ManpowerGroup 2013 Annual Report Download - page 61

Notes to Consolidated Financial Statements ManpowerGroup 2013 Annual Report 59
Amortization expense related to intangibles was $34.1, $36.7 and $38.9 in 2013, 2012 and 2011, respectively. Amortization
expense expected in each of the next five years related to acquisitions completed as of December 31, 2013 is as follows:
2014 — $30.3, 2015 — $27.0, 2016 — $23.9, 2017 — $20.3 and 2018 — $18.0. 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 United States and Canada 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 2013, 2012 and 2011, and there was no impairment of our goodwill or indefinite-lived intangible as a result of our
annual tests.
We utilize 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 2013, 2012 and 2011 included: expected revenue
growth rates, operating unit profit margins, working capital levels, discount rates ranging from 11.7% to 16.5% for 2013, 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, including the effects of our simplification and
recalibration plan.
If the reporting unit’s fair value is less than its carrying value, 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.
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. We
had no available-for-sale investments as of December 31, 2013 or 2012.