial Instruments
We are exposed to various risks relating to our ongoing business operations. The primary risks, which are managed through
the use of derivative instruments, are foreign currency exchange rate risk and interest rate risk. In certain circumstances, we
enter into foreign currency forward exchange contracts (“forward contracts”) to reduce the effects of fluctuating foreign
currency exchange rates on our cash flows denominated in foreign currencies. Our exposure to market risk for changes in
interest rates relates primarily to our Long-term debt obligations. We manage interest rate risk through the use of a
combination of fixed and variable rate borrowings. In the past, we have also used interest rate swap agreements, however,
we haven’t had any such agreements in 2011 or 2010. In accordance with the current accounting guidance for derivative
instruments and hedging activities, we record all of our derivative instruments as either an asset or liability measured at their
fair values.
FOREIGN CURRENCY EXCHANGE RATE RISK MANAGEMENT
The €300.0 ($388.7) Notes and the €200.0 ($258.9) Notes were designated as economic hedges of our net investment in
our foreign subsidiaries with a euro functional currency as of December 31, 2011.
For derivatives designated as an economic hedge of the foreign currency exposure of a net investment in a foreign
subsidiary, the gain or loss associated with foreign currency translation is recorded as a component of Accumulated other
comprehensive income, net of taxes. As of December 31, 2011, we had a $43.2 unrealized loss included in Accumulated
other comprehensive income, net of taxes, as the net investment hedge was deemed effective.
Our forward contracts are not designated as hedges. Consequently, any gain or loss resulting from the change in fair value
is recognized in the current period earnings. These gains or losses are offset by the exposure related to receivables and
payables with our foreign subsidiaries and to interest due on our euro-denominated notes, which is paid annually in June.
We recorded a loss of $0.1 associated with our forward contracts in Interest and other expenses for the year ended
December 31, 2011, in addition to the losses recorded for the items noted above.
The fair value measurements of these items recorded in our Consolidated Balance Sheets as of December 31, 2011 and
2010 are disclosed in Note 1 to the Consolidated Financial Statements.
13.
Contingencies
LITIGATION
In the normal course of business, the Company is named as defendant in various legal proceedings in which claims are
asserted against the Company. We record reserves for loss contingencies based on the circumstances of each claim,
when it is probable that a loss has been incurred as of the balance sheet date and can be reasonably estimated. Although
the outcome of litigation cannot be predicted with certainty, we believe the ultimate resolution of these legal proceedings
will not have a material adverse effect on our business or financial condition.
In February 2009, the French Competition Council rendered its decision and levied a fine of €42.0 ($55.9) related to the
competition investigation that began in November 2004, conducted by France’s Direction Generale de la concurrence, de
la Consommation et de la Repression des Fraudes (“DGCCRF”), a body of the French Finance Minister that investigates
frauds and competition violations. We had accrued for this fine as of December 31, 2008, paid this fine in April 2009 and
appealed the Competition Council’s decision. In January 2010, we received notification that our appeal was denied and in
March 2010, we again appealed the Competition Council’s decision to the Cour de Cassation. In March 2011, the Cour de
Cassation, France’s highest court of appeal, confirmed the decision.