ManpowerGroup 2012 Annual Report Download - page 60

Significant assumptions used in our goodwill impairment tests during 2012, 2011 and 2010 included: expected revenue
growth rates, operating unit profit margins, working capital levels, discount rates ranging from 10.6% to 16.9% for 2012,
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.
If the reporting unit’s fair value is less than its carrying value as was the case for Right Management and Jefferson Wells in
the fourth quarter of 2010, 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 intangible 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 indefinite-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.
In the fourth quarter of 2010, two of our reporting units, Right Management and Jefferson Wells, each experienced strong
indicators of impairment due to continued deterioration in market conditions for both reporting units as they experienced
further than anticipated profitability declines in the fourth quarter, which led us to adjust our long-term outlooks for each
reporting unit. As a result, we performed an impairment test of our goodwill and indefinite-lived intangible assets during the
fourth quarter of 2010, which resulted in a non-cash impairment charge of $311.6 ($311.6 after-tax) for goodwill associated
with Right Management and Jefferson Wells. In addition, we incurred a non-cash impairment charge of $117.2 ($72.7 after-
tax) for the tradenames associated with these two reporting units.
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 classified 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, 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. In 2012, we sold available-for-sale investments with a market value of $0.4 and an adjusted cost basis of $0.1
and realized a gain of $0.3. No realized gains or losses were recorded in 2011 and 2010. We had no available-for-sale
investments as of December 31, 2012. Our available-for-sale investments had a market value of $0.4 and adjusted cost
basis of $0.1, and no unrealized losses as of December 31, 2011.
We hold a 49% interest in our Swiss franchise, which maintained an investment portfolio with a market value of $192.5 and
$175.8 as of December 31, 2012 and 2011, respectively. This portfolio is comprised of a wide variety of European and
United States debt and equity securities as well as various professionally-managed funds, all of which are classified 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, 2012, 2011 and 2010,
realized gains totaled $0.1, $0.1 and $0.5, respectively, and realized losses totaled $0.2, $0.3 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, 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 5 years. The net capitalized software balance of $10.6 and $14.4 as of December 31, 2012 and 2011, respectively, is
included in other assets in the Consolidated Balance Sheets. Amortization expense related to the capitalized software
costs was $7.3, $7.8 and $11.6 for 2012, 2011 and 2010, respectively.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
in millions, except share and per share data
58 ManpowerGroup 2012 Annual Report Notes to Consolidated Financial Statements