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Summary of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2018

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses for the reporting period. Actual results could differ from these estimates.

Basis of Consolidation

The Consolidated Financial Statements include our operating results and the operating results of all of our majority-owned subsidiaries and entities in which we have a controlling financial interest. We have a controlling financial interest if we own a majority of the outstanding voting common stock and the noncontrolling shareholders do not have substantive participating rights, or we have significant control over an entity through contractual or economic interests in which we are the primary beneficiary. We account for equity investments in companies over which we have the ability to exercise significant influence, but not control, using the equity method of accounting. We recognize our ownership share of earnings of these equity method investments, amortization of basis differences, and related gains or losses in the Consolidated Financial Statements. These investments, as well as certain other relationships, are also evaluated for consolidation under the accounting guidance on consolidation of variable interest entities. These investments were $161.4 and $158.7 as of December 31, 2018 and 2017, respectively, and are included in other assets in the Consolidated Balance Sheets. Included in shareholders’ equity as of December 31, 2018 and 2017 are $105.2 and $103.9, respectively, of unremitted earnings from investments accounted for using the equity method. All significant intercompany accounts and transactions have been eliminated in consolidation.

Allowance for Doubtful Accounts

We have an allowance for doubtful accounts recorded as an estimate of the accounts receivable balance that may not be collected. This allowance is calculated on an entity-by-entity basis with consideration for historical write-off experience, the current aging of receivables and a specific review for potential bad debts. Items that affect this balance mainly include bad debt expense and the write-off of accounts receivable balances.

Bad debt expense is recorded as selling and administrative expenses in our Consolidated Statements of Operations and was $23.0, $18.1 and $20.4 in 2018, 2017 and 2016, respectively. Factors that would cause this provision to increase primarily relate to increased bankruptcies by our clients and other difficulties collecting amounts billed. On the other hand, an improved write-off experience and aging of receivables would result in a decrease to the provision. Write-offs were $12.0, $17.6 and $16.9 for 2018, 2017 and 2016, respectively.

Advertising Costs

We expense production costs of advertising as they are incurred. Advertising expenses were $27.9, $26.6 and $24.4 in 2018, 2017 and 2016, respectively.

Restructuring Costs

We recorded net restructuring costs of $39.3 and $34.5 in 2018 and 2017, respectively, in selling and administrative expenses, primarily related to severances and office closures and consolidations in multiple countries and territories. During 2018 and 2017, we made payments of $37.3 and $25.5, respectively, out of our restructuring reserve. We expect a majority of the remaining $15.5 reserve will be paid by the end of 2019. Changes in the restructuring liability balances for each reportable segment and Corporate were as follows:



	Americas⁽¹⁾			Southern Europe⁽²⁾			Northern Europe			APME			Right Management			Corporate			Total
Balance, January 1, 2017		$0.4			$1.3			$2.6			$0.1			$0.1			$—			$4.5
Severance costs	5.8			—			15.6			0.9			1.4			1.0			24.7
Office closure costs	0.5			—			8.2			0.5			0.6			—			9.8
Costs paid or utilized	(5.0		)	(0.4		)	(16.8		)	(1.5		)	(0.9		)	(0.9		)	(25.5		)
Balance, December 31, 2017	1.7			0.9			9.6			—			1.2			0.1			13.5
Severance costs	0.3			5.4			25.8			—			0.3			—			31.8
Office closure costs	—			—			7.5			—			—			—			7.5
Costs paid or utilized	(1.7		)	(4.6		)	(29.8		)	—			(1.1		)	(0.1		)	(37.3		)
Balance, December 31, 2018		$0.3			$1.7			$13.1			$—			$0.4			$—			$15.5

(1) Balance related to United States was $0.4 as of January 1, 2017. In 2017, United States incurred $3.7 for severance costs and $0.5 for office closure costs and paid/utilized $3.1, leaving a $1.5 liability as of December 31, 2017. In 2018, United States paid/utilized $1.2, leaving a $0.3 liability as of December 31, 2018.

(2) Balance related to France was $1.3 as of January 1, 2017. In 2017, France paid/utilized $0.4, leaving a $0.9 liability as of both December 31, 2017 and 2018. Italy had no restructuring reserves recorded as of either January 1, 2017 or December 31, 2017. In 2018, Italy incurred $1.9 for severance costs and paid/utilized $1.4, leaving a $0.5 liability as of December 31, 2018.

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 to reduce the assets to the amounts more likely than not to be realized.

