IBM 2002 Annual Report Download - page 78

Download and view the complete annual report

Please find page 78 of the 2002 IBM annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 112

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112

Notes to Consolidated Financial Statements
76 international business machines corporation and Subsidiary Companies
In accordance with SFAS No. 141, the unamortized bal-
ance for acquired assembled workforce of $33 million, which
had been recognized as an intangible asset separate from
goodwill, has been reclassified to goodwill effective January 1,
2002. In addition, an initial goodwill impairment test was
required to be performed in 2002 as of January 1, 2002. This
initial test and the company’s first annual goodwill impair-
ment test, performed as of October 1, 2002, resulted in no
goodwill impairment charges.
The following table presents reported Income from con-
tinuing operations and income adjusted to exclude goodwill
amortization, which is no longer recorded under SFAS No. 142
effective January 1, 2002.
(dollars in millions except per share amounts)
for the year ended december 31: 2002 2001 2000
Reported income
from continuing operations $«5,334 $«8,146 $«7,874
Add: Goodwill amortization
net of tax effects —262 436
Adjusted income from
continuing operations $«5,334 $«8,408 $«8,310
Basic earnings per share
from continuing operations:
Reported income
from continuing operations $«««3.13 $«««4.69 $«««4.45
Goodwill amortization —0.15 0.25
Adjusted basic earnings
per share from
continuing operations $«««3.13 $«««4.85*$«««4.70
Diluted earnings per share
from continuing operations:
Reported income from
continuing operations $«««3.07 $«««4.59 $«««4.32
Goodwill amortization —0.15 0.24
Adjusted diluted earnings
per share from
continuing operations $«««3.07 $«««4.74 $«««4.56
Reported net income $«3,579 $«7,723 $«8,093
Add: Goodwill amortization
net of tax effects —262 436
Adjusted net income $«3,579 $«7,985 $«8,529
Basic earnings per share:
Reported net income $«««2.10 $«««4.45 $«««4.58
Goodwill amortization —0.15 0.25
Adjusted basic earnings
per share $«««2.10 $«««4.60 $«««4.83
Diluted earnings per share:
Reported net income $«««2.06 $«««4.35 $«««4.44
Goodwill amortization —0.15 0.24
Adjusted diluted earnings
per share $«««2.06 $«««4.50 $«««4.68
*Does not total due to rounding.
On January 1, 2001, the company adopted SFAS No. 133,
as amended. SFAS No. 133 establishes accounting and report-
ing standards for derivative instruments. As of January 1,
2001, the adoption of the new standard resulted in a cumula-
tive effect, net-of-tax increase of $219 million to Accumulated
gains and (losses) not affecting retained earnings in the
Stockholders’ equity section of the Consolidated Statement of
Financial Position and a cumulative effect net-of-tax charge
of $6 million included in Other (income) and expense in the
Consolidated Statement of Earnings.
Effective January 1, 2001, the company adopted SFAS
No. 140, “Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities
—
a replacement of
SFAS No. 125.” This statement provides accounting and
reporting standards for transfers and servicing of financial
assets and extinguishments of liabilities and revises the
accounting standards for securitizations and transfers of
financial assets and collateral. The adoption did not have a
material effect on the company’s results of operations and
financial position. The standard also requires new disclosures
that were not applicable to the company.
New Standards to be Implemented
In June 2001, the FASB issued SFAS No. 143, “Accounting for
Asset Retirement Obligations.” SFAS No. 143 provides
accounting and reporting guidance for legal obligations asso-
ciated with the retirement of long-lived assets that result
from the acquisition, construction or normal operation of a
long-lived asset. SFAS No. 143 requires the recording of an
asset and a liability equal to the present value of the estimated
costs associated with the retirement of long-lived assets
where a legal or contractual obligation exists. The asset is
required to be depreciated over the life of the related equip-
ment or facility, and the liability is required to be accreted
each year based on a present value interest rate. The standard
is effective for the company on January 1, 2003. The company
has reviewed the provisions of this standard, and its adoption
is not expected to have a material effect on the company’s
Consolidated Financial Statements.