SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Dec. 31, 2013 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ' |
Basis of Presentation | ' |
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Basis of Presentation |
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The financial statements include all majority-owned subsidiaries, and all intercompany accounts and transactions have been eliminated in consolidation. Events subsequent to the balance sheet date have been evaluated for inclusion in the accompanying financial statements through the issuance date. |
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Accounting Estimates | ' |
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Accounting Estimates |
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The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and the differences could be material. JCG's significant estimates relate to investment securities, goodwill and intangible assets, equity compensation and income taxes. |
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Segment Information | ' |
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Segment Information |
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The Company operates one business segment, its Investment Management operations. |
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Cash Equivalents | ' |
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Cash Equivalents |
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Short-term investments with an initial maturity of three months or less when purchased, including investments in money market funds, are considered cash equivalents. |
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Property and Equipment | ' |
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Property and Equipment |
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Property and equipment is recorded at cost. Depreciation and amortization are recorded using the straight-line method over the estimated useful life of the related assets (or the lease term, if shorter). Depreciation and amortization expense totaled $11.2 million, $13.4 million and $14.0 million for the years ended December 31, 2013, 2012 and 2011, respectively. Property and equipment is summarized as follows (in millions): |
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| | | | December 31, | | |
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amortization | |
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Furniture, fixtures, computer equipment and software | | 3-7 years | | $ | 199.3 | | $ | 191.9 | | |
Leasehold improvements | | 3-24 years | | | 37.5 | | | 37.1 | | |
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Subtotal | | | | | 236.8 | | | 229 | | |
Less accumulated depreciation and amortization | | | | | (206.9 | ) | | (195.7 | ) | |
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Property and equipment, net | | | | $ | 29.9 | | $ | 33.3 | | |
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JCG evaluates its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The evaluation is based on an estimate of the future cash flows expected to result from the use of the asset and its eventual disposition. If expected future undiscounted cash flows are less than the carrying amount of the asset, an impairment loss is recognized in an amount equal to the excess of the carrying amount of the asset over the fair value of the asset. There were no impairments of long-lived assets for the years ended December 31, 2013, 2012 and 2011. |
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Software | ' |
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Purchased software is recorded at cost and amortized over its estimated useful life. Internal and external costs incurred in connection with developing or obtaining software for internal use are expensed as incurred during the preliminary project stage, as are training and maintenance costs. Internal and external costs incurred for internal use software during the application development stage are capitalized until such time that the software is substantially complete and ready for its intended use. Application development stage costs are amortized on a straight-line basis over the estimated useful life of the software. |
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Capitalized software costs totaled $8.3 million and $7.9 million at December 31, 2013 and 2012, respectively, and are presented within property and equipment, net on the Consolidated Balance Sheets. |
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Deferred Commissions | ' |
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Deferred Commissions |
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Sales commissions paid to financial intermediaries on sales of certain mutual fund shares are deferred and amortized over various periods, not exceeding four years, based on the estimated recoverability of the asset through distribution fee payments or contingent deferred sales charges. Contingent deferred sales charges received from early redemptions reduce the unamortized deferred commissions balance. Amortization expense for the years ended December 31, 2013, 2012 and 2011, totaled $5.3 million, $5.6 million and $7.4 million, respectively. |
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Deferred commissions, which are recorded as components of other current assets and non-current assets on the Consolidated Balance Sheets, are summarized as follows (in millions): |
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| | December 31, | | | | |
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Deferred commissions — current | | $ | 2.2 | | $ | 3 | | | | |
Deferred commissions — non-current | | | 0.3 | | | 0.4 | | | | |
