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Revenue | 6 Months Ended
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Jul. 01, 2018
Revenue from Contract with Customer [Abstract] |
Revenue | Revenue Adoption of ASC Topic 606, Revenue from Contracts with Customers On January 1, 2018, we adopted Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”), using the modified retrospective method applied to those contracts which were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under ASC 605. We recorded a net increase to opening earnings invested in the business of $3.4 million as of January 1, 2018 due to the cumulative impact of adopting ASC 606. The impact is primarily driven by the deferral of contract costs related to our customer contracts of $5.2 million, partially offset by deferring revenue billed at a point in time for services performed over time of $0.6 million and a deferred tax liability of $1.2 million. As of and for the three and six month periods ended July 1, 2018, the consolidated financial statements were not materially impacted as a result of the application of Topic 606 compared to Topic 605. Revenue Recognition Revenues are recognized when control of the promised services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled, to in exchange for those services. Our revenues are recorded net of any sales, value added, or similar taxes collected from our customers. We generate revenue from: the hourly sales of services by our temporary employees to customers (“staffing solutions” revenue), the recruiting of permanent employees for our customers (“permanent placement” revenue), and through our talent fulfillment and outcome-based activities (“talent solutions” and “outcome-based services” revenue). We record revenues from sales of services and the related direct costs in accordance with the accounting guidance on reporting revenue gross as a principal versus net as an agent. When Kelly is the principal, we demonstrate control over the service by being the employer of record for the individuals performing the service, by being primarily responsible to our customers and by having a level of discretion in establishing pricing in which the gross amount is recorded as revenues. When Kelly arranges for other contingent labor suppliers and/or service providers to perform services for the customer, we do not control those services before they are transferred, and therefore, the amounts billed to our customers are net of the amounts paid to the secondary suppliers/service providers and the net amount is recorded as revenues. Staffing Solutions Revenue Staffing solutions can be branch-delivered (Americas and EMEA regions) or centrally-delivered (within Global Talent Solutions (“GTS”)). Our Americas Staffing segment is organized to deliver services in a number of specialty staffing solutions, which are summarized as: commercial, specialized professional/technical (“PT”) and educational staffing. Staffing solutions contracts are short-term in nature. Billings are generally negotiated and invoiced on a per-hour or per-unit basis as the temporary staffing services are transferred to the customer. Revenue from the majority of our staffing solutions services continues to be recognized over time as the customer simultaneously receives and consumes the services we provide. We have applied the practical expedient to recognize revenue for these services over the term of the agreement in proportion to the amount we have the right to invoice the customer. Permanent Placement Revenue Permanent placement solutions can be branch-delivered (Americas and EMEA regions) or centrally-delivered (within GTS). Our permanent placement revenue is recorded at the point in time the permanent placement candidate begins full-time employment. On the candidate start date, the customer accepts the candidate and can direct the use of the candidate as well as obtains the significant risk and rewards of the candidate. As such, we consider this the point the control transfers to the customer. Talent Solutions and Outcome-Based Services Revenue In addition to centrally-delivered staffing services, our GTS segment also includes talent solutions (contingent workforce outsourcing “CWO”, payroll process outsourcing “PPO” and recruitment process outsourcing “RPO”) and outcome-based services (business process outsourcing “BPO”, KellyConnect, career transition/outplacement services and talent advisory services). Billings are generally negotiated and invoiced on a measure of time (hours, weeks, months) or per-unit basis for our services performed. We continue to recognize revenue from the majority of our talent solutions services and our outcome-based services over time as the customer simultaneously receives and consumes the services we provide. We have applied the practical expedient to recognize revenue for these services over the term of the agreement in proportion to the amount we have the right to invoice the customer. The following table presents our segment revenues disaggregated by service type (in millions):
|  | Second Quarter |  | June Year to Date
|  | 2018 |  | 2018
Branch-Delivered Staffing |  |  |  |
Americas Staffing |  |  |  |
Staffing Solutions |  |  |  |
Commercial |  | $ | 414.5 |  |  | $ | 812.9 |
Educational Staffing |  | 110.0 |  |  | 240.1 |
Professional/Technical |  | 70.1 |  |  | 137.5 |
Permanent Placement |  | 9.4 |  |  | 17.8 |
Total Americas Staffing |  | 604.0 |  |  | 1,208.3 |
International Staffing |  |  |  |
Staffing Solutions |  | 279.1 |  |  | 556.0 |
Permanent Placement |  | 7.5 |  |  | 15.3 |
Total International Staffing |  | 286.6 |  |  | 571.3 |
Global Talent Solutions |  |  |  |
Talent Fulfillment |  |  |  |
Staffing Solutions |  | 288.3 |  |  | 572.5 |
Permanent Placement |  | 0.4 |  |  | 0.8 |
Talent Solutions |  | 88.9 |  |  | 173.9 |
Total Talent Fulfillment |  | 377.6 |  |  | 747.2 |
Outcome-Based Services |  | 123.1 |  |  | 239.3 |
Total Global Talent Solutions |  | 500.7 |  |  | 986.5 |
Total Intersegment |  | (4.4 | ) |  | (9.3 | )
Total Revenue from Services |  | $ | 1,386.9 |  |  | $ | 2,756.8 |
Our operations are subject to different economic and regulatory environments depending on geographic location. Our GTS segment operates in Americas, EMEA and APAC regions. In the second quarter of 2018 and 2017, GTS made up $483.9 million and $492.0 million in total Americas, respectively, $11.2 million and $9.0 million in total EMEA, respectively, and the entire balance in APAC. For June year to date in 2018 and 2017, GTS made up $952.5 million and $967.7 million in total Americas, respectively, $23.3 million and $16.4 million in total EMEA, respectively, and the entire balance in APAC. The below table presents our revenues disaggregated by geography (in millions):
|  | Second Quarter |  | June Year to Date
|  | 2018 |  | 2017 |  | 2018 |  | 2017
Americas |  |  |  |  |  |  |  |
United States |  | $ | 981.2 |  |  | $ | 970.1 |  |  | $ | 1,955.9 |  |  | $ | 1,925.7 |
Canada |  | 37.0 |  |  | 34.6 |  |  | 70.6 |  |  | 68.7 |
Mexico |  | 30.0 |  |  | 28.3 |  |  | 60.4 |  |  | 52.1 |
Puerto Rico |  | 26.2 |  |  | 17.6 |  |  | 46.0 |  |  | 35.3 |
Brazil |  | 9.0 |  |  | 12.7 |  |  | 18.5 |  |  | 26.0 |
Total Americas |  | 1,083.4 |  |  | 1,063.3 |  |  | 2,151.4 |  |  | 2,107.8 |
EMEA |  |  |  |  |  |  |  |
France |  | 72.0 |  |  | 68.3 |  |  | 143.9 |  |  | 129.1 |
Switzerland |  | 52.8 |  |  | 53.9 |  |  | 102.5 |  |  | 102.2 |
Portugal |  | 51.2 |  |  | 41.7 |  |  | 102.3 |  |  | 78.0 |
United Kingdom |  | 28.5 |  |  | 20.8 |  |  | 57.5 |  |  | 41.0 |
Russia |  | 25.6 |  |  | 24.0 |  |  | 51.7 |  |  | 46.8 |
Italy |  | 19.3 |  |  | 15.7 |  |  | 39.8 |  |  | 29.4 |
Germany |  | 14.8 |  |  | 14.6 |  |  | 31.2 |  |  | 27.8 |
Ireland |  | 11.7 |  |  | 7.4 |  |  | 23.0 |  |  | 15.1 |
Norway |  | 9.2 |  |  | 8.4 |  |  | 17.6 |  |  | 16.0 |
Other |  | 12.8 |  |  | 11.0 |  |  | 25.2 |  |  | 21.4 |
Total EMEA |  | 297.9 |  |  | 265.8 |  |  | 594.7 |  |  | 506.8 |
Total APAC |  | 5.6 |  |  | 4.5 |  |  | 10.7 |  |  | 8.7 |
Total Kelly Services, Inc. |  | $ | 1,386.9 |  |  | $ | 1,333.6 |  |  | $ | 2,756.8 |  |  | $ | 2,623.3 |
