Basis of Presentation and Accounting Policies

9 Months Ended

Sep. 30, 2024

Basis of Presentation and Accounting Policies

(1) Basis of Presentation and Accounting Policies

Basis of Presentation

Certain information and footnote disclosures normally included in the financial statements prepared in accordance with United States Generally Accepted Accounting Principles ("GAAP") have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission, although we believe that the disclosures are adequate to make the information presented not misleading. These Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements included in our 2023 Annual Report on Form 10-K.

The information furnished reflects all adjustments that, in the opinion of management, were necessary for a fair statement of the Consolidated Financial Statements for the periods presented. Such adjustments were of a normal recurring nature, unless otherwise disclosed.

Allowance for Expected Credit Losses

We have an allowance for expected credit losses recorded as an estimate of the accounts receivable that may not be collected. This allowance is calculated on an entity-by-entity basis with consideration of historical write-off experience, age of receivables, market conditions, and a specific review for expected credit losses. Items that affect this balance mainly include provision for expected credit losses and the write-off of accounts receivable balances.

A rollforward of our allowance for expected credit losses is shown below:


	Nine Months Ended September 30, 2024
Balance, December 31, 2023	$	99.2
Provision charged to earnings		6.0
Write-offs		(9.8	)
Currency impact and other		0.2
Balance, September 30, 2024	$	95.6

Leases

We determine whether a contract is or contains a lease at contract inception. Right-of-use (“ROU”) assets and long-term lease liabilities are presented as separate line items on our Consolidated Balance Sheets. Short-term lease liabilities are included in accrued liabilities on our Consolidated Balance Sheets.

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Lease liabilities are recognized at commencement date based on the present value of remaining lease payments over the lease term. As the rate implicit in the lease is not readily determinable in most of our leases, we use our incremental borrowing rate. We determine our incremental borrowing rate at the commencement date using our unsecured borrowing rate, adjusted for collateralization, lease term, economic environment, currency and other factors. ROU assets are recognized at commencement date at the value of the related lease liabilities, adjusted for any prepayments, lease incentives received, and initial direct costs incurred. Our lease terms include options to renew or not terminate the lease when it is reasonably certain that we will exercise that option.

Lease expenses for operating leases are recognized on a straight-line basis over the lease term and recorded in selling and administrative expenses on the Consolidated Statements of Operations.

Goodwill Impairment

In accordance with the accounting guidance on goodwill, we perform an annual impairment test of goodwill at our reporting unit 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 evaluate the recoverability of goodwill utilizing an income approach that estimates the fair value of the future discounted cash flows to which the goodwill relates. This approach reflects management’s internal outlook of the reporting units, which is believed to be the best determination of value due to management’s insight and experience with the reporting units. Significant assumptions used in our goodwill impairment tests include: expected future revenue growth rates, operating unit profit margins, working capital levels, discount rates, and a terminal value multiple.

During the third quarter of 2024, we performed our annual impairment test of our goodwill and indefinite-lived intangible assets. The excess of fair value over carrying amount for our reporting units, which exceeded 15% or more of the respective carrying amounts, was sufficient to conclude that no impairment was indicated. While the excess of fair value over carrying amount exceeded 15% for our reporting units, we did see a lower level of excess cushion year over year in many of our North America and Europe reporting units. Given the current macroeconomic conditions in these regions, our assumptions on near-term expected future revenue growth rates and operating profit margins were lower than in the prior year assessment. Market conditions in North America and Europe continue to remain challenging given the economic uncertainty including the uncertainty surrounding the timing of an inflection point for improving market conditions. Management closely monitors the results of the reporting units and comparisons to the key assumptions used in our fair value estimate at the time of our annual impairment test, in addition to operational initiatives and macroeconomic conditions, which may impact the results of the reporting units.

There could be significant further decreases in the operating results of our reporting units for a sustained period, which may result in a recognition of goodwill impairment that could be material to the Consolidated Financial Statements.

Subsequent Event

On November 1, 2024, the Company sold 100% of its shares of its subsidiary Manpower Korea, Inc. for consideration of $20.6 and simultaneously entered into a licensing agreement under which the new ownership will operate Manpower Korea under the Manpower brand. This transaction is part of our ongoing efforts to optimize our global strategic and geographic footprint and overall efficiency. Manpower Korea, Inc. which is part of our APME reporting segment, contributed $83.2 and $244.7 of revenues for the three and nine month periods ended September 30, 2024 within our Consolidated Statements of Operations.