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Total | | $ | 2.5 | | $ | 3.4 | | | | |
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Investment Securities | ' |
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Investment Securities |
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JCG classifies investment securities as trading, available-for-sale or held-to-maturity at the time of purchase and periodically re-evaluates such classifications. Trading securities are carried on JCG's Consolidated Balance Sheets at fair value and consist primarily of investments related to seeded investment products, investments in advised funds previously utilized for the economic hedging of mutual fund share awards and investments related to the economic hedging of deferred compensation. |
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Seeded Investment Products |
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JCG periodically adds new investment strategies to its investment product offerings by providing the initial cash investment or "seeding." The primary purpose of seeded investment products is to generate an investment performance track record in a product to attract third-party investors. JCG's initial investment in a new product represents 100% ownership in that product. Seeded investment products are initially consolidated and the individual securities within the portfolio are accounted for as trading securities. JCG consolidates such investment products as long as it holds a controlling interest in the investment product, defined as greater than 50% ownership. |
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Upon deconsolidation, JCG continues to account for its investments in seeded products as trading securities if its ownership is between 20% and 50%. JCG may redeem invested seed capital for a variety of reasons, including when third-party investments in the relevant product are sufficient to sustain the given investment strategy. The length of time JCG holds a majority interest in a product varies based on a number of factors including, but not limited to, market demand, market conditions and investment performance. Changes in fair value of securities classified as trading are recognized in investment gains (losses), net on JCG's Consolidated Statements of Comprehensive Income. |
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The Company has determined that its seeded investment products do not represent variable interest entities. Seed investments are made largely in mutual funds, but may also be made in commingled pools and separate accounts. JCG has determined mutual funds to be voting interest entities rather than variable interest entities. Commingled pools are established as limited liability companies or partnerships, and as such, the Company applies partnership accounting rules. These rules dictate that a managing member or general partner would not consolidate an entity if the members or limited partners carry substantive kick-out rights. All of the Company's commingled pools carry substantive kick-out rights. Seed investments in separate accounts are 100% owned by JCG and are accounted for as trading securities. |
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Economic Hedging of Mutual Fund Share Awards and Deferred Compensation |
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JCG grants mutual fund share awards to employees that are indexed to certain funds managed by JCG. Upon vesting, participants receive the value of the mutual fund share awards adjusted for gains or losses attributable to the mutual funds to which the award was indexed, subject to tax withholding. Historically, JCG made corresponding investments in JCG managed funds for purposes of economically hedging the mutual fund share awards. Effective January 2013, such corresponding investments are no longer made. The value of the investments in the JCG managed funds is a component of investment securities on JCG's Consolidated Balance Sheets. |
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The Company maintains deferred compensation plans for certain highly compensated employees and members of its Board of Directors. Eligible participants may defer a portion of their compensation and have the ability to earn a return by indexing their deferrals to mutual funds managed by the Company and its subsidiaries. The Company makes no contributions to the plan. To protect against market variability of the liability, the Company creates an economic hedge by investing in mutual funds that are consistent with the deferred amounts and mutual fund elections of the participants. Such investments remain assets of JCG. Changes in market value of the liability to participants are recognized as long-term incentive compensation in JCG's Consolidated Statements of Comprehensive Income and changes in the market value of the mutual fund securities are recognized in investment gains (losses), net on JCG's Consolidated Statements of Comprehensive Income. |
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Available-for-Sale Securities |
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Investment securities classified as available-for-sale consist of seeded investment products in which JCG holds a less than 20% interest and are carried on JCG's Consolidated Balance Sheets at fair value, and debt securities. The debt securities are classified as available-for-sale as JCG may not hold them to maturity. Changes in fair value are reflected as a component of other comprehensive (loss) income, net of tax on JCG's Consolidated Statements of Comprehensive Income until realized. Realized gains, losses and declines in fair value that are judged to be other-than-temporary are reflected as a component of investment gains (losses), net on JCG's Consolidated Statements of Comprehensive Income. Accumulated gains and losses are reclassified to earnings when the securities are sold on a first-in, first-out cost basis. |
