Half Year Report 2012

Adecco Group –
Notes to consolidated financial statements (unaudited)
in millions, except share and per share information

Note 9 – Income taxes

Adecco S.A. is incorporated in Switzerland and the Company operates in various countries with different tax laws and rates. A substantial portion of the Company’s operations are outside of Switzerland. Since the Company operates worldwide, the weighted-average effective tax rate will vary from year to year depending on the earnings mix by country. Income taxes for the first six months of 2012 were provided at a rate of 23%, based on the Company’s current estimate of the annual effective tax rate. For the six months ended June 30, 2011, the tax rate was 20%.

The income tax rate in the first six months of 2012 and in the first six months of 2011 includes the positive impact of EUR 26 and EUR 32, respectively, from the successful resolution of prior years’ audits and tax disputes and the expiration of the statute of limitations in several jurisdictions.

As of June 30, 2012, the total amount of unrecognised tax benefits recorded decreased by EUR 23 compared to December 31, 2011 as a result of the settlement of tax audits and tax disputes, and the application of the statute of limitations in several jurisdictions. This was partly offset by current year additions and fluctuations in the exchange rates. As of June 30, 2011, the total amount of unrecognised tax benefits recorded decreased by EUR 29 compared to December 31, 2010 as a result of the settlement of tax audits, fluctuations in the exchange rates and the application of the statute of limitations in several jurisdictions. This was partly offset by additions for 2011.

The Company and its subsidiaries file income tax returns in multiple jurisdictions with varying statutes of limitations. Based on the outcome of examinations, or as a result of the expiration of the statute of limitations for specific jurisdictions, it is reasonably possible that the related unrecognised tax benefits for tax positions taken regarding previously filed tax returns could materially change from those recorded as liabilities for uncertain tax positions in the Company’s financial statements. An estimate of the range of the possible change cannot be made until issues are further developed or examinations close.

Significant estimates are required in determining income tax expense and benefits. Various internal and external factors may have favourable or unfavourable effects on the future effective tax rate. These factors include, but are not limited to, changes in tax laws, regulations and/or rates, changing interpretations of existing tax laws or regulations, results of tax audits, and changes in the overall level of pre-tax earnings.