ManpowerGroup 2014 Annual Report Download - page 46

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in employment opportunities and to improve our competitiveness, as required by the law. Due to the complexity of
compliance with this law, we may have adjustments to the payroll tax credit amount as a result of any audits. The CICE
credit is accounted for as a reduction of our cost of services in the period earned, and has had a favorable impact on our
consolidated gross profit margin, as well as margins in France and Southern Europe.
The payroll tax credit is creditable against our current French income tax payable, with any remaining amount being paid
after three years. Given the amount of our current income taxes payable, we would generally receive the vast majority of the
CICE credits after the three-year period. In December 2013, we entered into an agreement to sell a portion of the credits
earned in 2013 for net proceeds of $104.0 million. We derecognized these receivables upon the sale as the terms of the
agreement are such that the transaction qualifies for sale treatment according to the accounting guidance on the transfer
and servicing of assets. The discount on the sale of this receivable was recorded as a reduction of the payroll tax credits in
cost of services. We received the cash from the sale in December 2013, which improved our operating cash flows in the
fourth quarter of 2013.
Deferred Revenue
We recognize revenues under the current accounting guidance on revenue recognition. The accounting guidance generally
provides that revenues for time-based services be recognized over the average length of the services being provided.
For the outplacement line of business, we recognize revenues from individual programs and for larger projects over the
estimated period in which services are rendered to candidates. In our consulting business, revenues are recognized upon
the performance of the service under the consulting service contract. For performance-based contracts, we defer
recognizing revenues until the performance criteria have been met.
The amounts billed for outplacement, consulting services and performance-based contracts in excess of the amount
recognized as revenues are recorded as deferred revenue and included in accrued liabilities for the current portion and
other long-term liabilities for the long-term portion in our Consolidated Balance Sheets.
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, 2014 and 2013, the current portion of deferred revenue was $35.5 million and $48.5 million, respectively, and
the long-term portion of deferred revenue was zero and $10.0 million, respectively. The decrease in these amounts is
primarily related to a client contract that ended in 2014.
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 basis, 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, one which does not meet the 50% threshold, will not be
recognized in the financial statements.
Management’s Discussion & Analysis
MANAGEMENT’S DISCUSSION & ANALYSIS
of financial condition and results of operations