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Held-to-Maturity Securities |
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Investment securities are classified as held-to-maturity when JCG has the intent and ability to hold the securities to maturity. Held-to-maturity securities are carried on JCG's Consolidated Balance Sheets at cost with corresponding interest income reflected as other income, net on JCG's Consolidated Statements of Comprehensive Income. Realized gains, losses and declines in fair value that are judged to be other-than-temporary are reflected as a component of investment gains (losses), net on JCG's Consolidated Statements of Comprehensive Income. There were no held-to-maturity securities on JCG's Consolidated Balance Sheets for the years ended December 31, 2013 and 2012. |
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Impairment Evaluation |
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JCG periodically evaluates the carrying value of investment securities classified as available-for-sale or held-to-maturity for potential impairment. In determining if an impairment exists, JCG considers the duration, extent and circumstances of any decline in fair value. |
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For debt securities, an other-than-temporary impairment ("OTTI") is evident if JCG intends to sell the debt security or will more likely than not be required to sell the debt security before full recovery of the entire amortized cost basis is realized. However, even if JCG does not intend to sell the debt security and will not likely be required to sell the debt security before recovery of its entire amortized cost basis, JCG must evaluate expected cash flows to be received and determine if a credit loss has occurred. In the event of a credit loss, the credit component of the impairment is recognized within investment gains (losses) on JCG's Consolidated Statements of Comprehensive Income and the noncredit component is recognized through other comprehensive (loss) income, net of tax on JCG's Consolidated Statements of Comprehensive Income. |
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For equity securities, JCG evaluates the securities in an unrealized loss position in the available-for-sale portfolio for OTTI on the basis of the duration of the decline in value of the security and severity of that decline as well as JCG's intent and ability to hold these securities for a period of time sufficient to allow for any anticipated recovery in the market value. If it is determined that the impairment on an equity security is other than temporary, an impairment loss equal to the difference between the carrying value of the security and its fair value is recognized within investment gains (losses) on JCG's Consolidated Statements of Comprehensive Income. There were no impairments of investment securities for the years ended December 31, 2013, 2012 and 2011. |
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Derivative Instruments | ' |
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Derivative Instruments |
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The Company maintains an economic hedge program that uses derivative instruments to hedge against market volatility of its seed investments. Fluctuations in equity markets, debt markets and foreign currency markets are hedged by using index swaps, futures contracts and forward contracts, respectively. These derivative instruments are not classified as hedges for accounting purposes. The Company records all derivatives as either assets or liabilities on JCG's Consolidated Balance Sheets and measures those investments at fair value. Changes in the value of the index swaps and futures contracts are recognized as a component of investment gains (losses), net on JCG's Consolidated Statements of Comprehensive Income. Changes in the value of the foreign currency forward contracts are recognized as a component of other income, net on JCG's Consolidated Statements of Comprehensive Income. |
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Fair Value Measurements | ' |
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Fair Value Measurements |
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Fair value of assets and liabilities is determined using observable market data based on recent trading activity. Where observable market data is unavailable due to a lack of trading activity, JCG utilizes internally developed models to estimate fair value and independent third parties to validate assumptions, when appropriate. Estimating fair value requires significant management judgment, including benchmarking to similar instruments with observable market data and applying appropriate discounts that reflect differences between the securities that JCG is valuing and the selected benchmark. Depending on the type of securities owned by JCG, other valuation methodologies may be required. |
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Measurements of fair value are classified within a hierarchy based upon the transparency of inputs used in the valuation of an asset or liability. Classification within the hierarchy is based upon the lowest level of input that is significant to the fair value measurement. |
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The valuation hierarchy contains three levels: |
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Level 1 — Valuation inputs are unadjusted quoted market prices for identical assets or liabilities in active markets. |