Fair Value Measurements

The assets and liabilities measured and recorded at fair value on a recurring basis were as follows:



	Fair Value Measurements Using								Fair Value Measurements Using
	December 31, 2018		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		December 31, 2017		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Deferred compensation plan assets		$89.5		$89.5		$—		$—		$99.1		$99.1		$—		$—
Foreign currency forward contracts	0.1		—		0.1		—		—		—		—		—
		$89.6		$89.5		$0.1		$—		$99.1		$99.1		$—		$—
Liabilities
Foreign currency forward contracts		$0.1		$—		$0.1		$—		$0.1		$—		$0.1		$—
		$0.1		$—		$0.1		$—		$0.1		$—		$0.1		$—

We determine the fair value of our deferred compensation plan assets, comprised of publicly traded securities, by using market quotes as of the last day of the period. The fair value of the foreign currency forward contracts is measured at the value from either directly or indirectly observable third parties.

The carrying values of cash and cash equivalents, accounts receivable, accounts payable, and other current assets and liabilities approximate their fair values because of the short-term nature of these instruments. The carrying value of our variable-rate long-term debt approximates fair value. The fair value of the Euro-denominated notes, as observable at commonly quoted intervals (Level 2 inputs), was $1,052.9 and $939.9 as of December 31, 2018 and 2017, respectively, compared to a carrying value of $1,024.6 and $897.8, respectively.

Goodwill and Other Intangible Assets

We had goodwill, finite-lived intangible assets and indefinite-lived intangible assets as follows:



	December 31, 2018						December 31, 2017
	Gross		Accumulated Amortization		Net		Gross		Accumulated Amortization		Net
Goodwill⁽¹⁾	$	1,297.1	$	—	$	1,297.1	$	1,343.0	$	—	$	1,343.0
Intangible assets:
Finite-lived:
Customer relationships	$	444.8	$	351.7	$	93.1	$	453.6	$	325.2	$	128.4
Other	18.5		16.0		2.5		19.3		14.7		4.6
	463.3		367.7		95.6		472.9		339.9		133.0
Indefinite-lived:
Tradenames⁽²⁾	52.0		—		52.0		52.0		—		52.0
Reacquired franchise rights	98.7		—		98.7		99.0		—		99.0
	150.7		—		150.7		151.0		—		151.0
Total intangible assets	$	614.0	$	367.7	$	246.3	$	623.9	$	339.9	$	284.0

(1) Balances were net of accumulated impairment loss of $513.4 as of both December 31, 2018 and 2017.

(2) Balances were net of accumulated impairment loss of $139.5 as of both December 31, 2018 and 2017.

Amortization expense related to intangibles was $35.1, $34.6 and $36.0 in 2018, 2017 and 2016, respectively. Amortization expense expected in each of the next five years related to acquisitions completed as of December 31, 2018 is as follows: 2019 - $29.0, 2020 - $24.2, 2021 - $13.4, 2022 - $9.9 and 2023 - $7.7. The weighted-average useful lives of the customer relationships and other are approximately 13 and 4 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 2018, 2017 and 2016, and determined that there was no impairment of our goodwill or indefinite-lived intangible as a result of our annual tests.

For our goodwill impairment testing procedures, 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 2018, 2017 and 2016 included: expected revenue growth rates, operating unit profit margins, working capital levels, discount rates ranging from 10.6% to 14.2% for 2018, and a terminal value multiple. The expected future revenue growth rates and the expected operating unit profit margins were determined after taking into consideration our historical revenue growth rates and operating unit profit margins, our assessment of future market potential, and our expectations of future business performance.

We would record a goodwill impairment charge by the amount for which a reporting unit's carrying value exceeds its fair value, not to exceed the carrying amount of the goodwill.

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 in accordance with the accounting guidance on investments in debt and equity securities, and have historically determined that all such investments are classified as available-for-sale. As of January 1, 2018, we adopted the new accounting guidance on financial instruments, which requires equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net earnings (See Note 10 to the Consolidated Financial Statements for further information).

We hold a 49% interest in our Swiss franchise, accounted for under the equity method of accounting, which maintains an investment portfolio with a market value of $219.9 and $234.8 as of December 31, 2018 and 2017, respectively. The portfolio is comprised of a wide variety of European and United States debt and equity securities and various professionally-managed funds, all of which are classified as available-for-sale, as well as cash and cash equivalents. Since January 1, 2018, upon adoption of the new accounting guidance, we have recognized all the changes in fair value on the investment portfolio in the current period earnings. Prior to January 1, 2018, only our share of net realized gains and losses, and declines in value determined to be other-than-temporary, was included in our Consolidated Statements of Operations. Our share of net unrealized gains and unrealized losses that were determined to be temporary related to these investments was included in accumulated other comprehensive loss, with the offsetting amount increasing or decreasing our investment in the franchise. For the years ended December 31, 2018, 2017 and 2016, realized gains totaled $12.7, $14.7 and $2.9, respectively, and realized losses totaled $2.1, $3.8 and $1.0, respectively. Other-than-temporary impairment amounts were net gains of $0.1, $1.6 and $0.3 for 2018, 2017 and 2016, respectively, as previously impaired investments were sold for a gain.

