Adaptec 2002 Annual Report Download - page 60

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Net income (loss) per common share. Basic net income (loss) per share is computed using the weighted average
number of common shares outstanding during the period. The PMC−Sierra Ltd. Special Shares have been included
in the calculation of basic net income (loss) per share. Diluted net income (loss) per share is computed
using the weighted average number of common and dilutive common equivalent shares outstanding during the
period. Dilutive common equivalent shares consist of stock options and warrants.
Share and per common share data presented reflect the two−for−one stock split in
the form of a 100% stock dividend effective February 2000.
Segment reporting. Segmented information is reported under Statement of Financial Accounting Standards No.
131 (SFAS 131), "Disclosures about Segments of an Enterprise and Related Information". SFAS 131 uses a
management approach to report financial and descriptive information about a company's operating segments.
Operating segments are revenue−producing components of a company for which separate financial information is
produced internally for the company's management. Under this definition, the Company operated, for all
periods presented, in two segments: networking and non−networking products.
Recently issued accounting standards. In June 2002, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standard No. 146 (SFAS 146), "Accounting for Costs Associated with Exit or
Disposal Activities". SFAS 146 requires that the liability for a cost associated with an exit or disposal
activity be recognized at its fair value when the liability is incurred. Under previous guidance, a
liability for certain exit costs was recognized at the date that management committed to an exit plan. As
SFAS 146 is effective only for exit or disposal activities initiated after December 31, 2002, the adoption
of this statement will not impact the Company's financial statements for 2002, but will affect the
accounting for any restructurings initiated after 2002. In January 2003, the Company announced a further
restructuring plan, the costs of which will be accounted for in accordance with SFAS 146.
In November 2002, the FASB issued FASB Interpretation No. 45 (FIN 45), "Guarantor's Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others". FIN 45
requires that upon issuance of a guarantee, a guarantor must recognize a liability for the fair value of an
obligation assumed under a guarantee. FIN 45 also requires additional disclosures by a guarantor in its
interim and annual financial statements about the obligations associated with guarantees issued. The
recognition provisions of FIN 45 will be effective for any guarantees that are issued or modified after
December 31, 2002. The Company has adopted the disclosure requirements and is currently evaluating the
effects of the recognition provisions of FIN 45; however, it does not expect that the adoption will have a
material impact on the Company's results of operations or financial position.
In December 2002, the FASB issued Statement of Financial Accounting Standard No. 148 (SFAS 148), "Accounting
for Stock−Based Compensation − Transition and Disclosure". SFAS 148 provides alternative methods of
transition for a voluntary change to the fair value based method of accounting for stock−based employee
compensation. SFAS 148 also requires prominent disclosure in the "Summary of Significant Accounting
Policies" of both annual and interim financial statements about the method of accounting for stock−based
employee compensation and the effect of the method used on reported results. The Company has adopted SFAS
148 for the 2002 fiscal year end. Adoption of this statement has affected the location of the Company's
disclosure within the Consolidated Financial Statements, but will not impact the Company's results of
operation or financial position unless the Company changes to the fair value method of accounting for
stock−based employee compensation.
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