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Level 2 — Valuation inputs are quoted market prices for identical assets or liabilities in markets that are not active, quoted market prices for similar assets and liabilities in active markets, and other observable inputs directly or indirectly related to the asset or liability being measured. |
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Level 3 — Valuation inputs are unobservable and significant to the fair value measurement. |
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JCG's Level 1 and Level 2 fair value measurements consist of debt securities with maturities of 90 days or less carried within cash and cash equivalents, exchange-traded equity and debt securities underlying separate accounts and consolidated mutual funds and shares of unconsolidated mutual funds, investments in mutual funds related to the economic hedging of mutual fund share awards and deferred compensation plans, derivative instruments and long-term debt. The fair value level of consolidated seeded investment products is determined by the underlying securities of the product while the fair value level of equity-method and unconsolidated seeded investment products are valued using the respective net asset value ("NAV") of each product. All seeded investment products that utilize the NAV to determine their fair value are classified as Level 1, and primarily represent seeded mutual funds where JCG's ownership level is under 50%.The majority of investment securities classified as Level 2 are debt securities with values derived from evaluated pricing by independent third-party providers. Short-term securities with maturities of 60 days or less are valued at amortized cost, which approximates market value and are also categorized as Level 2 in the hierarchy. The underlying securities of mutual funds and separate accounts may be denominated in a foreign currency and are traded on exchanges outside of the U.S. In some cases, the closing price of such securities may be adjusted to capture the effects of any post-closing activity impacting the markets in which they trade. These adjustments result in the securities being classified as Level 2 and may also result in movements of securities between Level 1 and Level 2. |
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JCG's Level 3 recurring fair value measurements primarily represent redeemable noncontrolling interests. Redeemable noncontrolling interests in INTECH are measured at fair value using a discounted cash flow methodology. Significant inputs to the discounted cash flow analysis include forecasted operating results, discount rate and terminal multiple of future cash flows. Redeemable noncontrolling interests in Perkins are measured by a contractual formula intended to represent fair value. See Note 6 — Fair Value Measurements for further discussion of the fair value of redeemable noncontrolling interests. |
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Nonrecurring Level 3 fair value measurements include goodwill and intangible assets. JCG measures the fair value of goodwill and intangible assets using a discounted cash flow analysis that requires assumptions regarding projected future earnings and discount rates. Because of the significance of the unobservable inputs in the fair value measurements of these assets and liabilities, such measurements have been classified as Level 3. |
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Income Taxes | ' |
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Income Taxes |
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Deferred income tax assets and liabilities are recorded for the temporary differences between the financial statement and income tax bases of assets and liabilities as measured by the enacted income tax rates that may be in effect when these differences reverse. The effect of changes in tax rates on deferred tax assets and liabilities is recognized in the period that includes the enactment date. Significant management judgment is required in developing JCG's provision for income taxes, including the valuation allowances that might be required against deferred tax assets and the evaluation of various income tax contingencies. |
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The accounting guidance for uncertainty in income taxes sets forth a specific method for the financial statement recognition and measurement of a tax position taken or expected to be taken on a tax return. The tax contingencies liability relates primarily to general state tax items and has been recorded in other liabilities and other accrued liabilities on JCG's Consolidated Balance Sheets, as appropriate. |
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Taxing authorities generally charge interest and may assess penalties in the event that a tax position taken is subsequently reversed upon examination. JCG has accrued interest on its uncertain tax provisions based on the rates specified by the applicable taxing authorities and has recorded the interest as a component of the tax provision. At December 31, 2013, 2012 and 2011, $1.3 million, $2.2 million and $3.4 million, respectively, of accrued interest is included in the liability for tax contingencies. Any potential penalties associated with a tax contingency will also be included as a component of the tax provision in the period in which the assessment of a penalty becomes likely. JCG does not believe that it is subject to any penalties related to its tax contingencies and, therefore, has not accrued a liability for tax penalties. |
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In the event of an overpayment of income taxes, taxing authorities generally pay interest from the date of the overpayment. JCG records interest income from taxing authorities as a component of the income tax provision. |
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Goodwill and Intangible Assets, Net | ' |
