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76
The following weighted-average assumptions were used for
fiscal 2003, fiscal 2002 and fiscal 2001:
2003 2002
2001
TYCO TYCO TYCO TYCOM
Expected stock price
volatility 64% 52% 39% 80%
Risk-free interest rate 2.48% 4.03% 5.18% 4.71%
Expected annual
dividend per share $0.05 $0.05 $0.05 —
Expected life of
options 4.3 years 5.0 years 4.4 years 4.0 years
The effects of applying SFAS No. 123 in this pro forma disclosure
are not indicative of what the effects may be in future years.
SFAS No. 123 does not apply to awards prior to 1995. Additional
awards in future years are anticipated.
During fiscal 2003, the Company adopted FASB Interpreta-
tion No. (“FIN”) 45, “Guarantor’s Accounting and Disclosure
Requirements for Guarantees.” FIN 45 requires increased dis-
closure of guarantees, including those for which likelihood of
payment is remote, and product warranty information (see Note
20). FIN 45 also requires that guarantors recognize a liability
for certain types of guarantees equal to the fair value of the
guarantee upon its issuance. The adoption of FIN 45 did not
have a material impact on our results of operations or finan-
cial position.
In January 2003, the FASB issued FIN 46, “Consolidation of
Variable Interest Entities.” This interpretation clarifies the
application of Accounting Research Bulletin No. 51, “Consoli-
dated Financial Statements,” relating to consolidation of certain
entities. FIN 46 requires identification of the Company’s partici-
pation in variable interest entities (“VIE’s”), which are defined
as entities with a level of invested equity that is not sufficient to
fund future activities to permit them to operate on a stand-
alone basis, or whose equity holders lack certain characteristics
of a controlling financial interest. For entities identified as
VIE’s, FIN 46 sets forth a model to evaluate potential consoli-
dation based on an assessment of which party to VIE’s, if any,
bears a majority of the risk to its expected losses, or stands to
gain from a majority of its expected returns. FIN 46 also sets
forth certain disclosures regarding interests in VIE’s that are
deemed significant, even if consolidation is not required. The
Company adopted FIN 46’s accounting provisions as of July 1,
2003. See Notes 12 and 30 for further discussion of the impact
of FIN 46.
In November 2002, the EITF reached a consensus on EITF
Issue No. 00-21, “Revenue Arrangements with Multiple Deliver-
ables.” EITF No. 00-21 provides guidance on how to determine
when an arrangement that involves multiple revenue-generating
activities or deliverables should be divided into separate units
of accounting for revenue recognition purposes. It further states,
that if this division is required, the arrangement consideration
should be allocated among the separate units of accounting.
The guidance in the consensus is effective for revenue arrange-
ments entered into in fiscal periods that began after June 15,
2003. The adoption of this new standard did not have a material
impact on our results of operations or financial position.
In April 2003, the FASB issued SFAS No. 149, “Amendment
of Statement 133 on Derivative Instruments and Hedging
Activities,” which amends and clarifies financial accounting and
reporting for derivative instruments, including certain derivative
instruments embedded in other contracts and for hedging
activities under SFAS No. 133, “Accounting for Derivative
Instruments and Hedging Activities.” SFAS No. 149, which is to
be applied prospectively, is effective for contracts entered into
or modified after June 30, 2003, and for hedging relationships
designated after June 30, 2003. The adoption of this new standard
did not have a material impact on our results of operations or
financial position.
In May 2003, the FASB issued SFAS No. 150, “Accounting for
Certain Financial Instruments with Characteristics of Both
Liabilities and Equity,” which establishes standards for how an
issuer classifies and measures certain financial instruments
with characteristics of both liabilities and equity. It requires
that an issuer classify a financial instrument that is within its
scope as a liability (or an asset in some circumstances) and is
effective for instruments entered into or modified after May 31,
2003 and otherwise is effective at the beginning of the first
interim period beginning after June 15, 2003. The adoption of
this new standard did not have a material impact on our results
of operations or financial position.
Reclassifications Certain prior year amounts have been reclas-
sified to conform with current year presentation.
TYCO INTERNATIONAL LTD.
Notes to Consolidated Financial Statements