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 10 years. The net capitalized software balance of $7.4 and $3.5 as of December 31, 2018 and 2017, respectively, is included in other assets in the Consolidated Balance Sheets. Amortization expense related to the capitalized software costs was $1.5, $1.3 and $1.9 for 2018, 2017 and 2016, respectively.

Property and Equipment

A summary of property and equipment as of December 31 is as follows:



	2018		2017
Land	$	3.4	$	3.4
Buildings	12.0		14.5
Furniture, fixtures, and autos	167.3		172.3
Computer equipment	128.7		137.1
Leasehold improvements	302.2		306.1
Property and equipment	$	613.6	$	633.4

Property and equipment are stated at cost and are depreciated using primarily the straight-line method over the following estimated useful lives: buildings - up to 40 years; furniture, fixtures, autos and computer equipment - 2 to 15 years; leasehold improvements - lesser of life of asset or expected lease term. Expenditures for renewals and betterments are capitalized whereas expenditures for repairs and maintenance are charged to income as incurred. Upon sale or disposition of property and equipment, the difference between the unamortized cost and the proceeds is recorded as either a gain or a loss and is included in our Consolidated Statements of Operations. Long-lived assets are evaluated for impairment in accordance with the provisions of the accounting guidance on the impairment or disposal of long-lived assets.

Derivative Financial Instruments

We account for our derivative instruments in accordance with the accounting guidance on derivative instruments and hedging activities. Derivative instruments are recorded on the balance sheet as either an asset or liability measured at their fair value. If the derivative is designated as a fair value hedge, the changes in the fair value of the derivative and of the hedged item attributable to the hedged risk are recognized in earnings. If the derivative is designated as a cash flow hedge, the effective portions of the changes in the fair value of the derivative are recorded as a component of accumulated other comprehensive loss and recognized in the Consolidated Statements of Operations when the hedged item affects earnings. The ineffective portions of the changes in the fair value of cash flow hedges are recognized in earnings.

Foreign Currency Translation

The financial statements of our non-United States subsidiaries have been translated in accordance with the accounting guidance on foreign currency translation. Under the accounting guidance, asset and liability accounts are translated at the current exchange rates and income statement items are translated at the average exchange rates each month. The resulting translation adjustments are recorded as a component of accumulated other comprehensive loss, which is included in shareholders’ equity.

As of July 1, 2018, the Argentina economy was designated as highly-inflationary and was treated as such for accounting purposes starting in the third quarter of 2018.

A portion of our Euro-denominated notes is accounted for as a hedge of our net investment in our subsidiaries with a Euro-functional currency. For this portion of the Euro-denominated notes, since our net investment in these subsidiaries exceeds the amount of the related borrowings, net of tax, the related translation gains or losses are included as a component of accumulated other comprehensive loss.

Shareholders' Equity

Shareholders’ Equity

The Board of Directors authorized the repurchase of 6.0 million shares of our common stock in each of August 2018, July 2016 and October 2015. Share repurchases may be made from time to time through a variety of methods, including open market purchases, block transactions, privately negotiated transactions or similar facilities. In 2018, we repurchased a total of 5.7 million shares, comprised of 2.9 million shares under the 2018 authorization and 2.8 million shares under the 2016 authorization, at a total cost of $500.7. In 2017, we repurchased a total of 1.9 million shares at a total cost of $203.9 under the 2016 authorization. In 2016, we repurchased a total of 6.6 million shares, comprised of 1.3 million shares under the 2016 authorization and 5.3 million shares under the 2015 authorization, at a total cost of $482.2. As of December 31, 2018, there were 3.1 million shares remaining authorized for repurchase under the 2018 authorization and no shares remaining under the 2016 and 2015 authorizations.

During 2018, 2017 and 2016, the Board of Directors declared total cash dividends of $2.02, $1.86 and $1.72 per share, respectively, resulting in total dividend payments of $127.3, $123.7 and $118.4, respectively.

Noncontrolling interests, included in total shareholders' equity in our Consolidated Balance Sheets, represent amounts related to majority-owned subsidiaries in which we have a controlling financial interest. Net earnings attributable to these noncontrolling interests are recorded in interest and other expenses in our Consolidated Statements of Operations. We recorded income of $4.9 for 2018 and expenses of $6.5 and $10.1 for 2017 and 2016, respectively. The income recorded in 2018 was due to a revision in one of our joint venture agreements.

Cash and Cash Equivalents

We consider all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents.