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Goodwill and Intangible Assets, Net |
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Goodwill represents the excess of cost over the fair value of the identifiable net assets of acquired companies. JCG's identifiable intangible assets generally represent the cost of client relationships and mutual fund advisory contracts acquired as well as brand name and trademark. Goodwill and indefinite-lived intangible assets are tested for impairment annually as of October 1 or more frequently if events or circumstances indicate that the carrying value may not be recoverable. Intangible assets subject to amortization are tested for impairment whenever events or circumstances indicate that the carrying value may not be recoverable. Goodwill and intangible assets require significant management estimates and judgment, including the valuation and expected life determination in connection with the initial purchase price allocation and the ongoing evaluation for impairment. |
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Noncontrolling Interests and Redeemable Noncontrolling Interests | ' |
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Noncontrolling Interests and Redeemable Noncontrolling Interests |
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Noncontrolling interests that are not subject to redemption rights are classified in permanent equity. Redeemable noncontrolling interests are classified outside of permanent equity on the Consolidated Balance Sheets and are measured at estimated fair value as of the balance sheet dates. Changes in fair value of redeemable noncontrolling interests are recognized as increases or decreases to redeemable noncontrolling interests with an offsetting charge to retained earnings. Certain of the INTECH and Perkins ownership interests granted to employees become subject to redemption rights upon vesting at which time such interests are reclassified to redeemable noncontrolling interests. Earnings attributable to noncontrolling interests that are and are not subject to redemption rights are combined in JCG's Consolidated Statements of Comprehensive Income. Acquisitions of entities in which JCG holds an existing controlling interest are treated as a reduction of noncontrolling interests or redeemable noncontrolling interests in an amount equal to the purchase price. See Note 10 — Noncontrolling Interests for further discussion of noncontrolling interests. |
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Revenue Recognition | ' |
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Revenue Recognition |
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Investment management and shareowner servicing fees are recognized as services are provided. These revenues are generally determined in accordance with contracts based upon a percentage of average assets under management. |
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Performance fee revenue is derived from certain mutual funds and separate accounts. Mutual fund performance fees represent an adjustment to the investment management fee of certain mutual funds and are based on the relative investment performance of each fund compared to a specific benchmark index. The adjustment is up to a positive or negative 15 basis points and is calculated using each fund's daily net average assets based on a trailing 36-month measurement period. Separate account performance fees are specified in client contracts and are based on investment performance as compared to an established benchmark index over a specified period of time. Separate account performance fees are recognized at the end of the contractual period if the stated performance criteria are achieved. |
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Marketing | ' |
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Marketing |
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Marketing and promotional costs are generally expensed as incurred. |
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Stock-Based Compensation | ' |
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Stock-Based Compensation |
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Stock-based compensation cost is based on the grant date fair value of awards expected to vest at the end of the stated service period and consists of the total value of the awards less an estimate for forfeitures. The grant date fair value of stock options is determined using the Black-Scholes option pricing model, and the grant date fair value of restricted stock is determined from market price on date of grant. The Black-Scholes model requires management to estimate certain variables, including the lives of options from grant date to exercise date, the volatility of the underlying shares and future dividend rates. |
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JCG estimates, at the time of grant, the amount of awards that are not expected to vest based on historical forfeiture rates and subsequently records adjustments, as appropriate. |
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Other Income, Net | ' |
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Other Income, Net |
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The components of other income, net for the years ended December 31, 2013, 2012 and 2011, are as follows (in millions): |
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Dividend income | | $ | 3.8 | | $ | 2.3 | | $ | 2.5 | |
Interest income | | | 0.5 | | | 0.6 | | | 0.7 | |
Foreign currency gains (losses), net | | | 0.2 | | | (1.6 | ) | | 0.2 | |
Other, net | | | — | | | 1.9 | | | 0.4 | |
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Total other income, net | | $ | 4.5 | | $ | 3.2 | | $ | 3.8 | |
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