Variable Consideration Certain customers may receive cash-based incentives or credits, which are accounted for as a form of variable consideration. We estimate these amounts based on the expected or likely amount to be provided to customers and reduce revenues recognized to the extent that it is probable that a significant reversal of such adjustment will not occur. Provisions for sales allowances (billing adjustments related to errors, service issues and compromises on billing disputes), based on historical experience, are recognized at the time the related sale is recognized as a reduction in revenue from services. Payment Terms Customer payments are typically due within 60 days of invoicing, but may be shorter or longer depending on contract terms. Management does not assess whether a contract has a significant financing component if the expectation at contract inception is that the period between payment by the customer and the transfer of the services to the customer will be less than one year. We do not have any significant financing components or extended payment terms. Deferred Revenue Items which are billed to the customer at a point in time, rather than billed over time as the services are delivered to the customer, are assessed for potential revenue deferral. At this time, the balance of the contract liability as well as the amount of revenue recognized in the reporting period that was included in the deferred revenue balance at the beginning of the period is not material. Deferred Costs Sales commissions paid at initial contract inception and upon contract renewal by our sales team are considered incremental and recoverable costs of obtaining a contract with a customer. The sales commissions (and related fringe benefits such as taxes and benefits) are deferred and then amortized on a straight-line basis over an appropriate period of benefit that we have determined to be contract duration. We determined the period of benefit by taking into consideration our customer contracts and other relevant factors. Anticipated renewal periods are not included in the amortization period of the initial commission. Amortization expense is included in selling, general and administrative (“SG&A”) expenses on the consolidated statement of earnings. As a practical expedient, sales commissions with amortization periods of 12 months or less are expensed as incurred. These costs are recorded in SG&A expenses on the consolidated statement of earnings. Deferred sales commissions, which are included in other assets on the consolidated balance sheet, were $2.6 million as of second quarter-end 2018 and $3.2 million as of January 1, 2018. Amortization expense for the deferred costs was $0.4 million and $0.8 million for the second quarter and June year to date 2018, respectively. There was no impairment loss in relation to the costs capitalized for the second quarter and June year to date 2018. Occasionally, fulfillment costs are incurred after obtaining a contract in order to generate a resource that will be used to provide our services. These costs are considered incremental and recoverable costs to fulfill our contract with the customer. These costs to fulfill a contract are deferred and then amortized on a straight-line basis over a period of benefit that we have determined to be the average length of assignment of the employees. We determined the period of benefit by taking into consideration our customer contracts, attrition rates and other relevant factors. Amortization expense is included in SG&A expenses on the consolidated statement of earnings. Deferred fulfillment costs, which are included in prepaid expenses and other current assets on the consolidated balance sheet, were $3.4 million as of second quarter-end 2018 and $2.0 million as of January 1, 2018. Amortization expense for the deferred costs was $2.5 million and $4.6 million for the second quarter and June year to date 2018, respectively. There was no impairment loss in relation to the costs capitalized for the second quarter and June year to date 2018. Unsatisfied Performance Obligations The Company does not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed.

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- Definition The entire disclosure of revenue from contract with customer to transfer good or service and to transfer nonfinancial asset. Includes, but is not limited to, disaggregation of revenue, credit loss recognized from contract with customer, judgment and change in judgment related to contract with customer, and asset recognized from cost incurred to obtain or fulfill contract with customer. Excludes insurance and lease contracts. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -URI http://asc.fasb.org/topic&trid=49130388 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -URI http://asc.fasb.org/topic&trid=2122369 + Details
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