Payroll Tax Credit

In January 2013, the French government passed legislation, Credit d’Impôt pour la Compétitivité et l’Emploi (“CICE”), that provides payroll tax credits based on a percentage of wages paid to employees receiving less than two-and-a-half times the French minimum wage. The payroll tax credit was equal to 4% of eligible wages in 2013, 6% of eligible wages in 2014 to 2016, 7% of eligible wages in 2017, and 6% of eligible wages in 2018. The CICE payroll tax credit was accounted for as a reduction of our cost of services in the period earned.

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 these payroll tax credits after the three-year period. In April 2018, March 2017 and March 2016, we entered into an agreement to sell substantially all of the credits earned in 2017, 2016 and 2015, respectively, for net proceeds of $234.5 (€190.9), $143.5 (€133.0) and $143.1 (€129.9), respectively. 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 these receivables was recorded in cost of services as a reduction of the payroll tax credits earned in the respective year.

Recently Issued Accounting Standards

In February 2016, the Financial Accounting Standards Board (“FASB”) issued new accounting guidance on leases. The new guidance requires that a lessee recognize right-of-use (“ROU”) assets and lease liabilities on the balance sheet for leases with lease terms longer than 12 months. Similar to the current guidance, the recognition, measurement and presentation of lease expenses and cash flows depends on its classification by the lessee as a finance or operating lease. The new guidance also includes new disclosure requirements providing information on the amounts recorded in the financial statements.

We adopted the new lease guidance effective January 1, 2019, and will recognize any cumulative effect adjustment to retained earnings as of the effective date, without restating prior periods. We elected the package of three practical expedients which lessens the transitional burden of implementing the new guidance. Accordingly, we will not reassess: 1) whether any expired or existing contracts are or contain leases; 2) the lease classification for any expired or existing leases; or 3) initial direct costs for any existing leases. We also elected the land easements practical expedient allowing us to not reassess whether existing or expired land easements not accounted for as leases under previous guidance are or contain a lease under new guidance. We implemented internal controls and key system functionality, including a new global lease software system, to enable the preparation of financial information upon adoption.

The new lease guidance will have a material impact on our Consolidated Balance Sheets, but will not have a significant impact on our Consolidated Statements of Operations. The most significant impact will be the recognition of ROU assets and lease liabilities and related deferred tax balances for operating leases; our accounting for financing leases will remain substantially unchanged. At the transition date, we expect the amounts of the new ROU assets and lease liabilities to be within a range of $450 to $500. The impact on retained earnings is expected to be immaterial. The adoption of the new lease guidance is not expected to significantly impact our Consolidated Statements of Cash Flows.

In August 2017, the FASB issued new guidance on hedge accounting. The amendments in this guidance include the elimination of the concept of recognizing periodic hedge ineffectiveness for cash flow and net investment hedges, recognition and presentation of changes in the fair value of the hedging instrument, recognition and presentation of components excluded from an entity's hedge effectiveness assessment, addition of the ability to elect to perform subsequent effectiveness assessments qualitatively, and addition of new disclosure requirements. The guidance is effective for us in 2019. We do not expect the adoption of this guidance to have a material impact on our Consolidated Financial Statements.

In February 2018, the FASB issued new guidance on reporting comprehensive income. The new guidance allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Act. The guidance was effective for us as of January 1, 2019. We elected not to adopt this optional reclassification.

In June 2018, the FASB issued new guidance on the accounting for share-based payment awards. The guidance will make the accounting for share-based payment awards issued to nonemployees largely consistent with the accounting for share-based payment awards issued to employees. The guidance is effective for us in 2019. We do not expect the adoption of this guidance to have a material impact on our Consolidated Financial Statements.

In August 2018, the FASB issued new guidance on disclosures related to fair value measurements. The guidance is intended to improve the effectiveness of the notes to financial statements by facilitating clearer communication, and it includes multiple new, eliminated and modified disclosure requirements. The guidance is effective for us in 2020. The adoption of this guidance will have no impact on our Consolidated Financial Statements.

In August 2018, the FASB issued new guidance on disclosures related to defined benefit plans. The guidance amends the current disclosure requirements to add, remove and clarify disclosure requirements for defined benefit pension and other postretirement plans. The guidance is effective for us in 2021. The adoption of this guidance will have no impact on our Consolidated Financial Statements.

In August 2018, the FASB issued new guidance on the accounting for internal-use software. The guidance aligns the accounting for costs incurred to implement a cloud computing arrangement that is a service arrangement with the guidance on capitalizing costs associated with developing or obtaining internal-use software. The guidance is effective for us in 2020. We are assessing the impact of the adoption of this guidance on our Consolidated Financial Statements.

Subsequent Events

We have evaluated events and transactions occurring after the balance sheet date through our filing date and noted no events that are subject to recognition or disclosure.